COVID-19 Emergency Briefing Series

Agri-SMEs operating in uncertain financial, operational, and supply chain conditions

Pathway 4

Published on

May 27, 2020

In this emergency briefing series, ISF Advisors and the RAF Learning Lab will look at how the COVID-19 crisis is likely to affect different types of rural households in emerging markets and what the cascading effects may be on markets, food security, and national security. This briefing series seeks to be pragmatic and elevate the real experiences of smallholders and service providers who are most affected by ripple effects in the economy. The series builds on the 2019 Pathways to Prosperity report and provides tangible recommendations to critical decision makers on how rural agricultural livelihoods can be supported. In this brief, we look at how the COVID-19 crisis will impact small and medium agricultural enterprises (agri-SMEs) in emerging markets that, in many value chains, are squeezed between a drastic decline in consumer demand and difficult operating conditions along the supply chain.

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1

Pathway 4 Overview

Pathway 4 businesses range from commercial farms to small and medium agricultural enterprises (agri-SMEs) such as input suppliers, agro-dealers, cooperatives, traders, and processors. They are formal enterprises that typically rely on hired labor and mechanization. These enterprises are the lifeblood of agricultural value chains and local food security. In Africa, it is estimated that agri-SMEs sell 80% of the food produced for local consumption and generate 25% of rural employment (1). Despite their importance, it’s very challenging for commercial farmers and entrepreneurs to access financing, since financial service providers often consider them high risk and higher cost to serve. In fact, in sub-Saharan Africa alone, a Dalberg and KfW report estimates that there is a $100 billion lending gap for agri-SMEs (2). Lack of access to financing means that agri-SMEs* are particularly exposed to changes in demand or operations—such as those resulting from the COVID-19 pandemic. The impacts of COVID-19 on these businesses are likely to be felt all along the supply chain, from producers to consumers, with significant long-term consequences for rural livelihoods and food security.   

*For ease of reference, commercial farms that meet Pathway 4 criteria will be referred to as agri-SMEs in this briefing paper, unless otherwise specified.

Rural Pathways Model

Pathway 4 is diverse and complex in terms of the variety of enterprises and how these enterprises are integrated into value chains. To manage this complexity we have divided the briefing into four sections:  

  1. The external view: Understanding the impacts of disrupted markets on agri-SMEs
  2. The internal view: Managing agri-SME challenges to survive a prolonged shock
  3. The long term view: Responding now to mitigate longer-term market impacts
  4. Moving forward: How governments, donors, and service providers can best support this pathway

2

The External View: Understanding the impacts of disrupted markets on agri-SMEs

Pathway 4 businesses rely both on the steady demand for their goods and services, and the provision of goods, services, financing, and information to their business. The COVID-19 crisis is disrupting both of these critical needs. 

Across value chains, the biggest impact of COVID-19 on agri-SMEs is changes in demand, followed by disruptions to the flow of goods, information, and capital (3). Some businesses may benefit from increased demand for staple goods—but, for many, the supply chain disruptions will have a negative effect. The graphic below shows how typical COVID disruptions can impact Agri-SMEs.

Impact of COVID-19 on common types of Agri-SMEs within value chains

Starting with demand:

Volatile demand for products is disrupting the ability of agri-SMEs to maintain their businesses, across all types of value chains.

Shifting consumer demand from international markets. While the health risks of the pandemic reached developed economies first, changes in international demand for agricultural goods were felt immediately in emerging markets. This demand is projected to drop further, forcing traders to shift their forecasts for the rest of the year. Depending on a country’s main export commodity, there are a variety of industries whose disruption will significantly affect foreign earnings.

  • Floriculture for example is one of the hardest-hit markets. A spokesman from Royal FloraHolland, the Netherland’s largest cooperative of flower growers, reported that, from February to March, revenue had dropped by 85%. This hurts countries like Kenya, Ethiopia, Colombia and Ecuador that count flower exports as one of their largest sources of foreign currency (4).
  • In the coffee market changing buying patterns have shifted demand from a previously growing specialty market, to mass market home coffee. This affects the coffee reserves, and has led to a lot of uncertainty for coffee traders unsure as to when restaurants will reopen. For now coffee prices have remained high, and East African growers have been able to export, but there is significant uncertainty for the Latin American markets expected to harvest later in the year.

More broadly, with COVID-19 expected to lead to a global recession, there is still significant uncertainty as to when, or if, international demand for many export goods will return to pre-pandemic levels.

