Mapping Financial Mechanisms for Enhanced Rainfed Agriculture in Africa

Report Published: August 2019

Enhanced rainfed agriculture is particularly important in Africa, where 95% of agricultural production depends on rainwater and crop yields are amongst the lowest in the world. The main barrier to accelerating enhanced rainfed agriculture is investment. Financing for enhanced rainfed agriculture in Africa is relatively unexplored and access to credits for agricultural activities is limited for farmers.

This document maps international financing mechanisms with the potential to scale investments into enhanced rainfed agriculture. Six key approaches or mechanisms were identified and include public and philanthropic funding, carbon financing, payment for ecosystem services, corporate grants and sustainable procurement, impact investments and conservation finance and crop and weather insurance.

Written to support the work of Stockholm International Water Institute (SIWI) and South Pole, this mapping provides critical insights for a range of stakeholders involved in enhanced rainfed agriculture.

Insights

There is no single approach to financing enhanced rainfed agriculture. Specific mechanisms are suited to particular farming segments and contexts. However, there are a number of emerging solutions that have a potential for impact at scale.

• Donor and philanthropic grants reach smallholder farmers but are limited in terms of reach. Grants should therefore be used innovatively and to fund the public good component of enhanced rainfed agriculture, thus making it more attractive to mainstream financial sources. Corporations are a relatively unexplored source of finance and can incentivize sustainable practices. There are opportunities to scale through certification and standards, funding innovative solutions, and mainstreaming agricultural practices along their value chains.
• Certification schemes can act as a key enabler to promote a more prominent role for enhanced rainfed agriculture. Redirecting carbon finance presents a hidden opportunity.
• There is significant potential in carbon finance, resulting from the dynamic global offset market, insetting projects and Science Based Targets.
• Crop and weather insurance present an interesting option although it needs further development. Insurance options could also be blended with corporate sustainability funding

To facilitate investment into enhanced rainfed agriculture at scale, this brief makes five suggestions:

• Increase advocacy for green water and enhanced rainfed agricultural solutions
• Develop a credible and compelling business case
• Recognise the need for knowledge development and capacity building
• Use technology to increase investment potential
• Blend finance to de-risk more traditional instruments

This paper has been authored by Fränkl, L., Madden, K., & Silber, T.