In this ‘MSME Champions’ interview, Kindra Halvorson of TechnoServe explains how the organization has supported 700 food entrepreneurs to build their visions of thriving business. ‘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.
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 TechnoServe supports their growth.
Micro, small, and mid-sized businesses are absolutely critical to food systems and agricultural supply chains. As we saw during the COVID-19 epidemic and many other crises, the resilience of supply chains and food systems often hinges on the performance of the businesses that aggregate, process, transport, and distribute food. If these businesses falter or fail, food does not get from the farm to consumers’ plates.
Agribusinesses are also critical catalysts for systems-level change, with the potential to make food systems and value chains more prosperous and inclusive, climate- and nature-positive, and nutritious. Because agribusinesses are so important to TechnoServe’s vision of a sustainable world where all people in low-income communities have the opportunity to prosper, we support them in a number of ways.
Central to our support is technical assistance. This involves working with food entrepreneurs where they are, understanding where they want to go, then building their business and technical skills to get there. It often involves wok with not only the owners but also the management, and employees of an agribusiness to understand their challenges and opportunities, identify solutions, and design new products and innovations. We’ve provided this support to more than 700 food processors and millers across 16 countries.
We also work to strengthen market linkages, both to suppliers and new markets. For example, in India, we worked with the Walmart Foundation to help 27 farmer producer companies, sourcing crops from nearly 30,000 smallholders, to access new markets to increase their sales. The initiative helped the Maathota Tribal Farmer Producer Company to earn organic certification for its turmeric and engage buyers in lucrative markets in Europe and Oceania, resulting in nearly 150 MT of sales.
We also partner with SMEs to develop and implement inclusive business plans—strategies that add commercial value for the business while delivering positive social impacts, like generating better economic opportunities for women or integrating smallholders into supply chains. We worked with a grain miller in Tanzania, AA Nafaka Store Supply, to develop an inclusive business plan focused on sourcing crops in a more inclusive manner. As a result, the share of women among the company’s suppliers increased from 26% to 65%, while the company’s supply chain is stronger. We recently surveyed 500 smallholder farmers who were linked to agribusinesses we worked with; more than 80% reported higher incomes due to the improved market access.
Finally, of course, improving access to finance and meeting the capital needs of small- and medium-sized agribusinesses is critical.
Please describe some of the challenges your institution observes in lending to agricultural MSMEs in the Global South. What are some of the innovative approaches you use to navigate them?
In thinking about the access-to-finance challenges and solutions, it’s helpful to consider both the demand and supply side of the equation. On the demand side, many agricultural entrepreneurs don’t have the business records or sophisticated understanding of financial products needed to really evaluate the return on investment and timeframe for loans. It’s also often the case that they overestimate the amount of outside financing they need. As a result, we have found it really important to provide technical assistance that helps entrepreneurs understand their numbers, maximize the use of their own cash, and understand the full cost of capital and its implications for the business.
When talking about the supply of financing for agricultural SMEs, we really need to highlight the importance of local financial institutions and lenders. While there are certainly cases of impact investors working in the sector, few agribusinesses can deliver the kind of returns that are attractive. However, such businesses are very viable clients for local lenders and much in need of financing denominated in local currencies. For example, we recently completed a project that helped 45 small- and medium-sized food processing businesses in East and Southern Africa access finance. Of the approximately $11 million in loans they received, $9 million came from local banks.
It’s important to work with local lenders to help them understand the opportunities in the market and craft products that meet the needs of agri-entrepreneurs.
One approach that the program in East and Southern Africa took was partnering with banks to identify a pipeline of agribusinesses with which to work. This innovation actually emerged from necessity: during the COVID-19 pandemic, it was difficult for our team to do the kind of networking and site visits that normally help us identify clients. So instead, the team worked with financial institutions to find businesses that were either receiving loans or had applied for loans. The technical assistance our program provided reduced the lending risk, while the access to finance allowed the businesses we were supporting to make needed investments.
We also need to make access to finance more inclusive. The data is really clear that businesses owned or led by men tend to have an easier time securing finance. In part, that is because businesses owned by men are typically larger, but it’s also the case that men frequently have bigger professional networks that they can tap into when they need support, such as funding. To address that, our programs have hosted networking events for women entrepreneurs in the sector, where they can meet suppliers, retailers, and lenders.
What message would you like to share with donors, commercial banks and other players that hesitate to lend to agricultural enterprises?
I understand the hesitation of investors, given the risks, but we also have proven approaches to reduce the risk and increase the impact of investments.
We have to think about support to agricultural enterprises holistically. To thrive, to be resilient, and to catalyse positive transformation in our food systems, agricultural SMEs need access to a suite of services and advisory support that address market development and reliable suppliers, business and technical skills and suitable finance. Each of those pillars reinforces the others. To deliver that kind of comprehensive sector, we need to continue to develop initiatives that bring together a broad set of partners.
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Meet the Champion
Kindra Halvorson is the Chief Transformation Officer of TechnoServe. Previously she was the Senior Vice President of Program Development and Regional Director for East Africa. Kindra is an international development professional with over 16 years of experience in the public and private sectors, including eight years in economic and small business development. Kindra started her business development career by launching a $2 million investment fund with a double bottom line including financial returns and social impact through the creation of high-value jobs. She oversaw investments in 17 technology companies that ultimately created hundreds of high-wage jobs. Kindra later joined McKinsey & Company in Johannesburg as a consultant specializing in growth strategies in Africa and business expansion. She subsequently joined Population Services International (PSI), where she was responsible for a portfolio of programs in east and southern Africa, and later managed its development of a cutting-edge impact measurement system.