USAID Issues Mobilizing Financing for Agriculture Opportunity
USAID issued a Broad Agency Announcement (BAA) to seek participants to co-create, co-design, co-invest, and collaborate to identify new and innovative solutions to address the challenge of how to most effectively expand access to financing on terms and conditions (lower interest rates and longer tenors) that will allow for capital investment and facilitate trade.
Problem and Challenge Statement:
PROBLEM: Agriculture plays a key role in Ghana’s economy, but the sector’s advancement is hampered by limited access to finance. The sector accounts for 21.2 percent of GDP and employs nearly 60 percent of the labor force. Despite its size and importance, access to agricultural finance in Ghana is challenging to obtain, however, and where it is available, is often prohibitively expensive. Agriculture receives substantially less commercial bank lending than other sectors — barely five percent of total credit to the private sector. Interest rates for commercial bank loans are quite high, averaging 30 percent per annum. Financing tenors tend to be shorter-term, prohibiting longer-term investments. As a result, firms and smallholders alike have limited ability to modernize and upgrade agricultural value chains and expand agricultural trade. It is clear there are a number of constraints to agriculture-related financing and a number of possible solutions to address this challenge. What is unclear is which solutions will be the most effective and efficient in stimulating financing to the "missing middle" for investment in agriculture, without crowding out local finance providers and distorting the finance markets.
Challenge: The purpose of this BAA is to identify and test innovative, scalable, and sustainable approaches to rapidly increase the level of commercial (non-subsidized) financing for agriculture on terms and conditions that enable capital investment and support trade. The BAA will investigate the challenge of how to most effectively expand access to financing (in the form of lower interest rates and longer tenors) for the following agricultural sector entities:
- The “missing middle” of small and medium enterprises with financing requirements in the range of $10,000 to $500,000, and
- Smallholder farmers and microenterprises seeking financing (particularly financing on terms and conditions which can enable longer-term capital investment) in amounts under $10,000.
Solutions may include, but are not limited to, innovative financing structures, support in addressing systemic challenges, technology-based solutions, and other agribusiness-related possibilities. These solutions must: i) work in harmony and not undercut local Ghanaian finance providers; ii) be sustainable (i.e. generate revenues sufficient to cover costs); iii) ensure additionality (financing which otherwise would not occur); iv) target financing that supports the U.S. Government's Global Food Security Strategy and the Government of Ghana’s Strategy for the agriculture sector; and v) maximize leverage of USAID and other possible contributor funds.
Read the full announcement in the sidebar and make submissions by November 29th, 2018 by 10 am EST.