MICROCAPITAL BRIEF: IFAD Private Sector Financing Programme to Support Rural Businesses, Launching with $5m Loan to Babban Gona, Facilitator of Agriculture in Nigeria

The UN’s International Fund for Agricultural Development (IFAD) recently launched the Private Sector Financing Programme (PSFP) to support rural businesses; combat hunger, poverty and climate change; and promote the inclusion and empowerment of vulnerable groups in poor countries. The program will issue loans, equity investments and guarantees to “small and medium-sized enterprises (SMEs) and farmers’ organizations and financial intermediaries servicing small-scale farmers.” IFAD’s initial goal is to raise USD 200 million for PSFP from public investors, private investors and donors, eventually leveraging private investments of USD 1 billion to support 5 million small-scale and subsistence farmers.

The first disbursement from PSFP is a loan of USD 5 million to Babban Gona, a social enterprise in Nigeria. The firm helps farmers transition from subsistence agriculture to market-oriented farming. Babban Gona plans to use the loan to provide training, inputs and marketing services to approximately 377,000 rice and maize farmers across Nigeria. It also plans to help farmers store surplus harvest, and create “up to 65,000 jobs for women and 66,500 jobs for youth by 2025.” The loan to Babban Gona is IFAD’s first transaction that is not either a grant or sovereign loan.

IFAD President Gilbert F Houngbo said, “We urgently need to stimulate more private sector investments to rural areas and unlock the immense entrepreneurial potential of millions of rural SMEs and small producers. With access to capital, they can attract more investors and partners, grow their businesses and create employment opportunities – especially for young people and women.”

Established in 1977, IFAD is governed by its 176 member nations with the goal of eradicating rural poverty in developing countries. With a focus on agriculture and food supplies, the organization provides grants and loans to research organizations, governments, private firms and civil society organizations. As of year-end 2019, IFAD had USD 9 billion in assets. During that year, it disbursed loans totaling USD 630 million.

By Sophie Fiala, Research Associate

Sources and Additional Resources

IFAD press release
https://www.ifad.org/en/web/latest/-/ifad-s-new-investment-programme-to-boost-private-funding-of-rural-businesses-and-small-scale-farmers

Babban Gona homepage
https://babbangona.com/

IFAD profile on PSFP
https://www.ifad.org/psfp

IFAD 2019 annual report
https://www.ifad.org/en/web/knowledge/-/publication/ifad-annual-report-2019?p_l_back_url=%2Fen%2Fweb%2Fknowledge%2Fannual-reports

Previous MicroCapital brief on IFAD
https://www.microcapital.org/microcapital-brief-ethiopia-ifad-focus-3rd-phase-of-rural-financial-intermediation-programme-rufip-on-supporting-farmers-through-climate-change-covid-19-pandemic/

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