12th CAADP PARTNERSHIP PLATFORM MEETING

12th CAADP PARTNERSHIPPLATFORM MEETING:Delegate Brief on Sub-Themes

12th CAADP PARTNERSHIP PLATFORM MEETING

Delegate brief on the sub-themes under discussion during the CAADP PP meeting 11th to 12th April 2016

11th-14th April 2016, La Palm Royal Beach Hotel, Accra, Ghana

Contents

1. Partnership Platform Meeting2. Funding the African Agricultural Investment to attain Malabo commitments2.1 Public Sector Lead2.2 Attracting Private Sector Investment2.3 Measurement of success3. Agricultural Finance Landscape and Policy Environment3.1 Imperativesforsmallholderfinanceinagriculture3.2 Africa’sPrivateagriculturalfinancingsystems3.3 PolicyandregulatoryEnvironmentforAgriculturalLending3.4 NewModelsandProductsforEnhancingAgriculturalFinancing4. Inclusive Access to Finance to empower women and Youth4.1 SomechallengesforfinancialInclusioninAgriculture4.2 Relevancytoagriculturaltransformation4.3 Public sector contribution to attract private sector4.4 Sustaining private sector investment4.5 Measurement of success5. Innovative Delivery of Financial Services5.1 Relevance to agricultural transformation5.2 Public sector contribution to attract private sector5.3 Sustaining private sector investment5.4 Measurement of success6. Value Chain Finance6.1 RelevanceofValueChainFinancetoAgriculturalTransformation6.2 Public sector contribution to attract private sector6.3 SustainingPrivateSectorInvestmentinValueChainFinance6.4 MeasurementofsuccessinValueChainFinance7. Agriculture and Food Insecurity Risk Management7.1 Relevancytoagriculturaltransformation7.2 Public sector contribution to attract private sector7.3 Sustaining private sector investment7.4 Measurement of success8. Renewing Partnership for Accelerated Development8.1 Context of the CAADP PP8.2 KeyimplementationsuccessfactorforCAADPduringtheseconddecade8.3 Keyguidingquestions8.4 Break-awaygroupsessions8.5 ExpectedOutcomes

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THE 12th CAADP Partnership Platform Meeting (11-14 April 2016)Delegate Brief on sub-themes of the meeting

1. Partnership Platform Meeting

TheaimofthismeetingistoidentifythecapacityneedsandpartnershipsrequiredatalllevelstoimplementtheMalaboDeclarationincludingitsImplementationStrategyandRoadMap.

Eachsub-themewillbediscussedandanumberofkeyactivitiesnecessary to improveorstrengthen itsdevelopment will be identified to ensure impact on delivering theMalabo Commitments. The identifiedactivitiesoractionswillbeaddressedbyAUCandNPCAtogetherwith thevariouspartners todevelopastandardapproach inwhichthe identifiedactivitycanbeaddressedbythepublicorprivatesectorwithafocus on the creation of an environment conducive to attract private sector participation.

Duringtheplenarysessionsandspecificallythebreakoutsessions,themoderatorofthesessionwillensurethat a number of actions and issues raised during the discussion are summarized for inclusion into the communique. Theactionsand issues raisedwill serveasasummaryof thePPandserveasguidanceintotheefforts towardsaccelerating implementationofCAADPthroughinnovativefinancingandrenewedpartnership.

1.1 The main theme

The12thCAADPPPisorganisedaroundthetheme“AcceleratingImplementationofCAADPthroughInnovativeFinancingandRenewedPartnership”.ThethemereflectstheurgencybeingplacedonimplementationbytheAfricanUnionand itsmembers. ThePPmeetingwillserveasan importantplatformto takestockofsuccess,howbestthiscanbereplicatedandhowexistinggapsinthecontinent’scapabilitiestoattainthegoalsandtargetsassetintheMalaboDeclarationcanbefilled.ThePPmeetingwillgenerateanumberofkeyactionableactivitiesthatwillhavetobeaddressedbyAUCandNEPADAgency.

The meeting has been structured to address seven (7) sub-themes relevant for the acceleration of CAADP implementation through innovative finance. The sub-themes include the following:

Sub-theme 1: FundingtheAfricanAgriculturalInvestmenttoattainMalabocommitmentsSub-theme 2: AgriculturalFinanceLandscapeandPolicyEnvironmentSub-theme 3: InclusiveAccesstoFinancetoempowerwomenandYouthSub-theme 4:InnovativeDeliveryofFinancialServicesSub-theme 5:ValueChainFinanceSub-theme 6:AgricultureandFoodInsecurityRiskManagementSub-theme 7: Renewing Partnership for Accelerated Development

2. Funding the African Agricultural Investment to attain Malabo commitments

Africa has committed to the CAADP process and the declarations of Maputo and Malabo. Most of the developmentplanningcontinuestofollowadevelopmentalorsupplyledapproach.Asaresultmostofthepublicsectorinitiativeshavenotbeenverysuccessfulinattractingprivatesectorinvestment.Theprivatesectortendstofeelleftoutorcrowdedoutofthedevelopmentinitiatives.Thekeychallengeishowbesttoimplementpublicsectorpoliciesthataddressthekeybottlenecksfacedbytheprivatewhileensurethatweattain inclusive growth and impact.

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2.1 Public Sector Lead

Thekeydriverhereshouldbeattainingcoordinationthatcarriesbenefitsacrossthepublicandprivatesector.The relationshiphas tobesymbiotic forboth thepublicandprivatesector. Ensuring that theministryoffinanceand the central bankwork togetherwith other relevantministries to create a policy environmentattractive enough for theprivate sector to invest inwhat could bebest describedas theheavy lifting toimprovefinancialinclusion.Insuchanapproachthepublicinvestmentbuildsthepolicyenvironment(thepublic good) which is able to leverage the investment of the various private sectors institutions that value the opportunityasattractive.

