Aceli Africa: Closing the Agri-SME Financing Gap with Multi-Stakeholder Listening
Agricultural small and medium enterprises (SMEs) are the backbone of the food system in Africa. These roughly 130,000 businesses provide critical services, inputs, and market access opportunities to smallholder farmers. Agri-SMEs play an essential role in preventing food insecurity and in building the food system’s resilience to climate shocks by empowering smallholder farmers to contribute to the broader food supply chain.
Yet these businesses are perennially under-financed, limiting their growth and ability to adapt. There is an estimated $74.5 billion agri-SME financing gap in Africa. This is largely because banks perceive these businesses as too risky and costly to serve, despite their essential role in the food system. Closing this gap is a top priority in the sector; during NY Climate Week in September, USAID and Norway announced the launch of a new initiative which aims to fund 500 agri-SMEs.
This new fund, and the many other initiatives that aim to tackle the agri-SME lending gap, can learn from the evidence base that Aceli Africa has been building since 2020. Aceli partners with lenders, providing first loss coverage at a portfolio level to increase lender risk appetite and origination incentives to defray the high transaction costs and encourage lending to agri-SMEs. Aceli also facilitates technical assistance to the SMEs to help them qualify for and manage financing.
Aceli embeds learning and feedback into their approach at every level – including from the lenders, the SMEs, their employees, and the farmers they serve – to better understand how lending practices have changed, the effects of access to finance on business performance for agri-SMEs, and how farmers have experienced the impacts. Ultimately, Aceli seeks to document the value generated by these approaches relative to the costs, and use the evidence to further unlock financing for agri-SMEs across Africa.
As of November 2023, Aceli provided incentives for 32 lenders to give out 1,447 loans totaling $144M to agricultural SMEs that collectively purchase crops from 850K farmers and employ 25K full-time workers. That’s a lot of different stakeholders! So, it requires a simple and scalable solution for capturing impact data. 60 Decibels has supported Aceli in this effort since 2021.
We conduct lean, remote, impact studies with farmers, SME owners, employees, and lenders using turn-key, standardized tools that can be rapidly deployed and scaled. We want to make listening as easy and as valuable as possible for the lenders and SMEs who are busy running their businesses.
Aceli’s October 2023 Aggregate Impact Snapshot highlights the experience of representatives from 63 agri-SMEs that have received loans from six of Aceli’s partner financial institutions in Kenya and Tanzania. Here are some of the key insights:
> SMEs are accessing credit for the first time: 48% of SMEs said their Aceli-supported loan was the first time they had borrowed from a financial institution. 84% had not received substantial financing from any other lender.
> SMEs are highly satisfied with their loans. 75% reported no challenges with their lender. Those who did report challenges provided valuable feedback for the lenders on issues related to disbursement timing and customer service.
> SMEs attribute key improvements in their business to the loans they received. More than 9 in 10 SME representatives reported increased revenues, improved business operations, and increased number of farmers served linked to the finance they are accessing. Reflecting on the next 12 months, all reported increased confidence in achieving their growth plans.
This is just the beginning! Stay tuned in 2024 for more insights from our interviews with 4,000+ farmers and 250 employees working with these SMEs. For more sector-wide insights, head over to our Farmer Benchmarks or check out our Agricultural insights page. If you want help measuring your impact, don’t hesitate to reach out.