Standard Bank wins Africa Investor Agribusiness Award

The Agribusiness Awards aims to recognise achievements across the main Agribusiness and finance sectors in Africa and reward the personalities driving transactions and improving the continent's Agribusiness investment climate. The awards also aims to emphasise the important need to invest in developing Africa's Agribusiness sector.

Workable solutions

"The Agricultural Guarantee Fund Scheme demonstrates Standard Bank's commitment to creating, with fellow stakeholders, workable solutions to the obstacles that hamper African development. We believe this award is an acknowledgement to that commitment" says Clive Tasker, Standard Bank Africa CEO.

"It is not very often that we can be part of initiatives that make a difference to the lives of people on many levels. We are fortunate here to see an impact that permeates across many spheres, from sustainability, economic development and growth, to job creation and poverty alleviation," he says.

The Agricultural Guarantee Fund Scheme

Standard Bank's winning initiative, The Agricultural Guarantee Fund Scheme, is an innovative fund for Africa's smallholder farmers and was created by a partnership between Standard Bank, the Alliance for a Green Revolution in Africa (AGRA), OPEC Fund for International Development, Kilimo Trust, Millennium Challenge Account Mozambique, Ministry of Agriculture Mozambique and The Millennium Development Authority.

Initiated in March 2009, the US$100 million scheme aims to reach about 750,000 small farmers and small and medium-sized enterprises in Ghana, Mozambique, Tanzania and Uganda over three years. Under the scheme, the partners provide a Risk guarantee while Standard Bank provides the funding for lending. This partnership is the single largest facility targeting smallholder agriculture by a bank.

Finance for agriculture

The aim of the scheme is to open up access to finance for the agricultural sector in Africa as this has been a major constraint to unlocking the potential of agriculture on the continent. Financial institutions have been reluctant to lend to this sector for a number of reasons, including the remoteness of clients, the lag between investment needs and expected revenues, lack of usable collateral, and high risks due to environmental factors such as weather, pests, diseases and price.

The scheme uses an innovative funding structure that works through a co-operative mechanism. The structure includes linkages to formal markets that provide minimum price guarantees (thus mitigating price risk), includes weather index insurance (to mitigate climate risk) as well as training and mentorship. The co-operative structure allows farmers to consolidate their bargaining power which reduces input costs and contributes to economies of scale in terms of output and market access.

Improving food and income security

The initiative has been well-received and has the support of the governments of all four countries and involves numerous local non-governmental organisations. However, the biggest success will lie in the initiative's ability to improve household food and income security due increased agricultural productivity and the generation of market surpluses, improved access to markets, the development and expansion of rural businesses servicing farmers, and improved rural employment.