2.2 Attracting Private Sector Investment

TheinvestmentrequiredtoattaintheMalabocommitmentsismassiveandnoneoftheAfricancountriescanattainitthroughthepublicsectorworkingininsolation.ThechallengeishowtheAfricangovernmentscanleverage the investments the governments are making to attract private sector investments and how can these be improved to increase the multiplier effect of public investment on private sector investment.

Ifacceptable,thentheidentificationofbottlenecksofapublicnature(publicgood)thatlimitprivatesectorinvestmentsandoperationsbecomesapriority.

2.3 Measurement of success

ThiswillultimatelybethevalueofprivatesectorinvestmentsmadeagainstpublicsectorinvestmentortheabilityofPublicsector fundsto leverageprivatesector funds. Therearegreatexamplesofpublicsectorfundsusedtoleverageprivatesectorfunds,theNigeriaCentralBankusingUS$500milliontoleverageUS$3billionworthfordebtfundingfromtheprivatesectorfinancialinstitutions(Using1USDollartoattract6US6 Dollars).

Theothermeasureofsuccesscouldincludetheabilitytokeepreplicatingthisapproachwithintheeconomyandmultiplytheeffects.

3. Agricultural Finance Landscape and Policy Environment

Agriculturecontributesmorethan20%toGDPandaccountsforabout70%ofemploymentinSub-SaharanAfrica.Apartfromfoodsecurityissues,itiskeytounlockingtheeconomicpotentialofthecontinent.Asworldpopulationincreases,themajorchallengethattheworldfacesfrom2050duetoprojectedhumanpopulationof9.6billionishowtomeetthefoodrequirementsofitscitizens.Mostcountrieshaverunoutofarablelandswith the exception of Africa where agricultural land is underutilized.

3.1 Imperatives for smallholder finance in agriculture

Investmentinimprovingsmallholderagriculturecouldbethebestwaytogenerateandexpandemploymentopportunities and createwealth at the grassroots level, generating demand for goods and services thatcreateabroaderbaseofjobsandincomesinruralareas.Smallholdersfarmsoffergenerallybestreturnoninvestment(comparedtolargescalefarmsaccordingtothedecreasingmarginalreturn).

3.2 Africa’s Private agricultural financing systems

Privatefinancialsystems inmostAfricancountriesarestillunderdevelopedrelative toother regions,withonly24%oftheadultpopulationhavingbankaccountsatformalfinancialinstitutions,whichishalftheglobalaverage.Banksandotherdeposit-takinginstitutions,suchascooperatives,dominatefinancialsystemsinmostAfricacountries,withregulatedMicrofinanceInstitutions(MFIs)increasinglyplayinganimportantroleinexpandingaccesstofinancialservicestolow-incomeearners.

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Supportedbyrisingincomes,urbanizationandtheinnovativeuseoftechnology,thefinancialservicesindustryisexpanding.Technologicalinnovation,suchasmobilemoneysolutions,isplayingamajorroleingivingAfricansaccesstobankingandfinancialservices.Kenya’sM-Pesamobilemoneytransferservicehasgivenmorethan70%ofthecountry’sadultsaccesstofinancialservices.

3.3 Policy and regulatory Environment for Agricultural Lending

The policy and regulatory environment for agricultural finance in Africa has been somehow uneven.PopulationincreaseinAfricawillrequireenhancedfoodandproductionsystemsmostofwhich(infactover80%)areproducedbysmallholderfarmers.TheeverchangingAfrica’sagriculturalenvironmentwithdigitaltechnologycoming, farmersareadopting to innovative technologicaladvancementsrelating toenhancingproductivitysuchasthoseelectronicvouchersforaccesstoagriculturalinputs;aswellasaccesstomarkets,mechanizationandfinance-relatedtechnologiessuchasmobilebanking.

Countries likeUganda,Kenya,BurkinaFaso,andRwandahaveaspecific legislation thatallow licenseddeposit-takingmicrofinanceinstitutions(MFIs). Inthesecountries, thepolicies, lawsandregulationsareexplicitonthemaximumsizeforasingleloanthatanMFIcangrant,asapercentageoftheborrowerscapital.Thiscanbestregulatethesystembutthepracticeissomewhatdifferentfromwhattheregulationsprovide.TheotherkeypolicyisastowhethercountrieshavemandatorydepositinsurancesystemthatMFIsmustsubscribeto.Althoughmostcountrieshaveregulationstothiseffect,MFIsdonotsubscribetothisdepositinsurancesystemandtheenforcementsoftheseareweak.

Theemergenceofmobilemoneyandagencybankingpresentskeyopportunitiestoreducecostsandrisksofsmallholderlending.Thecheaperalternativedeliverychannels(e.g.agents,bankonwheels,mobilewallets)andthepossibilitytotrack(cash)transactionsandbehaviouroffarmersatadistance,createsopportunitiesforfinancialservicesproviderstoaccessnewgroupsofcustomerssuchassmallholderfarmers.Mostcountriesdohavepoliciesandlawsthatallowe-moneyandsomelevelofbranchlessbankingservices,eachcountryhashoweverchosendifferentviewsonhowbesttofacilitatethefinancialinclusionagenda.

3.4 New Models and Products for Enhancing Agricultural Financing

AGRAhassetitselfthetargettodemonstratetofinancialservicesprovidersthattheperceivedhigherrisksandcostsofagriculturallendinginAfricaarenotinalignmentwiththerealrisksandcostswhich(canbe)aremuchlowerandthereforekeytoleveragingsubstantialflowsoffundsinsupportofagricultureacrossthevaluechain.AGRAdevelopsinnovativerisksharingmodelsforfinancingofAgribusinessesanditpromotestheuseofdigitalchannelsforfinancialservicesdeliverytosmallholderfarmersinselectedAfricancountriesto address the above listed challenges and unleash investments into the agricultural value chains.

