Access to finance

G4AW projects are expected to become financially sustainable businesses in the course of the first three or four years of the project. This implies that partnerships need to evolve from a subsidy or grant oriented form of financing, like the G4AW facility, to more business oriented financing.

This information page offers an Inventory of Access-to-Finance for G4AW entities experiencing a growing business. The included financiers each provide their own instruments and have their own eligibility criteria on what type of entities they are looking to finance, which is summarised in the Inventory of Access-to-Finance.

Funding options are available for a variety of needs including research, technical assistance, business start up, business implementation and business growth.

The inventory is not an exhaustive list of all funding options available to candidates, but offers examples of fund providers or programs that may be relevant.

Different financiers

In the Inventory of Access-to-Finance of funding entities for G4AW the following financiers are distinguished:

Social/ Impact Investment Funds: closed or open ended funds from either retail, institutional, NGO or venture capital investors with the objective of creating a social or developmental impact in emerging countries, often with a special focus on agriculture and/or technology. They may offer different type of instruments (loans, equity, guarantees) and each fund has its own specific eligibility criteria and required returns.

(Development) Banks: Licensed (development) banks with a mission to support businesses in developing countries. In case they provide direct investments it is indicated in the table. Most Development Banks typically follow an “indirect” investment model, where they mostly provide funding to funds. These portfolio funds are active investors in a large range of initiatives, business type and company stage. In addition local banks or special government banks (e.g. the agricultural bank) may be an option, but these are not included in this inventory.

Other Financing Facilities: Non-bank institutions, foundations and other funds and facilities that offer financing options focused on agri-value chains or commodities in emerging economies.

Other Financing Facilities focused on smallholders:  Banks, funds and other facilities offering solutions  for smallholder financing, often by providing loans or gurantees to financial intermediaries such as cooperatives, microfinance institutions, or agri-input suppliers.

Type of financing needs

A company needs short term and long term financing.

Typically short term financing is needed to run the operations of the company. Having adequate financing to manage day-to-day operations of the company ("working capital needs") is crucial as shortfalls in cash can be detrimental for obvious reasons. Short term financing needs will mainly depend on the company’s operating cycle;  when does the company receive payment for it services? When does the company have to pay its employees and its providers?, etc.

Once the company has a clear idea of how and when cash will come in and flow out of the company, any shortfalls will be more easily forecasted. Once possible shortfalls are identified, the company needs to see if this can be financed internally (for example with expected retained earnings, partnership contributions, own capital, etc.). If this is not possible it should consider external sources of funds, which will typically have a short term (less than 1 year), such as a credit line (short term loan) with a local bank, a trade finance facility or a supply chain finance product.

Long term financing requirements will largely depend on the growth and investment strategy of the company. For example, for business expansion when services need to be rolled-out to new regions or a new asset will be bought. This will require a large capital expenditure to finance the new asset. This could be provided by a longer-term loan with collateral (e.g. 'asset-backed 'loan), newly attracted equity or various other instruments.

 

NpM, Platform for Inclusive Finance publications

NpM publication 'Geodata and ICT Solutions for Inclusive Finance and Food Security'

NpM ICT map, overview of Geodata and ICT technologies that are currently being used to boost production, market access and access to finance for smallholder farmers: http://www.inclusivefinanceplatform.nl/ict-map