European investors back FEFISOL II fund dedicated to pumping money into Africa’s agriculture sector

AFRICA – Financial and economic inclusion promoters, SIDI and Alterfin, have announced the close of its newly formed fund, FEFISOL II, dedicated to financing African rural microfinance institutions and agricultural entities sourcing from small-holder farmers in Africa.

The fund is designed to respond to the crucial issues of financing vulnerable populations in rural areas in Africa, and more particularly the financing of the agricultural sector.

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Its formation follows successful close of FEFISOL I in 2021 which has had considerable impact including disbursing €86.5 million, of which 93% in sub-Saharan Africa, 60% in low HDI countries and 90% in countries vulnerable to climate change.

FEFISOL I financed 92 clients in 25 countries and offered 139 technical support projects with 51 clients.

The positive outcomes of the first fund have convinced investors to invest in the new FEFISOL II fund with The European Investment Bank, Proparco via FISEA+, the Belgian investment company BIO, the Alternative Swiss Bank, French social bank Crédit Coopératif, Banca Etica and SOS Faim Luxembourg signing up for a stake in the fund.

SIDI and Alterfin, have each contributed £4.8 million and £2 million. The fund is making its first closing at €22.5 million, and a technical assistance package of €1 million.

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The first disbursements will be made in July 2022 with the second closing launched in 2023.

Managed by Inpulse, a Brussel-based investment manager, FEFISOL II is structured to financially and technically support locally designed solutions to lack of financing in Africa’s agriculture sector.

FEFISOL II fund package aimed to drive agriculture financing

Notwithstanding the fact that the agricultural sector makes a major contribution to many African economies, and that its growth directly contributes to poverty reduction, it remains financially underserved because it is often perceived as too risky or not profitable enough.

Today, the penetration rate of microfinance in rural areas in Africa remains very low: less than 5% of the loans disbursed by traditional financial institutions are intended for the agricultural sector and less than 10% of farmers have access to formal sources of credit.

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Nevertheless, the agricultural sector accounts for 23% of the continent’s GDP and 55% of employment.

Financing the agricultural sector is therefore of uttermost importance in terms of food security, employment, resilience in the face of climate change, and finally, in terms of the financial inclusion of women.

FEFISOL II will be implemented in more than 28 African countries and should eventually support 110 microfinance institutions or agricultural companies and cooperatives sourcing from smallholders, most of which are Fair Trade or organic certified.

The new fund will offer diversified and adapted financial products, in 12 to 15 local currencies in order to avoid exposing partners to exchange rate risk and will implement specific assessment and monitoring tools for agro-ecological performance.

Finally, FEFISOL II will propose a new technical assistance facility with a more in-depth scope and upgraded procedures. Its aim will be to support its partners in strengthening their institutions and their resilience to climate change.

By supporting the implementation of socially and environmentally sustainable practices, FEFISOL II directly aims to improve the living standards of vulnerable populations in rural Africa, reduce inequalities and promote sustainable agricultural development.

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