TheCentralBankofNigeriamadeaUS$500millioninvestmentintheNigeriaIncentiveBasedRiskSharingSystemforAgricultureLending(NIRSAL)toleverageUS$3billioninloansfromNigerianfinancialinstitutions.Inanother initiative, theGhanaMinistryofFoodandAgriculture (MOFA), theBankofGhana (BOG)andAGRA have resolved to design and implement a similar scheme for Ghana dubbed the Ghana Incentive-BasedRiskSharingSystemforAgriculturalLending(GIRSAL).InKenya,AGRAisimplementingtheProgramforRuralOutreachofFinancialInnovationsandTechnologies(PROFIT),a$30millionprogramfundedbyIFADandtheGovernmentofKenyamodelledalongtheNIRSALandGIRSAL.PROFITisexpectedtobeimplementeduntil2018afterwhichitwillbescaleduptoKIRSAL,theKenyaIncentive-BasedRiskSharingsystemforAgriculturalLending.

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ThegreatestchallengethatremainsishowbesttousetheseinitiativestochangetheagriculturalfinancelandscapeandpolicyenvironmentforgreaterimpactandupscaleacrossAfrica.

4. Inclusive Access to Finance to empower women and Youth

Inthecontextofyouthemploymentanditsattendantdynamics,especiallyinAfrica,agriculturaldevelopmentalong the value chain offers one of the best opportunities to create the best impetus for engaging emerging ‘Africanyouth’ for inclusivegrowth inAfrica.Giventhedynamicsof farmingsystemsandagriculture foodmarkets, food consumption both domestically and internationally; agriculture and agribusiness offer newopportunitiesforjobcreationandemploymentgeneration.

Inclusivefinancinginagriculturalandagribusinessdevelopmentremainafundamentalfactorforincreasingproductivity, profitability and competitiveness in Africa’s economic and rural development agenda. Thecontinent currently holds 60%of theworld’s uncultivated arable land but continues to importmore than$60billionworthoffoodannually;equivalentto5%ofSub-SaharanAfrica’sGrossDomesticProduct(GDP)orthecombinedGrossDomesticProductofKenya,UgandaandMalawi.

By reducing vulnerability to economic shocks and boosting job creation, financial inclusion can supportpovertyreductionandinclusiveeconomicgrowth,andshoreupthereliabilityandstabilityofnationalfinancialsystems.StrengtheningfinancialinstitutionscanhelpmobilizedomesticsavingsandincentivizethedomesticfinancialsectortoincreaselendingtotheMSME“missingmiddle”.Providingaccessfortheun-bankedtoarangeoffinancialservices,sustainablyandresponsibly,anddeepeningfinancialintermediationcangrowlocaleconomies,strengthentheprivatesector,andcreatejobsandeconomicopportunities,especiallyforwomenandyouth.

4.1 Some challenges for financial Inclusion in Agriculture

Lackofaccesstofinanceisoneofmanychallengespreventingyouthandparticipationinagriculture

• lackofinnovationintheformalbankingindustry(nostructuredproductsforyouthinagriculture)• lackofyouthfinancialcapabilities• LackofResources(especiallyland),AssetsandSocialCapitalforbothyouthandwomen• LimitedorLackofKnowledge,InformationandAdequateEducation (TechnicalandBusinessManagementSkills)• LimitedPolicyProcessesforFinancialInclusion(thepoliticalprocess)• UnderdevelopedandExclusionfromAgriculturalValueChain(PoorlinkagestoInputand Outputmarkets)

4.2 Relevancy to agricultural transformation

TheMalaboDeclarationand thesubsequent forwardmarchof theCAADPProcess into thenewdecadehavebeenexplicitontheinclusiveapproachtoagriculturedevelopment.Withspecificreferencetoyouthandwomen in an inclusiveapproach,Africa is confrontedwith financing, innovationand the sustainableachievementofthesespecificgoals:

• Establishingand/orstrengtheninclusivepublic-privatepartnershipsforatleastfive(5)priority agriculturalcommodityvaluechainswithstronglinkagestosmallholderagriculture;• Creatingjobopportunitiesforatleast30%oftheyouthinagriculturalvaluechains;• Supportingandfacilitatingpreferentialentryandparticipationforwomenandyouthingainfuland attractive agri-business opportunities.

The African Union declared 2015 as the Year of Women’s Empowerment and Development towardsAfricaAgenda2063prioritizedfinancial inclusionandwomeneconomicempowermentbyfocusingonthe

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realization of this momentum in the agricultural sector where most of rural African Women work to ensure theirdailysubsistenceandalsosupporttherealizationoftheMalabo2025objectives.CAADPisthereforerefocusing to improve the economic well-being of women and youth through entrepreneurship, financialinclusion,increasedaccessofwomentonewtechnologies,capital,financing,land,marketsandintegrationtopreviouslyrestrictedagriculturalvaluechains.

Enabling gender responsive policies, financing and services and business environments are crucial tostimulatethestartupandupgradingofwomen’sbusinessesandtherebyhelpgeneratedecentandproductivework,achievegenderequality,reducepovertyandensurestrongereconomiesandsocieties.Ensuringthatyouthsuccessfullyparticipateinagriculturerequiresthedevelopmentofinnovativefinancemodels.Thiscanbedone iffinancialservicesproviders (FSPs),non-financialservicesproviders (NFSPs)andgovernmentadoptkeyprinciplesduringthedesignoftheproductsandprovideasuitableenvironmentforyouthtoexpressthemselves

4.3 Public sector contribution to attract private sector

Thepublicsector, ledby thegovernmenthave the responsibility toseek to reduce the riskof lending toyouthandwomeninagricultureessentiallybycreatingopportunitiesforthemtoexpressthemselves,andbyprovidinganenabling regulatoryenvironment that permitsa secure interactionwithFinancialServiceProviders (SPs) through innovative mechanisms to support these target groups. Creating an enablingenvironment to enhance women’s economic participation and entrepreneurship includes all measures and conditionsthataimtoremovesocio-cultural,legalandpoliticalbarriersinordertoachievegenderequalityand the advancement of women in economic life.

