27 March 2024, Mozambique – The Food and Agriculture Organization of the United Nations (FAO), through its EU-funded project PROMOVE Agribiz, and in partnership with the targeted District Services for Economic Activities in the Provinces of Nampula and Zambezia is calling upon farmer groups and micro, small, and medium enterprises to submit investment proposals, following the success of the first investment round from 2023. These proposals aim to operationalize microprojects, with co-financing from FAO available at up to 80 percent through the Beneficiary Grants modality.

FAO collaborates closely with government authorities in ten selected districts across Nampula and Zambezia Provinces for the operationalization of the Beneficiary Grants Modality. The Representation enhanced the capacity of the district extension agents in agribusiness principles and together introduced the Farmer Business School (FBS) methodology to targeted farmer groups. Through the FBS, extension agents assist farmers in structuring their farms as viable businesses business, assist in identifying market opportunities and crafting business plans. Furthermore, they assist in identifying potential investment prospects and formulating concrete investment proposals, enabling the farmers to expand the farms as sustainable businesses.

In 2023, FAO successfully co-financed the first fifty microprojects following a competitive selection process. These projects, with budgets ranging from USD1 500 to USD15 000, empower farmers to invest in businesses supporting the transition from subsistence to commercial farming. The financing can be utilized for various purposes, including acquiring essential assets or services to scale production, addressing minor infrastructural (storage, processing, etc.) gaps hindering commercialization or effective aggregation, and supporting diversification efforts to engage in new income-generating farming activities.

By deploying the necessary matching grants, alongside business development services and market expansion support, FAO effectively supports farmers to become reliable business partners and address key constraints in the value chain. The FAO led micro-projects are proven to be a catalytic instrument to address the vicious circle of farmers that lack investment capital to engage in commercial farming. By investing around USD200 000, FAO managed to further attract and leverage USD60 000 of private investments in the first batch of micro – projects. Ultimately, the projects result in a sustainable and commercially led integration of smallholder farmers in value chains, higher incomes and greater overall resilience.

To maximize the impact of this funding, the District Service for Economic activities and FAO have developed a strong partnership to monitor and provide both technical and financial management support during the implementation process of the micro-projects. This effective collaboration ensures that the projects are aligned with the commercial partners of the farmers so that the projects effectively help them enter new markets or grow presence in existing markets. The alignment between the Government and FAO Mozambique is marking a pioneering effort in leveraging innovative financing tools to bolster farmers within the commercial sector. The successful completion of the initial investment round underscores FAO's expertise in overseeing and institutionalizing the mechanisms for impact-driven investments that yield both positive social or environmental outcomes and financial returns within the agricultural sector. Following the initial success, for the second call for proposals FAO is extending the invitation for co-financing to both off-takers and farmer groups. FAO hereby works in close partnership with the German Corporation for International Cooperation (GIZ) to also address the supply chain and market needs of MSMEs who often directly source the farmer. Both farmers and MSMEs off-takers are requested to define joint proposals after assessing the supply chain needs or opportunities and barriers that inhibit the full potential of the commercial relationship. FAO supports this assessment and the matchmaking process between the two parties through the organization of dedicated agribusiness forums in the 3 districts of Alto Molcoue, Mocuba and Nametil.

"Utilizing the appropriate blended finance instruments enables private sector led growth and investment to expand commercial farming operations." José Luis Fernandez - FAO Representative in Mozambique

"The FAO supported micro-projects encourage investment as beneficiary farmers groups are required to contribute a portion of the funds. This ensures that beneficiaries hold the critical sake of the project's success and are motivated to utilize resources effectively." Jan Verlaak - FAO Mozambique Agribusiness Specialist

"Matching grants can spur innovation in agriculture by supporting experimental or novel approaches to address pressing challenges, based on the experience from the farmers. The grants hence are a powerful social cohesion tool supporting cooperation among farmers and overcoming one of the main bottlenecks in commercialization: volume of sales." Dario Cipolla - FAO Mozambique Technical Adviser