By: Laura Owings

This article is supported by the CASA programme.

Small farms and agricultural firms in Sub-Saharan Africa and South-East Asia are facing a billion dollar cash black hole for climate change adaptation, a report says.

Overall there is a gap of US$106 billion in available investment in agricultural small- and medium-sized enterprises (agri-SME) ranging from farms, to rice millers and agricultural data firms, according to the report, entitled The state of the agri-SME sector – Bridging the finance gap.

“Not only is there a gap for traditional financing needs for agri-SMEs in these regions, but there is also a big gap in the need to mitigate risk of climate change, with essentially no money going toward these needs,” explains report author Jérôme van Innis, a senior manager at the South African strategic and financial advisory group ISF Advisors, which produced the report alongside the Commercial Agriculture for Smallholders and Agribusiness (CASA) programme, which supported this article and involves CABI, the parent organization of SciDev.Net.

According to the report, the cash is needed by small firms operating in the agriculture space to finance day-to-day operations, but also to fund investments and adapt to changes brought about by global heating.

Outlining priorities for investors and policymakers to support the sector, the report calls for the urgent mobilisation of climate adaptation funding for agri-SMEs. However, achieving this requires a system of measurements that identify opportunities for adaptation investment, and government policies that support a pipeline of agri-SME innovation.

Investment in agriculture is an effective poverty-reduction tool, according to global charity Oxfam, while also improving food security and economic development.

But without a system that can identify measurable adaptation outcomes, investors will struggle to support small-scale farmers to grow their businesses, say specialists.
Absence of climate finance

Within this overall picture, the report shows there is an “absence of any major flows of climate finance for agri-SMEs relative to the known dimensions of the climate crisis”.

Globally, only 1.7 per cent of global climate finance, or about US$10 billion, is available to small-scale agriculture, according to the analysis and advisory organisation Climate Policy Initiative. Over 95 per cent of that is provided from public sources and earmarked largely for efforts to curb climate change, rather than adapt to it.
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