Decline in local demand, due to restrictions and loss of income. Changes in demand are also noticeable in local markets, driven by both decreased incomes and social distancing regulations. While there is limited data available, in Nigeria, IFPRI’s research estimates an 18% decline in agri-food GDP during a five-week lockdown; in Rwanda, a 27% decline over a six-week period (5).

  • In the direct consumer markets the biggest cause of declining demand is from decreasing household income. In Nairobi’s informal settlements, for example, a recent study shows 68% of respondents had skipped a meal or eaten less in the past two weeks because they did not have enough money to buy food (6). Demand for staple foods, such as maize and rice, has increased; however, markets struggled to fulfill the demand in the face of government regulations limiting transport. The decrease in income also creates a shift in demand from higher-value horticulture toward more basic vegetables and staple crops. As lockdown measures continue in most emerging market economies, it is unclear as to when, or if, consumer purchasing power will increase again. 
  • While in business markets (hotels, restaurants, etc.) tourism has been halted across most countries, and social distancing or curfew measures have forced many businesses to close. This has forced agri-SMEs to think differently about how they can serve local customers.

Resulting price volatility. Prices of goods have been very volatile as demand for different types of food continues to change. In general, the price for staple goods has increased with demand. IFPRI’s Food Security Portal, which monitors global markets for staples, found that prices of most key foods in Uganda have increased >15% since mid-March (7). In Ethiopia, the price of cabbage dropped by over 60% in just two weeks due to decreased urban demand, the lack of traders traveling to rural areas, and oversupply of some goods in March (8). Similarly, in Bangladesh, two studies showed that low demand has led to 17-70% decreases in vegetable farmgate prices (9). These price fluctuations make it very difficult for agri-SME to forecast and manage their cash-flow which in turn has a significant effect on financing their operations and servicing any financing commitments.

In response to COVID-19, Clover—a network across India that brands and sells farmers’ greenhouse produce through B2B and B2C channels—has shifted its business from hotel, restaurant, and catering channels to other retail and business channels. Omnivore Partners, the venture capital fund that has invested in Clover, reported that during the first week of COVID-19 restrictions, Clover’s business declined by about 80%. However, in recent weeks, the business has been able to capitalize on changing markets and recover to nearly pre-COVID-19 levels of revenue. Clover has begun selling to two segments that have seen an increased demand due to COVID-19: food delivery and local general stores (10). Clover was able to pivot its operations, in part, due to supportive investors and established connections to capital providers. This financial support is necessary for agri-SMEs to remain agile and adjust their operations during this crisis.

THE FLOW OF GOODS AND SERVICES:

The flow of agricultural inputs and availability of labor has been disrupted as government regulations around social distancing are enforced.

Flows of inputs. The supply and distribution of inputs for agri-SMEs has been severely disrupted by both international and domestic travel restrictions. This includes inputs such as seeds and fertilizer for commercial farms, and raw materials for processors. A survey of 54 agri-SMEs across Ghana, Malawi, Mozambique, Tanzania, and Uganda found that over 40% of respondents reported a significant negative impact on their ability to source agricultural inputs for sale (11). And 55% of food processors reported not having enough raw materials to meet current demand (12). These disruptions are forcing businesses to proactively manage their inventory, stocking up when they can. This is difficult, however, without access to credit lines—especially as the price of some inputs, notably fertilizer, is increasing by up to 20% (13). It is particularly difficult for commercial farmers, for whom the arrival of their inputs is very time-sensitive to planting season. For aggregators and processors that source from smallholder farmers, there is a particular constraint to their access to raw materials if the farmers are keeping their harvest for their own consumption rather than selling to traders or processors.  For example, in Lagos, Nigeria food trading has been restricted to only four hours every other day (14).

Labor availability. The travel restrictions and risk of the virus have also impeded the availability of labor, a crucial factor in agri-SME operations. Travel restrictions, limits to public transport, and curfews have all forced changes to labour use—varying based on the severity of the government interventions and the density of labour needed for the business’ operations. The impact is also felt differently depending on when the curfew and travel restrictions hit according to the planting or harvest seasons. Coffee growers in Colombia and Ecuador, interviewed at the end of April, cited labor as their most critical concern for the upcoming harvest (61% and 46% of respondents respectively). They plan to use community or family labor to mitigate this effect, however around half of the producers expect to lose more than 30% of their harvest (15). Youth, who rely on rural employment in many countries, will be particularly hard hit. As the virus spreads, there are also health risks for the labor force of agri-SMEs, especially in the case of older employees.

