Financial Innovation Supporting Agricultural Entrepreneurship in the WAEMU

On 26 June 2024, FERDI's Chair on Agricultural Modernisation Policies in Africa, in collaboration with the ALFA association, hosted a conference at the InVivo Group's headquarters focused on financial innovation to support agricultural entrepreneurship in the WAEMU region. 

WAEMU intends to undertake a major strategic reorientation of its agricultural policy by diversifying funding sources and increasing private sector involvement as part of an integrated approach to agricultural value chains.

The regional institution has noted that the current supply of credit is often inadequate: bank loan maturities are too short, interest rates are high relative to the profitability of activities, and the standardization of financial products is incompatible with the fluctuations of agricultural activities. Furthermore, collateral loans are problematic due to the very limited assets of the stakeholders and the precariousness of property rights.  Furthermore, development institutions dedicated to the private sector may find that their risk management strategies can potentially conflict with their impact objectives. 

What solutions can overcome the mismatch between supply and demand for financing in the private agricultural sector?  How can more capital be attracted to a sector perceived as too risky ?

In partnership with the WAEMU Commission, FERDI has studied the architecture of a "blended finance" investment vehicle, which should help mitigate risk, accelerate investment profitability and amplify the positive environmental and social impacts of agricultural entrepreneurship development in WAEMU.

The conference aimed to present an innovative financial vehicle based on the concept of blended finance. This financial instrument was detailed in a report prepared by Ferdi for the WAEMU Commission, and the event was attended by Amadou Mbodj, the Commission's Director of Agriculture.

Targeted exclusively at the agro-pastoral sector, this investment fund is designed to enable African SMEs that are leaders in their field to initiate or expand their activities, while also supporting smaller players, including family farms, that are essential to their growth.

Chaired by Jean-Marc Gravellini, Director of the Chair on Agricultural Modernisation Policies in Africa, the conference sought to review the current situation, present the instrument, and gather feedback from stakeholders. The event was attended by 80 people at InVivo's headquarters, with around a hundred more participating online.

The event featured 14 panellists from a diverse range of backgrounds. The conference was divided into three parts: the first session focused on the challenges and financial needs of the agricultural sector in West Africa, followed by an in-depth presentation of the financing vehicle. Discussions continued during a second round table, providing an opportunity to gather feedback from financial stakeholders.