By 2050, the global food system needs to feed an additional two billion people while drastically reducing its climate footprint. Despite agriculture making up one-third of global emissions and an annual investment need of $350 billion to transform the global food system, less than 5% of climate finance is currently being allocated to sustainable food and land use.1, 2 At the same time, women-led SMEs face a financing gap of $300B and agricultural SMEs with the smallest credit needs remain among those most vulnerable.3 CSAF members are innovating to meet these challenges with creative capital: responsAbility, in partnership with the CGIAR and with KfW as anchor junior investor, has launched a first-ofits-kind blended finance fund that uses science-based interventions for holistic food systems transformation. The Climate-Smart Agriculture and Food Systems Fund (Food Systems Fund) will raise $200M to provide long-term expansion debt financing and technical assistance to agricultural SMEs in Africa, Asia, and Latin America. Over the next 10 years, the Food Systems Fund will showcase projects that support a transition to a low-carbon, gender-sensitive, and climate-resilient global food system by intensifying production, promoting sustainable and inclusive food brands, reducing food loss, and adopting climate technologies. Alongside investment, the fund will provide technical assistance to support climate-smart practices and expand opportunities for women at all levels of the value chain. With target ticket sizes of $3M–10M and a focus on long-term loans, the Food Systems Fund reaches a market segment adjacent to, and largely unserved, by CSAF members. In 2011, amid a rapid increase in global capital flows to Africa, SIDI and Alterfin launched the European Solidarity Financing Fund for Africa (FEFISOL) to channel investment specifically to under-served rural communities. Building on the success of FEFISOL, which concluded in 2021 after disbursing €86.5M, SIDI and Alterfin have structured FEFISOL II. This fund, which closed at €22.5M and includes €1M for technical assistance, will focus on local currency lending, climate and social impacts of borrowers, and resilience of agricultural SMEs in Africa. As noted above, the average loan size across CSAF has trended upwards over the past decade even as agricultural SMEs with credit needs below $500K remain underserved. In 2014, SME Impact Fund (SIF) launched in Tanzania with a focus on serving smaller businesses operating in food crop value chains such as maize and rice sold to domestic consumers. Over the past eight years, SIF has built the case for investing in these businesses in Tanzania, disbursing almost $15M at an average ticket size of $80K. With support from CSAF field building partner Small Foundation, SIF commissioned a market study of replicating the fund, and assessed the supply and demand of missing middle agricultural SME finance in Kenya and Uganda. Guided by these findings, SIF plans to expand to these countries and triple its reach by launching SME Impact Fund II in 2023. The new fund will capitalize $20M and an accompanying technical assistance facility of $2M to unlock the impact of this crucial segment of agricultural SMEs.
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