Female employees face unique challenges during COVID-19. As women make-up, on average, 43% of the agricultural labor force in emerging markets this is particularly important within agricultural value chains (16). Women’s employment is shaped by domestic and caregiving responsibilities, especially in emerging markets. These caregiving responsibilities fall disproportionately on women; they perform 76.2% of the total hours of unpaid care work globally, more than three times as much as men (17). In times of crisis this is amplified, as women are often forced, by a partner or economic circumstance, to give up paid work to care for children, the elderly, or sick relatives at home (18). Women’s care burden during the COVID-19 crisis will likely have long-term impacts on their economic independence. Evidence from the Ebola crisis in West Africa shows that women employees will have a more difficult time returning to their prior income levels (19). Traditional expectations that caring for children, the elderly and the sick should be done for free, and usually by women, obscure the true economic value of this work, and this crisis has highlighted the extent to which unpaid domestic labor is subsidizing public services and private profits. Without policies or protections to help women maintain their jobs throughout this crisis, the post-COVID recovery will happen at the expense of women's financial stability and economic independence.

THE FLOW OF INFORMATION:

The flow of information favors SMEs that are integrated into more formal networks and systems; it is much more difficult for smaller, more rural agri-SMEs.

Understanding public health requirements. Governments have issued public health guidance writ large, but guidance for essential services is not always clear. In transporting goods, agri-SMEs fall into a grey area. In some cases, security services don’t recognize agri-SMEs as “essential service,” which leads to additional unnecessary delays (20). Owners of agri-SMEs often do not have specific guidance on PPE and social distancing for their industry, causing confusion and potentially unnecessary costs for the businesses.

Clear market information. Access to market information is an existing gap for many agri-SMEs. With the arrival of COVID-19, and the corresponding volatility in demand and supply of products, this information gap is even more apparent (21). Farmers may be in touch with traders and suppliers, but do not have the information to plan or forecast for the future. Some are holding off on investments for next season while they await more information—which will significantly impact next season’s harvest. Cooperatives supported by large institutional buyers have the benefit of information and potentially even support with planning for future scenarios, but there are still high levels of uncertainty.

Becoming aware of support options. Some governments have provided support for small businesses, but it is typically focused on reducing taxes and providing loan extensions via central banks. There are a number of opportunities for SMEs being provided by NGOs and development finance institutions (DFIs). For example, FINCA International launched the FINCA Emergency Response Fund, which will provide support to entrepreneurs and startups across agriculture, health, education, and energy (22). Organizations that work with SMEs, such as Open Road Alliance, Vital Capital, and Equalife, are offering bridge loans off their balance sheet. DFIs and multilaterals, such as IFC and KfW, are providing emergency liquidity funds. However, these funds are likely to be too small to meet demand, not necessarily targeting agriculture, and agri-SMEs are likely to have difficulty accessing information about the funds if they are not already well-connected to donor programs. John Dludlu of the Small Business Institute in South Africa noted “there is quite a lot of support from the private sector as well as from the government aimed at supporting small businesses in South Africa but [small business owners] just don’t have access to this information" (23). There is a risk that this funding will go to the “usual suspects” who are already known to donors, missing important SMEs.

THE FLOW OF CAPITAL:

The flow of capital is already constrained for agri-SMEs, and is now further constrained as agri-SMEs become more risky and commercial banks retreat.

The existing financing gap was already significant: In sub-Saharan Africa alone there is a $100 billion lending gap for agri-SMEs (24). This is partly driven by the higher cost to serve agri-SMEs, which is driven by small ticket sizes and the higher risk profile (25). The Kenya Bankers Association noted that, “the primary underlying reason for [low levels of bank lending to agriculture] is that the risk-adjusted returns to capital are too low to justify commercial lending to agriculture when other opportunities exist" (26). Financing challenges are even more severe for women-owned SMEs, of which an estimated 70% have inadequate or no access to financial services (27). For women, lower rates of savings, lack of networks, discrimination, and social norms can pose additional challenges to securing the capital needed to grow or expand their business.

COVID-19 is creating even more financing pressure for agri-SMEs: Volatile markets and ongoing restrictions of movement are putting additional pressure on agri-SMEs’ finances. Approximately six weeks into the crisis, a survey of 43 of 2SCALE’s private sector partners in Africa found that 39% experienced difficulties paying off loans, 23% have been forced to let go some of their employees, and 8% have closed their operations entirely (28). Many more of the respondents expected to face these same difficulties in the subsequent eight weeks. Central banks in some countries are looking for ways to support SMEs, but the measures have not been sufficient.  In Kenya, the Central Bank has directed SMEs to contact their banks for assessment and restructure of their loans, but the system can take weeks to process; many agri-SMEs cannot wait this long.

