2 Enabling environment: Recommendations

To help create a suitable enabling environment, donors should

2.1 Recognize the nature of the underserved middle and develop support mechanisms to effectively facilitate the growth of these agri-SMEs.

2.2 Work with governments and others to focus policy and investment efforts on supporting and stimulating a conducive ecosystem of policies, regulations and infrastructure that enables private enterprises to thrive.

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The underserved middle: Defining excluded enterprises in agricultural value chains [15 pages]

clarifies the concepts of the ‘missing middle’ in terms of access to finance and the ‘hidden middle’ in terms of access to regulatory authorities. The report also identifies the key roles in the broader enabling environment that are essential for addressing the challenges facing agri-SMEs.

Watch the video 

Understanding the ‘underserved middle’ [59 minutes] reflects on financing gaps and needs, with the discussion drawing on published data and market analysis to provide clarity to the investor community on opportunities for investing in SME agribusinesses sourcing from smallholder farmers.

Or read: the one-page summary of the video.

To help create a suitable enabling environment donors should:

2.3 Work collaboratively with impact investors to understand and engage them in the agriculture sector, offsetting some of the development and research costs associated with deal origination and due diligence, to bring them into the market.

2.4 Have clear strategies for starting (and exiting) grant funds that respond to the needs of the agri-SME sector and do not crowd out private capital or philanthropy.

2.5 Provide financial support for the development and implementation of rigorous, consistent methodologies to measure social impact.

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Bridging demand and supply of private investment capital for small and medium sized enterprises
[56 pages] clarifies the apparent division: there are not enough investable enterprises and yet there is a huge unfulfilled demand for finance.

To help create a suitable enabling environment donors should also:

2.6 Work with policymakers should support efforts to clarify legal frameworks for carbon finance and initiatives to improve smallholder security of land tenure such that both smallholder farmers and the private sector can benefit from the associated opportunities.

2.7 Consider investing in industry coordination to help agribusinesses to achieve the scale necessary to attract carbon finance into the sector.

Read the report

Carbon Finance for Smallholder Farmers and Agribusinesses: Analytical Briefing on Agroforestry Solutions [48 pages]

examines the role carbon finance could play in the transition of smallholder agriculture to a more sustainable, productive, and resilient future.

Updated March 2023

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