Project Description
The Sovereign Catalytic De-Risking Framework (SCDF) provides a standardized architecture that deploys sovereign capital across a range of de-risking instruments to catalyze private sector capital at scale into local agricultural value chains.
It achieves this by deploying a targeted suite of de-risking tools, including:
- Guarantees: To address balance sheet constraints
- Climate insurance: To mitigate systemic production risks
- Hedging solutions: To enable local-currency financing and manage FX volatility
- Annual Percentage Rate (APR) buydowns: To lower the final cost of borrowing for the end-user
It expands not just how much capital reaches the sector, but also how well it is structured—enhancing affordability, reducing risk, and improving suitability. The proposed framework leverages a multi-layered de-risking framework catalyzing private capital and scaling agri lending to MSMEs.
The framework uses a three-tier X–Y–Z capital stack: AfDB/MDB senior capital (X), sovereign catalytic de-risking capital (Y), and mobilized private capital (Z). A digital infrastructure layer supports real-time monitoring, risk management, tapering and recycling of scarce sovereign resources.
Project Objectives
- Unlock additional AfDB and PFI lending capacity by strategically deploying sovereign capital as first-loss/risk-participation support.
- Expand affordable, suitable finance to underserved agri-MSMEs, cooperatives and smallholder farmers across agricultural value chains.
- Mitigate key agricultural financing constraints through guarantees, climate insurance subsidies, FX hedging and APR buy-downs.
- Establish a standardised governance, documentation and digital monitoring architecture that enables replication, tapering and recycling of catalytic capital.
Expected Outcomes
- Mobilize approximately USD 8–15 of agri-sector lending for every USD 1 of sovereign capital deployed.
- Agri-MSME growth and resilience: Structural market transformation unlocking long-term, affordable, uncollateralized finance and climate-smart investment.
- Livelihoods and demographic dividend: Jobs for youth and women and stronger food security via off-take markets, manufacturing and value chains.
- Climate-resilient value addition: ACRIFA turns uninsurable risk into insured exposure and climate-resilient value chains, closing the 97% gap as the facility scales across markets and PFIs.
- Economically viable agri-finance: Proven performance draws in private capital, cutting reliance on concessional support.