Severalgovernmentshavesetupspecialfundstosupportyouthenterprisesasadirectresponsetohighrates of youth unemployment. Examples include theBotswanaYouthFund, theKenyaYouthEnterpriseDevelopmentFund,theNamibiaYouthCreditScheme,theUmsobumvuYouthFundinSouthAfrica(nowtheNationalYouthDevelopmentAuthority),andtheYouthVentureCapitalFundinUganda.Thesefundsnormallycombinecreditatasubsidizedratewithtrainingforthebeneficiaries.Theyoftenincludemechanismstoreducetheriskofloandefault.Forexample,Botswana’sfunddoesnotpayoutloanstotheborrowers,butrather,paysdirectlytothesuppliersofassetstotheborrowers.InKenya,thegovernmentiscommittedtosource10%ofitsprocurementneedsfromyouthenterprisesinordertoreducetheseenterprisesmarketrisks .

4.4 Sustaining private sector investment

Sustainingprivatesectorinclusivefinancingalsorequiresacriticalvolumeofpublicandprivateinvestmentfor secondary and tertiary infrastructure development along specific value chains to help stimulate localeconomies,andprovideexpandedaccesstoessentialservicesandopportunitiesforbetterjobs.Inclusioninwell-organizedagriculturalvaluechainsaddressesmanyoftheprimeconstraintsthatyouthfacewhenbecominginvolvedinagriculture.Marketsmustbereasonablysecure,inputsprovidedoncredit,theavailabilityofadditionalfundingagainstthesecurityoffuturesales,accesstotechnicalsupport,well-establishedlogisticstobringgoodstomarket,etc.

Giventhatthefactorslimitingwomen’sentrepreneurshiparemanifoldandintertwined,integratedmeasuresare needed to realize women entrepreneurs’ potential. Programmes and services should take into account ruralandwomen-specificneedsandrecognizethatwomen-ledbusinessesarediverseinnature,operateinvariousagriculturalandnon-farmsectors,andfollowsarangeofbusinessmodels,includingmicro,small,mediumandlargeenterprises,cooperativesandsocialenterprises.

Thereisalsotheneedtoestablishflexiblecapitalvehiclesforlocalinvestmentwhichcanserveaslast-mileinvestorstode-riskthelocalinvestmentclimateandlaythegroundworkforotherinvestorsandstakeholders–bothpublicandprivate - toenterwithconfidence.Lastly there is theneed toaccelerate investment in

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financial inclusion, including throughdigitalpathways, inorder tosupportpoverty reductionandwomen’seconomicempowerment, andexpandemployment throughsmall andmediumenterprises, especially foryoungpeople.


Innovativefinancingespeciallyforyouthrequiresanintegratedapproachtoachievethemeasureofsuccessrequires.Itinvolvesaccesstoresourceslikelandandtechnologyincludingirrigationfacilities,mechanizationandmodernequipment.However, theneed for skills inagriculture isalsoverycritical in thedirectionofsupportingyoungpeoplenotonly toaccessfinancingbut toprofitablyutilizefinancing inpre-production,production and post-production phases in a sustainable manner.

Public sector support in special purpose vehicles for financing for youth andwomen is required. Publicpoliciesandpoliticaleconomiesshouldlookatframeworks,policiesandstrategiesthatarealignedtothenationaldevelopmentalagendaespeciallytheNationalAgricultureInvestmentProgram(NAIP)oftheCAADPProcesswithpublicpolicyon‘youthvoice’forallspheresofagriculturedevelopment

5. Innovative Delivery of Financial Services

Anestimated80%oftheworldisfedtodaybysmallholderfarmers.Yetthesefarmerslackaccesstofinancialservicesandareunabletorelysolelyontheirsavingstoreachproductionlevelsthatwilladdressextremepovertyissuesinwhichmostsmallholderfarmersaretrapped,andhelpreducehungerandmalnutrition.Someofthereasonswhyfinancialinstitutionsdonotextendtheirservicestoruralareasincludehightransactionfeestoconductbusinessinhighlydispersedpopulations,lackofcollateral,highperceivedrisksofagriculturalloans,weakfinancialinfrastructure,limitedfinancialliteracyofclients,etc.Often,manyfinancialinstitutionshaveverylimitedunderstandingofruralclientsandlowexpertiseindeliveringfinancialservicestoruralareas

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becauseofthehighlyperceivedcostoftraditionalwaysofdeliveringfinancialservices.Asaresult,thesefinancial institutionsbecomereluctanttoprovidefinancialservicestotheagriculturalsectorbecauseruralpopulationsareperceivedtohavelimitedabilitytosaveandapoorcreditculture.

5.1 Relevance to agricultural transformation

Digitalfinancialservices(DFS)havethepotentialtoaddressfinancialaccessandpaymentissuesthatfarmersfacetoday,especiallythoselivinginruralandremoteareas.Wheretraditionalbankingsectorhasfailedtomeettheneedsofsmallholderfarmers,digitalfinancialservicescouldreapthebenefitsofrapidlyincreasingcellphoneusageandbranchlessbankingtodeepenfinancialinclusion,therebyincreasingfarmers’incomewhileaddressingmalnutrition.Farmersfacearangeofbottlenecksinthepursuitofthemanagementoftheirfarmsasabusiness,fromacquiringinputs,toaccessingfinancialservices,tostoring,processingandsellingtheirharvest.Theabsenceoffinancial institutionsinmostruralplacesinAfricadeeplyaffecttheabilityoffarmers tosave,access loansandperform regularbanking transactions.Although it is tooearly todrawconclusionson thepositiveeffectsofDFS, initialevidence fromvariouspartsof theworldsuggests thatdigitalfinancialservicespresentarealopportunitytoaddressfinancialaccesschallengesinagricultureinthefollowingways:

