The partnership will create market transparency that is needed to unlock financing for agri-SMEs in emerging markets.
Agricultural small and medium enterprises (agri-SMEs) face complex and persistent challenges in emerging markets, despite the vital role they play in these economies. On the one hand the agribusinesses do not meet market requirements to attract funding, often because they are not run as businesses. On the other hand, the financiers – which range from local financial institutions, regional lenders, and global investors – find the agricultural sector extremely risky and expensive to service. The partnership between MIX and SCOPEinsight will address this by using data to create transparency, help financiers make more informed decisions, and build a bridge between agri-SMEs and the capital they need to grow. This partnership’s first set of activities is supported by the Alliance for a Green Revolution in Africa (AGRA).
Agri-SMEs – which include farmer organizations, input providers, off-takers and distributors, among others – play a crucial role in rural economies. “These businesses create employment and connect smallholders to markets and opportunities to improve their livelihoods,” said Camilla Nestor, CEO of MIX. “Yet agri-SMEs are often unable to access the financing they need to grow.” Estimates place the financing gap for agri-SMEs at USD 100 billion for the segment in sub-Saharan Africa alone.
The financing gap is driven in part by low visibility into a pipeline of viable agribusinesses and a lack of reliable data for decision making and investment.
MIX and SCOPEinsight will leverage the support, guidance, and deep network connections of AGRA to develop and test a set of standardized metrics that enable investors and lenders to compare the financial and operational performance of agri-SMEs, leading to informed decision making. In order to build this set of metrics, the two organizations will first develop a common language for agri-SMEs in consultation with industry actors including investors, lenders, and the agribusinesses themselves. The partners will also tap into AGRA’s expertise and experience supporting agribusinesses. Beginning with select markets in sub-Saharan Africa, MIX and SCOPEinsight will aggregate existing information currently siloed by value chains and geographies, and will conduct outreach to agri-SMEs and their partners.
“Agricultural SMEs contribute to a dynamic marketplace by offering a diverse set of products and services to improve the yields and incomes for smallholder farmers,” said Hedwig Siewertsen, Head of Inclusive Finance for AGRA. “In order for these businesses to grow sustainably, extend their reach, and enhance their value for customers, they need access to appropriate financial services. Yet the current financial services landscape is exceedingly difficult to navigate for both the SMEs and the financial service providers. By supporting MIX and SCOPEinsight in this effort, AGRA aims to enable these players to more easily navigate the available financial services and, ultimately, better match the supply and demand of agricultural SME finance.”
The partnership between MIX and SCOPEinsight brings together two organizations with deep experience solving intractable problems in the agricultural finance space.
SCOPEinsight was established 10 years ago with the aim to develop a system that would measure and score the level of professionalism of agri-SMEs with the aim to link these organizations in a scalable manner to finance. The graduation system has for the largest part been developed and is being rolled out with local partners. In the past years, nearly 4000 assessments have been conducted in 40 different countries.
“SCOPEinsight has come a long way in these past years and the time is right to develop the last piece of the puzzle. We have a great partner in MIX, who has the complementary knowledge and network to make this a success.” Marise Blom, COO of SCOPEinsight, said of the partnership. She elaborates, “In the past, SCOPE scores with the underlying data have proven to be instrumental for the more professional agri-SME’s to gain access to finance. SCOPEinsight envisions a linkage between the bankability metrics and the SCOPE scores, building the bridge between the agri-SME’s and the financiers.”
To propel the partners’ vision forward, the organizations are establishing an advisory board to include leading thinkers and practitioners with deep experience in emerging market agricultural finance.
This article was originally published by AGRA.