While many commercial banks stage a retreat: Banks are facing challenges in serving customers as their own credit lines are constrained, particularly for foreign currency. As international demand contracts for exported cash crops, countries that rely on agriculture exports may see a decline in foreign reserves. This, in addition to the currency devaluations being seen across the world, could decrease the ability of countries to import essential supplies. For example, Ethiopia relies on coffee and flower exports to generate foreign exchange. The two products contributed 45% of export revenue generated in the first 8 months of the country’s 2019-20 fiscal year (29). Banks’ risk appetites are also declining as a result of the global contraction of financial markets. The cost to serve agri-SMEs is expected to increase due to COVID-19 restrictions, as banks need to reach rural clients while adhering to safety measures. Agri-SME loans in Africa are already 22% higher-cost than loans in other regions, and this pandemic is likely to further dissuade banks from lending (30).

3

The Internal View: Managing agri-SME challenges to survive a prolonged shock

In the short-to-medium term, agri-SMEs must focus on surviving the effects of the COVID-19 pandemic, a challenge that centers around how they manage disruption of linkages, create agile responses, and manage their cash reserves.

For many agri-SMEs, the COVID-19 crisis is an existential threat. Findings from a USAID-sponsored ACDI/VOCA survey in Honduras found that 83% of enterprises will close their operations within three months if the situation does not change (31). Whether enterprises survive the crisis will be heavily dependent on their balance sheet, ownership structure, contracts, location, and systems. Agri-SMEs have different starting points that will heavily influence their ability to pivot into new opportunities. However, three factors are likely to be most important to agri-SME survival through the initial phase of the COVID-19 crisis: linkages, agility, and liquidity.

Most important factors for agri-SME survival through the initial phase of the COVID-19 crisis

LINKAGES:

Agri-SMEs are highly interdependent actors in agricultural value chains, meaning any disruption has immediate consequences.

Agri-SMEs depend heavily on the continuous flow of goods and services — what we call functional linkages.  These linkages broke very quickly in the face of social distancing measures, transport restrictions, and consumer spending decreases. Traders, aggregators, and transporters — agri-SMEs sitting at transitional points in the value chain — were hit first. Very quickly, however, their inability to operate led to bottlenecks more broadly. 

In emerging market agricultural value chains, these are often based on trusted relationships rather than formal contracts. The informal nature of most of these linkages increases the vulnerability of agri-SMEs. When the flow of goods is constrained at even one point in the value chain, it can create challenges throughout. Data on small and growing businesses already show that 62% of early-stage businesses are unable to deliver on existing orders or contracts due to logistical challenges (32) while in Ghana and Uganda, 30-40% of agri-SMEs surveyed cite that their input suppliers have not provided credit with the arrival of COVID-19 (33).

Where there are more formal contracts in place, the impact of COVID-19 may be less immediate. For example, Aceso, a social enterprise in El Salvador that connects small commercial farmers to large retailers, has been working with its retail partners to maintain its supply chains (34). However, even where there are established contracts, COVID-19 may impact agri-SME financing in the longer term. Traders and some cooperatives establish contracts with smallholder farmers to provide inputs and guarantee offtake for an agreed price. This value chain financing system enables the flow of inputs in the short term; but as the crisis continues, farmers may seek immediate cash through side selling rather than honoring their supply commitments. This would erode trust and disrupt many formal supply contracts over time.

AGILITY:

To mitigate the risk of broken linkages, agri-SMEs need to adapt quickly to new circumstances, potentially changing fundamental parts of their business.

Like businesses around the world, many agri-SMEs have had to adjust their operations to comply with social distancing regulations, provide PPE, and keep their teams safe. In other cases agri-SMEs may be forced to “hibernate” or close their business completely.  In countries with extreme lockdown measures, some larger processors (e.g., Olam and Great Lakes coffee processors in Uganda) have even provided accommodation for their staff. These types of measures, while safer, increase operating costs and may unintentionally exclude women if they have caregiving responsibilities or are not permitted to work away from home. 

