‘MSME Champions’ is a series of interviews capturing the expertise and experiences of individuals and institutions supporting enterprises in the missing middle of agriculture, as part of an advocacy campaign for the International Day for Micro, Small and Medium-sized Enterprises (MSMEs) on 27 June 2024. In this interview, Liz Wilson, Deputy Chief Executive Officer (CEO) at Small Foundation tells us about how the organization supports rural MSMEs with access to funding, knowledge and networks.
The International Day for Micro, Small and Medium-sized Enterprises (World MSME Day) is an opportunity to reflect on the key role of enterprises in the missing middle of agriculture. Please tell us why and how Small Foundation supports their growth.
Small Foundation views MSMEs as the engines of economic growth in rural economies across Africa. They create jobs, provide incomes, generate services and unlock wider economic opportunities for the long term. Small Foundation supports the innovators and entrepreneurs that want to reach these rural-impacting MSMEs by providing access to finance and knowledge to these intermediaries and initiatives. In particular, Small Foundation invests in commercially viable sustainable business models serving rural MSMEs, partners with other capital providers, and funds collaborative networks such as the Smallholder and Agri-SME Finance and Investment Network (SAFIN) to strengthen the business ecosystems in which MSMEs and other ecosystem actors operate.
Please describe some of the challenges your institution faces when lending to agricultural MSMEs in Small Foundation. What are some of the innovative approaches you use to navigate them?
Many of Small Foundation’s partners lend to agricultural MSMEs and they navigate challenges such as poor market information, currency risk, changing policy environments, biophysical impacts (such as extreme weather events), and real or perceived lower financial returns. Our partners use a variety of approaches to mitigate these challenges, including leveraging technology, deploying innovative financial approaches, and building relationships of trust and alignment with other innovators to continually navigate system dynamics in different local contexts.
An example of a recent initiative Small Foundation has supported is the Emerald Africa Financing Facility, which provides debt to early-stage digital innovators in sub-Saharan Africa who are enabling greater access to finance for rural SMEs.
Small Foundation’s systems strategy requires us to continually assess where we can be most additional and impactful with the limited resources we have. Looking ahead we would like to expand our work across a number of areas: collaborating with local financial institutions in different African countries; supporting early-stage rural SME fund development in Africa; exploring exits and liquidity for rural MSMEs and the MSME investment ecosystem; and pursuing approaches for more commercially viable technical assistance for rural MSMEs.
What message would you like to share with donors, commercial banks and other players that hesitate to lend to agricultural enterprises?
Investing in agricultural SMEs can be both poverty-busting and profitable!
Agricultural investment is a smart proposition for reducing poverty in countries where agriculture is a dominant economic activity. We know that it can be two to four times more effective at reducing poverty than investing in other sectors. Agriculture constitutes a wider range of activities that also stimulates different sectors through input supplies, transport, processing, and financial services.
In 2022, ISF Advisors estimated that the annual agri-SME financing gap in sub-Saharan Africa is USD 74 billion across approx. 130,000 agri-SMEs, representing 84% of total demand in the region. This represents a significant opportunity for all finance providers. As the needs of agri-SMEs are diverse, a variety of finance supply and support is needed. Many initiatives that Small Foundation has funded, such as SAFIN, AFRACA, AMEA, WAI, ESCP and CSAF, are working collaboratively to improve agri-SME finance flows for poverty-reduction and profit – we hope that you can join them.
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About the Champion
Liz is Deputy CEO at Small Foundation, an innovative family foundation based in Ireland focused on increasing income-generating opportunities for the rural poor in sub-Saharan Africa, managing and developing their expertise and practice around impact networks, systems, impact management, and communications. Previously Liz has worked as deputy director and co-founder of Agriculture for Impact & The Montpellier Panel, Imperial College London, providing evidence and analysis to European governments to support their approach to agricultural development, food and nutrition security in sub-Saharan Africa. As a project officer in DFID China, she worked on partnership initiatives to pilot climate change adaptation, low carbon development and sustainable urban development strategies. She also worked for the humanitarian health NGO Merlin in the DRC and the UK, and served as a diplomat in the UK Embassy in China. Liz is a trustee of the Nigeria-based Visiola Foundation.