1. Abilityoffarmerstoaccessarangeofsavingsproductsandservicesforshortto long-terminvestments;2. Lowtransactioncoststolendinruralareaswillmakecreditmoreavailabletofarmers;3. Costandriskreduction,improvingfarmers’liquiditymanagement,enhancingbuyers’cash distributionandsuppliers’payments;4. Digitizationofpaymentsacrossthevaluechainwilllowercosttobuyers,andeventuallyincrease pricetransparency;5. Farmerswillhavetheabilitytopurchasequalityinputsthankstoincreasedpurchasingpower resultingfromdecreasedtransactioncosts;6. IncreasedtransparencyandefficiencyinGovernments’processofdistributingsubsidizedfarm inputsorcashsubsidiestofarmers;7. Accesstostoragefacilitieswithinventory-basedcreditwillimprovetheabilityoffarmerstomanage post-harvestlossandspeculateforhigherpricesforharvests;8. Improved access to markets and better control of funds will empower women in decision-making inagriculture;


Public sector contribution to the use of digital financial services in expanding access to finance in theagriculturalsectorliesmostlyintheestablishmentofanenvironmentthatisconducivetotheestablishmentofpaymentsystemsthatareflexibleenoughtoallowpartnershipsbetweenmobilenetworkoperatorsandfinancialinstitutions,digitalpaymentsasanacceptableformofpaymentandbranchlessbanking.Thepublicsector would also have a role in building the regulatory framework, minimum infrastructure, e-paymentswitchesatthecentralbank,onwhichthetelephonecompaniesandfinancialinstitutionsrelytocompletetheneededtransactions.Thepublicsectoralsohasacrucialroletoplayinthefinancialeducationofthepopulation,whichwouldeventuallydrivetechnologyadaption.


Digitalfinancialservicesinvolveprivateinstitutionsacrossdifferentindustrieswillingtomakethenecessaryinfrastructureinvestmentsintelecommunicationsandfinancialservices.Assuch,itisimportantforvariousactorstounderstandthebenefitsofcooperation/partnershipwithoutwhichprivateinstitutionsacrossdifferentindustrieswouldnothavetheabilitytosustainablyincreasetheirbuttonlinewhilereachingouttotheruralpopulation with their services.

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Successwillbemeasuredbytheincreasednumberofpeoplewhohaveaccesstoformalfinancialsector,improved livelihoods and ability to transact efficiently along the agricultural value chains, savingsmadepossiblepertransaction,thenumberofbusinessesenabled,newjobscreated.

6. Value Chain Finance

The Malabo Declaration on Accelerated Agricultural Growth and Transformation explicitly commits AUmemberStatesto:

• Create,enhanceappropriatepolicyandinstitutionalconditions,andsupportsystemstofacilitate privateinvestmentinagriculture,agribusinessandagro-industries;• Establish/strengthenpublic-privatepartnershipsforatleast5priorityagriculturalcommodity valuechains;• Createjobopportunitiesforatleast30%oftheyouthinagriculturalvaluechains;and• Supportandfacilitatepreferentialentryandparticipationforwomenandyouthin agri-business opportunities.

Theseprovisionscallformajoreffortsatdevelopingandscalingupinclusivefinancingsystemsthatmeettheneedsoftheentiresetofinterdependentactorsofthevaluechainsoftheagrifoodsystems.Yet,traditionalfinancialservicesthatrespondwelltothedemandsofsomeindividualcategoriesofactors--especiallythoseof thehigh-valueand low-riskstagesof thevaluechains -- typicallyexcludeactorsof the lower-endandhigher-riskstagesofthechains.Indeed,someactors(especiallysmallholderfarmers,womenandyouth)areoftennotwellservedbytheformalfinancialsectorbecauseoflackofcollateral,perceivedoractualhighrepaymentriskorcostofoutreach.Valuechainfinance(VCF)hasemergedgloballyandisgraduallybeingexperimentedinAfricaasaninnovative,comprehensiveandintegratedapproachtoaddressingthechallengeofgrantinginclusiveaccesstothenecessaryfinancialproductsandservicestoallactorsforcoordinatedandeffectivedeploymentandperformanceofagriculturalvaluechains.

6.1 Relevance of Value Chain Finance to Agricultural Transformation

Inaway,agriculturaltransformationisaboutwalkingthroughandupthevaluechainsoftheagrifoodsystem,i.e.thesequenceofvalue-addingactivities,frominputstoproductiontoconsumption,throughprocessingandcommercialization.Asthesesegmentsareinter-linkedbackwardandforward,thewholevaluechainisonlyasstrongasitsweakestlink.Hence,agriculturaltransformationrequiresstrengtheningthelinksamongthestagesandsecuringtheflowoffinancialproductsandserviceswithinthevaluechains.

Valuechainfinancehelpsachievethisfunction.Itisasystemicapproachtoensuringthatfinancialservices,productsandsupportservicesflowtoand/orthrough,upanddownavaluechaintoaddresstheneedsandconstraintsoftheinter-linkedstakeholdersinvolvedinthechain.Inacomprehensiveapproach,valuechainfinancelooksnotonlyatthedirectborrowertakenindependently,butratherconsiderstheentirevaluechain,those(producers, traders,processors,etc.) involved inand the linkagesamong itsdifferentsegments, inordertobeststructureandalignfinancingaccordingtotheneedsofvariousvaluechainstakeholdersforthespecificpurposeofgettingproductstomarkets.Valuechainfinancenotonlyhelpsmeetthefinancialneedsofchainactorsbutisalsousedasawaytosecuresales,procureproducts,reduceriskandimproveefficiencywithin thechain. It thereforecontributes to increasingandexpandingfinancialflows, improvingfinancialinclusion,andenhancingefficiency,competitivenessandsustainabilityacrossthevaluechain.

