Support to Investment

Public-private producer partnerships to increase farmers’ incomes in Benin - PADAAM

Woman preparing food for fishermen in port town of Cotonou, Benin.
06/08/2019

The development of inclusive agro-based value chains contributes to delivering on the SDGs. Instruments such as the public-private producer partnership (4P) model, advocated by IFAD, aim to bring more small-scale farmers, particularly women and young farmers, into profitable value chains. These 4P financing instruments also address the ‘missing middle’ phenomenon – i.e. rural enterprises too small to obtain loans from commercial banks and development finance but too large to access microcredit schemes.

The IFAD-funded agricultural development and market access project in Benin, prepared with Investment Centre support, is a good example of how to implement the 4P model for SME development in value chains such as rice, cassava and maize. To increase the incomes of the rural poor, the project supports the development of SMEs (called ESOPs) under a joint venture scheme where the business assets, ownership, revenues and expenditures are shared among producers, a private entrepreneur and a private investor (in this case the Togolese NGO Entreprises, Territoires et Développment). While ESOPs will first rely on public funds to kick-start their enterprises, the longer-term objective is to privately finance the most promising 4Ps once the six-year project is phased out.

To achieve this, the design team approached various social impact investment funds to finance new SMEs – through private equity or debt – to ensure sustainability after the project closes. Impact investing uses private capital investments to generate social or environmental benefits while also turning a profit. Since impact investors look for reliable agro-entrepreneurs, the project also identified SME incubators to advise and coach them to become better performing business leaders.

Leveraging private finance from equity funds while also programming incubation activities, which would not have happened without FAO’s support during project design, could easily be expanded to other projects to support inclusive value chains and SME development, thereby boosting agribusiness development in sub-Saharan Africa.

Photo credit ©FAO/Desirey Minkoh / FAO
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