SPOTLIGHT
Financing and TA: fertile ground for the growth of agricultural companies in Africa Gabrielle Orliange, Head of social and environmental performance, SIDI/FEFISOL
The FEFISOL fund was set up in 2011 by SIDI and its partners. In addition to its financial support, it proposes a technical assistance (TA) facility to African rural players. After conducting some 140 TA projects in Africa, SIDI and Alterfin are set to launch a second fund in 2022, with the aim of further deepening its social and environmental approach to the funded companies.
FOCUS SIDI To address the challenges of financial inclusion in Africa, particularly in rural areas, SIDI (International Solidarity for Development and Investment) and two European investors, Alterfin and Etimos, set up the European Solidarity Financing Fund for Africa (FEFISOL) in 2011. Their objective: to offer financial services tailored to agricultural structures and microfinance institutions operating in rural areas. To strengthen its impact and ensure its additionality,1 FEFISOL primarily targets small institutions going through a consolidation process and entities with strong social innovation. Proparco became a shareholder of the fund when it was set up.
I
n Africa, the traditional banking sector takes little interest in microfinance and the rural sector. Yet technical assistance (TA) for agricultural companies, combined with an appropriate range of financing, plays a crucial role in the sustainable development of the continent. It is for this reason that the FEFISOL fund proposes a technical assistance facility to rural players, in addition to its financial support. In this context, it provides its clients with specialized service providers that help them strengthen their viability and improve their productivity, while ensuring that the livelihoods of smallholders are preserved. Since it was set up just 10 years ago, FEFISOL has financed 139 support projects for 51 clients in 22 African countries. Over two-thirds of the beneficiaries are small microfinance institutions (MFIs) going through a consolidation process2 or farming entities. A quarter of the technical assistance projects supported by the fund are
related to financial issues, such as accounting and strengthening internal control. The technical assistance program strengthens the impact of the financial support. For the beneficiary, the two tools for action are complementary: the FEFISOL loans allow companies to increase their activity, while the technical expertise helps them secure this growth by improving their efficiency. In terms of the management of the fund, the technical assistance in turn gives the investment officers a better understanding of how the beneficiary companies operate, which improves operational efficiency. The TA services offered by FEFISOL are especially noteworthy because they provide a customized response to the client’s needs. The client is closely involved in the entire process, including in the selection of the service provider. This effective ownership is also strengthened by the direct financial contribution that each client must make to the project3.
1 The additional nature of financing lies in the fact that the resources mobilized must be entirely dedicated to financing sustainable actions whose development impact would not have been achieved by the private operator without the mobilization of these resources. 2 Tier 3 MFIs whose total assets are less than USD 5m. 3 This compulsory contribution – at least 15% of each mission – accounts for the relatively low average amount for TA projects.
20