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Valuechainfinanceusesasetoffinancial instruments inatailor-madeapproachtoexpandandimprovefinancialservicestomostefficientlymeettheneedsofthoseinvolvedinthevaluechain.Inessence,theseinstrumentsallowfinanceproductsandservicestobe“pluggedin”thevaluethroughahigh-valueandlow-risksegmentofthevaluechainand,throughcontractuallinkages,toflowto“lesscreditworthy”actorsacrossthechain.Theseinstrumentsinclude:

• Productfinancinginstrumentssuchastradercredit,inputsuppliercredit,marketingcompanycredit andlead-firmfinancing;• Receivablesfinancinginstruments,includingtradereceivablesfinance,factoringandforfaiting;• Physicalassetcollateralizationthroughwarehousereceipts,repurchaseagreementsand financiallease;• Riskmitigationproductssuchasinsurance,forwardcontractsandfutures;and• Financialenhancementsthroughsecuritizationinstruments,loanguaranteesand joint-venturefinance.


Value chain finance operations are primarily of private-sector domain. However, governments have acriticalroletoplayinsettingconducive“rulesofthegame”andprovidingthenecessary“publicgoodsandservices”forprivate-sectoroperationstobesecure,profitableandtransparent. Besidesprovidingforthenecessaryvaluechaininfrastructure(e.g.roadsystems,electricity,storagefacilities, informationsystems,etc.), governments need to create the appropriate policy and regulatory frameworks to level the playingfield,increasetheopportunitiesandincentivesandreducerisksforprivatesectorfinancingandinvestment.Governmentpolicyandregulationsshouldalsoaimatfinancialsystemgovernanceandstability,customerprotection,effectiveandefficientuseofinvestors’funds,thesettingofminimumstandards,clarificationofthelegalpositionoffinancialinstitutionsandinstruments,andcontractenforcement.Legislationmayalsotarget support to thedevelopmentofmanagedwarehouses thatenablecollateralizationof inventory, thecertificationofagriculturalinputs,theregistrationofagribusinesses,thedevelopmentofindustrystandards,and the opening of domestic and international markets. Governments can also utilize funds to assist in reducingrisk infinancingagricultureandagro-industry, forexample, throughsupport toguarantee funds,agricultural insurance or incentives for start-up. They should facilitate and support the organization andcapacitydevelopmentoftheweakestsegmentsofvaluechainactors,especiallysmallholders.Affirmative-actionpolicyinterventionsbygovernmentsshouldalsohelpenhanceinclusivenessinagriculturalvaluechainfinance,especiallyforwomenandyouth.

6.3 Sustaining Private Sector Investment in Value Chain Finance

Theviabilityof valuechainfinancedependsonhowvaluechaingovernance, relationsand linkagesarestructured to respond to market opportunities. Sustaining private sector investment through value chain financerequiresstrongandreliableend-marketdemand,aswellastransparency,trustandstrongtransactionrelationshipsamongvaluechainplayers.Asvaluechainfinancetakesplacewithinamarketsystemandisbasedoncommercialtransactionsbetweenvaluechainactors,theviabilityofvaluechainfinancemechanismscanbelimitedbyloworunreliableend-marketdemand,mistrustamongactors,andunsupportiveregulatoryandpolicyenvironment.Failures incontractenforcement,productionandpricerisksandside-sellingcanundermine buyer-based finance mechanisms.As a result, sustaining private sector investment throughvaluechainfinancerequiresnewandadditionalcapacitiesforpublicpolicyandregulatorybodies,financialinstitutionsaswellasprivatesectoractors(farmers,traders,processors,etc.)ofthevaluechains.

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6.4 Measurement of success in Value Chain Finance

Successinvaluechainfinanceisultimatelymeasuredbyitscontributiontoimprovingtheperformanceoftheconcernedvaluechains.Elementsofthisassessmentcanbeexpressedintermsofincrementin:

• Overallvolumeoffinancialflowstovaluechainactors;• Inclusivenessincategoriesandnumbersofactorsaccessingfinancialproductsandservices;• Productionandproductivityofactivitiesperformedbytheseactors;• Competitivenessoftheconcernedvaluechainsinmarketpenetrationandmarketshares;and• Self-sustainabilityofthefinancialmechanismsandinstrumentsused.

7. Agriculture and Food Insecurity Risk Management

WhileAfricanruralproducersfaceahighlevelofriskintheirdailyactivities,theyareglobally,thelessequippedtoaddressthoserisks.ThisisamajorimpedimentinachievingtheGoalofAgricultureTransformation.

Agriculture and Food Insecurity Risk Management is therefore gaining momentum in the context ofimplementation of the Malabo Declaration for impact and results. It is cutting across 5 of the Commitments includingEnhancingAgricultureFinance,EndingHunger,HalvingPoverty,BoostingIntra-AfricanTradeandEnhancingResilience.Twomajorreasonsforthis:1/AfricaistheonlycontinentwheretheGreenRevolutionhasnotyetbeensuccessfulandwherefoodinsecurityandmalnutrition,povertyandinequalityarestillmajorchallengeswithlittleprogressornoneduringthepastdecades.2/WhilethedevelopedworldandemergingcountriesinAsiaandLatinAmericahavewidelydevelopedagricultureriskmanagementinstrumentstoboostagricultureproductivityandgrowth, these toolsare still at an infant stage inmostAfricancountries. It isthereforerecognizedthatunlockingthepotentialofAgricultureinAfricawillrequirealongtermandcollectiveefforttodesign,developandimplementalargerangeofriskmanagementinstruments(mostofthembeingrelatedtofinancialinstruments),whileexpandingruralinfrastructureandprovidinganenablingenvironment.

