Several African economies rely heavily on agriculture because it is the primary source of income for millions of people and a major contributor to Africa’s GDP. However smallholder farmers, who make up the vast majority of the farming population, suffer various obstacles, including restricted access to capital. By increasing agricultural investment in Africa, new forms of financing are pulling the continent out of its poverty cycle.
Impact investment: A promising financial strategy
Indeed, impact investment is one of the most promising financial strategies. To generate a financial return as well as a measurable social or environmental benefit is the goal of impact investing. Impact investors in the agricultural sector often provide capital to smallholder farmers who would otherwise have trouble obtaining it.
The AgDevCo fund: What is it?
The AgDevCo fund is one such impact investment programme in the agricultural sector. To help African farmers get off the ground, AgDevCo is a social impact investor that offers long-term financing. The goal of the fund is to help small farmers by investing in companies that help them with things like inputs, education, and access to markets. AgDevCo’s goal is to help these companies succeed so that Africa’s agricultural sector may grow and benefit more people.
Crowdfunding as another way of raising funds
Crowdfunding is yet another novel approach of raising capital. The term “crowdfunding” refers to a method of financing that solicits monetary contributions from numerous persons using digital mediums. As an alternative to bank loans, crowdfunding has become increasingly popular among Africa’s smallholder farmers.
An example of crowdfunding
Farmcrowdy is an example of an effective crowdfunding project in the farming industry. Farmcrowdy is an online marketplace that helps Nigerian farmers secure financial backing for their operations. When farmers use the platform, they have access to inputs, training, and assistance throughout the whole farming cycle, and investors get a cut of the profits. Around 25,000 Nigerian farmers’ lives have been improved thanks to Farmcrowdy since the platform launched in 2016.
A financial system that Africa is becoming familiar with
Mobile money is another new type of financial system that is catching on in Africa. Payments, wire transfers, and other monetary transactions can all be made via mobile money. When compared to traditional banking, the convenience and mobility of mobile money have made it a popular choice for smallholder farmers.
A type of mobile money programme
M-Kulima is a pioneering mobile money programme that has helped farmers in Tanzania. In Kenya, smallholder farmers can access loans and other financial services using M-Kulima, a mobile application. The platform makes use of mobile money to streamline transactions, making it easier for farmers to get their hands on much-needed financing. More than 100,000 smallholder farmers have benefited from M-Kulima since its start in 2014.
Why finding new and innovative ways of financing is essential to increase economic growth in Africa via agricultural investment.
Ultimately, new forms of financing are becoming increasingly significant in the fight against poverty in Africa via increasing investment in agriculture. Financing innovations such as impact investment, crowdsourcing, and mobile money are helping to sustain and expand Africa’s agricultural sector and provide opportunities for the continent’s smallholder farmers. These financial approaches are empowering African farmers to realise agriculture’s full potential as a growth engine and tool in the fight against poverty.