Transportation restrictions are also forcing agri-SMEs to find new ways to distribute their products, leading many to ramp up in the adoption of e-commerce and digital technology. Producers and processors that typically serve urban areas have begun to sell their products on e-commerce platforms or via social media. Many are leveraging existing platforms: AgriBazaar, a Delhi-based e-commerce platform, has seen significant increase in demand since the lockdown in India, with transactions growing 400% in one month (35). For businesses that are not serving more tech-savvy urban areas where e-commerce is an option, the shift to new ways of working is more difficult. Agro-dealers, for example, need to find safe ways to collect their stock and reach their remote clients.

Some agri-SMEs will have to make more fundamental changes to their business model but the changing market dynamics in the aftermath of COVID-19 will also lead to opportunities — notably in import substitution and staple crops. In import substitution, there may be opportunities for businesses to shift their operations to replace costly and delayed imports. For example, Tanzania currently imports palm oil, but could use locally grown and processed sunflower oil. While these types of shifts could be transformative for agri-SMEs, they are often risky and difficult to finance.

LIQUIDITY:

The breakdown of strong linkages — particularly demand — makes agri-SMEs even more reliant on difficult-to-access commercial financing for survival.

Agri-SMEs are historically underserved when it comes to commercial financing. This lack of financing will almost certainly be exacerbated by the COVID-19 crisis—right when agri-SMEs need access to financing the most. Most agri-SMEs do not have the balance sheet to continue their operations in the face of extended decreases in revenue and increases in compliance costs. Surveys by BFA Global found that if revenues fall by half, companies have an average of four to six weeks of runway to keep operating (36). Further, a recent study from Startup Genome found that only 60% of startups based in emerging markets have more than three months of cash runway in the bank; for agri-SMEs, this percentage is likely to be even lower (37). In a situation where 50% of food processors surveyed by Technoserve indicated a 50% or greater reduction in sales (with 14% saying sales had halted completely) this situation quickly becomes dire (38). The effects of this are already apparent—Technoserve’s survey of food processors found that only 31% of companies are retaining their full workforce (39).

The most vulnerable agri-SMEs are the already under-capitalized smaller or less established businesses that will continue struggling to find formal financing. These SMEs tend to be in more remote areas, which makes it more difficult for them to access and complete loan assessments, even without restrictions on movement. The fast and dramatic impact of the early weeks of the pandemic will have eaten up any reserves of cash in the business, making future loan applications more difficult. These are the businesses that urgently need liquidity in order to keep their operations going, and keep food moving through the system.

4

The Long-Term View: Responding now to mitigate longer-term market impacts

It is not yet clear how agricultural value chains will be shaped by COVID-19 in the long term. However, as outlined in our initial Emergency Briefing, the potential cascading effects from rural livelihoods to markets to food security and ultimately national security are critical to understand.

Without sufficient action now, the wholesale failure of rural agri-SMEs risks to, at best, cripple national commodity markets, and at worst lead to their complete collapse.

The survival of agri-SMEs has high stakes. With tourism collapsing, many countries will be forced to rely even more heavily on agriculture — both to feed their own population and to generate highly sought-after foreign exchange to enable central banks to continue to service their debt obligations and maintain the liquidity needed to import necessary goods — particularly important to economies that rely on staple food imports. The five illustrative scenarios below project what might happen to agri-SMEs, markets, and livelihoods if sufficient support is not provided throughout the COVID-19 crisis.

Long term effects of COVID-19 on agri-SMEs

While the scenarios above are dire predictions, there are also opportunities for agri-SMEs. The many agri-SMEs that do survive can build back better with: 

  • More agility: The crisis will make many agri-SMEs more agile, as they are forced to adopt new technologies, potentially increasing digitization and spurring broader rural digital technology usage. These enterprises may find new input suppliers when the regular supply chain is delayed. They may also pursue new business opportunities, including distribution channels, product offerings, and customers. Some may form partnerships with other businesses, ultimately strengthening their own business model. 
  • More flexible finance options: Investors will change their needs assessments or find more effective ways of conducting them with social distancing—potentially even lowering the costs of operations and therefore increasing the potential for profit. Similarly, investors may speed up their process due to the urgency of the pandemic. Some may change their requirements in recognition of the unique situation and the collapse of other national industries, such as tourism. There is a particular opportunity at this juncture to embed a gender lens throughout the investment process, and set ambitious targets for financing  youth-owned agri-SMEs, bringing inclusion to previously unbanked or underbanked business owners. 
  • Greater resilience: Investors are likely to refocus their efforts with agri-SMEs on resilience: the business’ ability to bounce back from a crisis. The CDC Group, for example, has stated that its investments will prioritize resilience, resource efficiency, adaptation, and ability for businesses to withstand future shocks. This provides an opportunity for agri-SMEs to rise to the challenge of investors, and local financial institutions to rise to the challenge of serving agri-SMEs.