7.1 Relevancy to agricultural transformation

AgricultureandFoodInsecurityRiskManagementshouldbeconsideredasanentrypointforcapacitatingruralproducersandfinancialinstitutionsintheagriculturetransformationagenda.Throughappropriateriskmanagementpoliciesandstrategies,riskaversionofrelevantstakeholdersisreduced,andtheyareabletomakeinformedandwellplanneddecisionswhiletakingareasonableandmanageablelevelofrisk.Itisonlyundersuchcircumstancesthatthepotentialoftheagriculturesectorcanbeunlocked,becomeattractiveinparticulartotheyoungpopulation,andleadtoqualityandsustainableinvestment.Bybuildingappropriatetools tomanage agriculture and food insecurity risk and providing it to rural producers and processors,wearecontributing tostrengthening theirability toperform inamarketenvironment.Hence, theywillbegraduatingfromlowproductivity/socialprotectiontypeofassistancetomarketinstrumentsandcontractualarrangements with higher returns. 7.2 Public sector contribution to attract private sector

It is expected that the public sector provides a range of public goods and services that will provide the appropriateanddifferentiatedincentivestotheprivatesectorinitsdiversity,i.e.includingSMEs.Thosepublicgoods and services have to be tailored to the needs of the range of agriculture risk management tools to makethemeffectiveandefficient.

It is also expected that an appropriate combination of policies and regulations be designed and formulated. Thesepoliciesandregulationshavetobepredictableandenforced.Improvedinformationsystemsmayguideboththedesignofsuchpoliciesandthatoftheriskmanagementtools(indexbasedinsuranceforexample).

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Inter-institutionalcoordinationiscriticalforthevariousmeasuresundertakentobecomeeffectiveandefficient,providedthemultisectoraldimensionofagricultureriskmanagement.Thosevariousmeasureshavetobeintegratedanddesignedinsuchawaytoavoidconflictingwitheachother,andrathercomplement,synergiseand stimulate one another.

Publicsectorcontributionhasalso toevolveover timeandadapt to thecurrentsituation.Thefocusmaybeatthebeginningonprovidingtheappropriatetools/incentivesforliftingupsmallholderfarmerstowardsgraduatingasbusinessoriented farmers.Thisentails facilitatingandsupporting theprovisionofasetofrisk management tools and enabling environment that will create the paradigm and effective shift from subsistenceorientedactivitiestomarketorientedones.Italsoentailsincentivisingfinancialinstitutionsandsocial enterprises to design and provision risk reduction and preparedness measures that allow smallholders to uptake riskier activities by adopting new technologies for exploring new, alternative markets, henceincreasingproductivity.Italsoentailssupportingfinancialinstitutionsthemselvesinaddressingandsharingor transferring the risk burden.

Verybasicpublicgoodsandservicestoprovideandmakeaccessible,areregularagricultureandmarketaswellasfoodsecurityandearlywarninginformationsystems.Thiscouldguideallstakeholdersinbuildingprevention/preparednessmeasures aswell as adaptation strategies. Such information systems are alsocritical for designing and operationalising most risk management instruments like index insurance and warehouse receipt systems, and aremajor contributors towell-designed and predictable public policies.Theselatterusesofinformationsystemsconstituteanalternativeandmarketabledemand,henceensuringsustainabilityofsuchpublicservices.

Whilesoftinfrastructureasdescribedaboveisanenablerofagricultureriskmanagementtools,publicsectorhasalsotoprovidehardinfrastructurelikeirrigationschemes,storagefacilities,roads,energy…inabroaderpartnershipwithprivatesector,NGOs,financialinstitutions,developmentpartners,CSOstobuildeffectivemarkets for private sector involvement in product development and distribution.


Private sector investment in agriculture will be sustained through effective provision and adoption of agriculture riskmanagementtoolsandpolicyinstrumentsthatwillreducethelevelofriskofruralproducers,actorsalongthevaluechainandfinancialinstitutions.Theleitmotivofprivatesectorbeingtoundertakeriskyactivitiesforprofit,privatesectorinvestmentwillalsobesustainedthroughtheprovisionofthosespecificinstrumentstoanincreasedmarketprovidedthroughthegraduationofsmallholderruralproducersfromsocialprotection/productivesafetynetstomarketinstruments.Thisisthepathtoagriculturetransformation.

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Success of Agriculture Risk Management is based on the level of integration of agricultural risk management policiesandstrategiesintonationaldevelopmentpoliciesandtheirimplementation.Thisshouldideallyconsistof5broadcomponentsnamely:

• Integrationintopublicbudgeting;• Capacitydevelopmentinthedesignofappropriateriskmanagementinstruments;• IntegrationofAgriculturalandFoodInsecurityRiskManagementinstrumentsintolocaldevelopment plansandprojects;• Adoptionoflawsandregulationstoattractfinancial/privatesectorinvestmentintoengineeringofrisk managementinstruments;• Accessibilityandaffordabilityofthedesignedinstrumentstosmallholderruralproducers.

Once these have been achieved, the measures of success could be dropped down to community andhouseholdleveltomeasureaccess,affordability,utilisationandeffectivenessaswellasimpactonlivelihoodsand investment in agriculture.

8. Renewing Partnership for Accelerated Development

Attaining the CAADP Malabo goals places emphasis on partnerships for accelerated implementation to bring tobeartheenablingcapacity(technical-policy–social-politicalanalysisandsupportinginstitutionalreforms;etc.)inadditiontoincreasedinvestmentsandfinancingtotransformAfricanAgriculture.Thisvisionrequiresabroadrangeof multidisciplinary, multi- sectoral, multi-level institutions, partnerships and alliances tocoalesce,co-createandinnovatetowardsdeliveryandrealisationoftheCAADPVision2025.

This session aims to discuss how best to attract more private sector engagement, leverage existingand emerge with adapted partnership arrangements for enhanced agricultural policy dialogue, mutualaccountability, performance monitoring learning; inclusiveness, collective leadership and coordination atcontinental,regionalandnationallevels.

