Felipe Dizon, the acting program manager for the Global Agriculture and Food Security Program (GAFSP), recently highlighted the pressing need to tackle financing gaps in the agrifood sector, particularly in low-income countries. In a conversation with AgFunderNews, he emphasized that urgent action is required to support high-potential yet underserved segments of this vital industry. This statement comes on the heels of GAFSP’s announcement of a new $75 million investment window aimed at accelerating financial innovations that benefit smallholder farmers and micro, small, and medium enterprises (MSMEs) across 77 low-income countries.
The initiative seeks to address a dire global issue: hunger. Currently, Africa, which houses a significant portion of low-income nations, has over 280 million people—approximately 20% of its population—facing hunger. The challenge is not limited to Africa; parts of Asia and Latin America are also grappling with similar issues. With just six years remaining to achieve the United Nations Sustainable Development Goal of eradicating hunger by 2030, the urgency to act has never been greater.
One of the most persistent barriers to reducing hunger in these regions is the lack of access to finance. According to a recent UN report, a staggering 63% of low and middle-income countries struggle to finance their food security. This financial shortfall is particularly acute in agricultural sectors, where access to funding is crucial for farmers who depend on seasonal crop cycles. The report further illustrates that countries with limited financing options are significantly more likely to experience undernourishment, with a 23.1% prevalence rate compared to just 6.9% in nations with high access to financing.
Data from Aceli Africa indicates that only 25% of the estimated $240 billion market for agricultural finance in Sub-Saharan Africa is currently being met. This leaves a substantial $180 billion annual gap, with $65 billion specifically needed for small and medium enterprises. Traditional financial institutions have largely failed to meet these needs, viewing smallholder farmers and MSMEs as too risky and costly to serve, often resulting in minimal lending to the agricultural sector.
In response to these challenges, GAFSP was established in 2010 by G20 nations and various multilateral development financial institutions. Over the past decade, GAFSP has facilitated access to financing for agricultural value chains in low-income countries, funding around 300 projects that have benefited over 20.5 million people with a total of $2.5 billion. Notably, nearly 60% of these funds have been directed towards Africa, while a quarter has gone to South and East Asia.
The newly launched Business Investment Financing Track (BIFT) aims to build on this foundation by de-risking investments in smallholder farmers and MSMEs. This $75 million investment window is designed to foster public-private partnerships, engage civil society, and strengthen platforms that aggregate funding from diverse investors. The focus on 77 countries is intentional, as many of them are affected by fragility, conflict, and violence, which exacerbate food security challenges.
Dizon noted that BIFT represents a shift in strategy. It aims to move beyond traditional financing methods that have proven inadequate in addressing the needs of the agricultural sector. By incentivizing blended finance solutions, BIFT opens new avenues for funding projects that may not attract conventional investment due to perceived risks. This is particularly important for early-stage projects that hold significant potential for positive development impacts.
To qualify for BIFT financing, project sponsors must align their proposals with national strategies and public investments that emphasize inclusive, climate-smart, and nutritious food systems. Proposals must clearly outline how they will address financing gaps and support smallholder farmers and MSMEs engaged in producing nutritious foods for local markets.
With the pilot program set to run until June 2026, the long-term vision for BIFT is to become a cornerstone of food production in low-income countries. Dizon expressed optimism about its potential transformative impact, particularly as it encourages multilateral development financial institutions to adopt blended finance approaches, which could yield systemic benefits for underserved segments of the agrifood system.
As BIFT rolls out in partnership with institutions like the African Development Bank and the International Finance Corporation, its success will be closely monitored. The initiative not only aims to finance projects but also to create sustainable solutions that enhance food security, climate resilience, and economic opportunities in some of the world’s most vulnerable regions.