The 20-year experiment: Why IFC thinks African agritech has finally come of age
The IFC is backing 15 African agritech companies and connecting them to nearly 200 commercial banks to expand financing for smallholder farmers, reduce lending risks, and boost agricultural productivity.
For two decades, attempts to modernize African agriculture through technology have been plagued by failed pilots, underfunded startups, and reluctant commercial lenders. Africa imports approximately $90 billion worth of staple food products yearly, a situation that exacerbates currency depreciation and inflation. Recognizing the need for a solution, the International Finance Corporation (IFC) has embarked on a 20-year experiment to back 15 African agritech companies.
Aliou Maiga, Director of the Financial Institutions Group for Africa at IFC, announced the new approach at the Africa Financial Industry Summit (AFIS) in Luanda. This strategy marks a significant departure from previous venture-capital models that required agritech startups to assume balance-sheet lending risk. Instead, IFC is leveraging commercial bank liquidity to support rural smallholder value chains, underwriting the ventures with risk-sharing guarantees.
The IFC's tripartite model involves providing direct equity to the 15 selected agritech firms to facilitate product development and commercial scaling. Rather than compelling these startups to raise costly debt to lend to farmers, IFC connects them to its network of nearly 200 commercial banks and institutional lenders. This approach aims to address the continent's agricultural finance challenges and promote industrialization of domestic food production.
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