8.1 Context of the CAADP PP

The CAADP Partnership Platform (PP) was established to serve as a mechanism for peer review andengagementamongst thecoreCAADPsupport institutionsandpartners.Theoverallgoalof theCAADPPPwastofacilitateamutualreviewofprogress,performanceandchallengeswithinCAADPandtoenrichdialogueamongststakeholdersonimplementationprioritiesandprocesses.OvertheyearsthePartnershipPlatformhasprovidedthemuchneededleadershiptogalvanisecountrylevelactionsandownership,withaddedvoiceandparticipationofnon-stateactorsparticularlyfarmersandcivilsocietyaswellastoratchetupglobalattentiononAfricanAgriculture.UndertheleadershipoftheAfricanUnionCommissionandNEPADAgency,thePartnershipPlatformhasalsoprovidedthecentrestageforcriticalthinkingandlearningresultingin noteworthymilestones such as theSustainingCAADPMomentumReport (2012/13)which led to theemergenceoftheCAADPResultsFramework(2014).Itisuponthisbasisthatthe23rdAfricanUnionSummitoftheAfricanUnionHeadsofStateandGovernmentendorsedtheMalaboDeclarationonAcceleratedAfricanAgricultureandTransformationAgenda(3AGTs)(Malabo,EquatorialGuinea,2014)asthedefiningboldandaspirational targets for the next decade of CAADP implementation.

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This12thCAADPPPthereforetakesplacesatadefiningmoment,astheAUgearstorolloutimplementationsupport to the countries to begin to domesticate the set goals and targets of the Malabo Declaration. As added impetus,theCAADPResultsFrameworkprovidesthebasisforasystematicbiennialAgriculturalReviewtohelpwithperformancemonitoringandreportingbyactorsandmemberstates.TheResultsFrameworkalsoaimstofosteralignment,harmonisationandcoordinationamongmulti-sectorialeffortsandmulti-institutionalplatformsforpeerreview,mutuallearningandmutualaccountability.

TherenewedfocusonresultsandimpactimpliesalsothatCAADPimplementationsupportshouldhelpalignandstrengthensystemiccapacitiesforeffectivedeliveryandimplementation,andmoresoinacohesiveandharmonised manner for inclusive and sustainable development.

8.2 Key implementation success factor for CAADP during the second decade

TransformationofAfricanAgricultureiscoalescingfactorforCAADPpartnershipsandalliances.Tothisend,thisPPaimstoreflectfurtherandhelpframetheinstitutionalarrangementsthatshouldguidetheadaptationof thePartnershipPlatformarchitecture.Underlying the re-engineeringof thepartnerships towardsmorefocusonimplementation,resultsandimpact,thefollowingCAADPprinciplesandresultorientationsforthenextdecadeserveasfoundationalcriticalsuccessfactor.Tomentionafew:-

• Aligningandstrengtheninglocalsystemiccapacitiestodeliverresults• Embracingcross-cuttingissueswhichunderliebothsustainabilityandinclusivenessprinciples andvalues,suchaswomenandyouthempowerment;entrepreneurshipdevelopment;climate change,resilienceandriskmanagementtomentionafew• Rallyingtechnical-policy-politicalanalysisincludingforesighttowardscatalysingimplementation ofeconomicpolicymeasureswhilesalsodemonstratingearlywinsandresultsandcontinuingto manage immediate technical and political needs• Fosterandenhancequalityofdialogueatcountryandregionalleveltosupportmonitoring, reporting,mutualaccountabilityandlearning• EnhancequalityandreturnsofInvestmentFinancingofbothpublicandprivatesectorinvestments• Fostermulti-sectorialapproachesandcoordinationtolinkstrengthenlinkagesbetweenAgriculture andothersectors,alongsharednationaldevelopmentagenda

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8.3 Key guiding questions

1. LookingbackonthegainsandinsightsfromfirstdecadeofCAADP,howshouldtheCAADPPartnership Platform(and itsassociatedstructures)continue tocontribute towardsagriculture’scontribution to economic growth and inclusive development?

2. Whatshouldbetheprinciplesbywhichtheexistingplatformscanattractandbeusedtoincrease private sector dialogue and engagement to drive agricultural transformation and sustained inclusive agriculturalgrowth,particularlyatnationallevel?

3. In view of the goals and targets set for the next decade of CAADP transformation agenda and emergingtrends(challengesandopportunities)towhatextentshouldtheCAADPpartnershipPlatform architectureevolve(objectives;keyprinciplesandvalues)tohelpstrengthencooperation,collaboration andaccountabilityamongststakeholdersto:

a) tocontributetowardsstrengtheningandaligningofsystemiccapacitiesforeffective executionanddeliveryofresults; b) toleverageandincreaseinvestmentsandfinancing

Inviewofemergingimplementationsupportdemands,thefourcategoriesofpartnershipshighlightedinthis12THCAADPPartnershipPlatformcover the followingareas:Financing;expertknowledgeandanalysis;privatesectorinvolvementandin-countrycoordination.

8.4 Break-away group sessions

The four breakaway sessions are the following:

1. FinancingarrangementsinsupportofCAADPcoordinationandprocess2. PartnershipsforKnowledge,skillsandcapacitybuilding3. Harnessprivatesectordialogue4. In-countrycoordination,multi-sectorapproachandnewcoalitionstodeliverresultsandimpact

8.5 Expected Outcomes

Buildingontheguidanceprovidedaboveandtheplenarypaneldiscussioneachworkingsessionisexpectedto provide stakeholder expectations on what should be guiding principles to help frame and strengthen multi-partner,multi-disciplinarycollaboration,coordination,coherence,harmonisationandmutualaccountabilityofindividualandcollectiveeffortstowardseffectivedeliveryoftheMalaboCommitments.

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12th CAADP PARTNERSHIP PLATFORM MEETING

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