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Moving Forward: How governments, donors, and service providers can best support this pathway

Agri-SMEs are vital to agricultural markets: they facilitate trade, keep people employed, and enable food security. To ensure they continue to operate throughout and beyond the pandemic, it is critical that we invest in maintaining their linkages, increasing their liquidity, and supporting their agility. 

We believe governments, donors, and service providers should consider five major pitfalls as they develop their approaches:

Pitfall #1

Underestimating the potential for catastrophic long-term costs and large-scale failures of agri-SMEs.

The devastating, holistic impact that could ripple out from the collapse of agri-SMEs cannot be underestimated. Agri-SMEs failure will severely disrupt value chain linkages — affecting rural livelihoods and employment, as well as food security in urban areas. In worst case scenarios we may see entire domestic production systems fail.  The general lack of data around agri-SMEs can lead to these disruptions and effects being underestimated due to lack of effective quantification. Work must be done quickly and comprehensively to estimate the cost of emergency aid to these businesses, compared to the long-term aid needed to rebuild them.

ACTION NEEDED: Governments will need to take the lead on rapid scenario planning to ensure the scale of the agri-SME challenge is understood and defined.  Any upfront investment (however large) should be weighed against the longer-term costs (to employment, rural incomes, food security and trade) should large numbers of agri-SMEs fail.

Pitfall #2

Relying on current models of agri-SME financing to step in without creating more effective, faster ways to deploy funding to the right places.

Commercial lending has historically been expensive and difficult for agri-SMEs to access; the COVID-19 pandemic will cause commercial banks to become even more risk averse.  Chronic lack of access to long-term financing means that women-led businesses are particularly vulnerable; previous economic recessions have taught us that they are much less likely to survive such a crisis, due to their low level of capitalization. This crisis should be used as a catalyst to find new and more effective ways of lending to agri-SMEs, with a particular focus on ensuring that financing and support mechanisms are tailored to also meet the needs of women-led agri-SMEs.

ACTION NEEDED: Governments, donors and impact investors will need to rapidly bolster commercial bank lending to agri-SMEs through risk-sharing mechanisms and relaxed regulatory requirements where appropriate; while at the same time using less traditional financing channels including fin-tech models and direct government programs to get credit flowing. 

Pitfall #3

Failing to prioritize and target the most critical value chains for food security, and the most vulnerable points of dependency within those value chains.

Certain value chains are critical for national food security, either because they are staple crops or significant cash crops. And within each value chain there are also linkages that are more vulnerable to the constraints from COVID-19 than others. Actions to support agri-SMEs must identify which value chains are high priority for food security, and where the weak spots are within those value chains.

ACTION NEEDED: Governments need to identify critical value chains for food security (including those that earn foreign exchange for food imports) and find ways to support the most vulnerable linkages through program support, regulations, or cash injections.

Pitfall #4

Assuming technology is a simple solution for agri-SMEs.

The need for social distancing as a critical mitigation measure of COVID-19 has led many agri-SMEs, donors, and service providers to proactively leverage digital technology. In many cases, digital tools can help with reaching customers or suppliers safely and more cost effectively. However, the adoption of digital technology often takes time. Rushing this implementation for the sake of social distancing can lead to significant sunk costs and long-term ineffective tools.

ACTION NEEDED: Donors and service providers who are working to bring technology systems to agri-SMEs need to be careful about how and where technology is applied.

Pitfall #5

Missing the opportunity to shape more resilient and inclusive markets, even as some businesses fail.

With the looming global recession, many investors and governments are in disaster management mode. However, they may be overlooking opportunities to develop more robust local and regional supply chains, and to build inclusive and resilient employment opportunities — particularly for women and youth. There are a number of products that could potentially be produced locally — given the right investment and support — and could increase long-term resilience and generate additional employment for rural areas.  

ACTION NEEDED: Governments and donors should be thinking outside of the box in terms of how the pandemic could lead agri-SMEs to build back better within more resilient and inclusive food systems.

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Additional resources for the protection of rural livelihoods through COVID-19

We want to hear from you

As new information about COVID-19 emerges on a daily basis, we hope this series will serve as an opportunity to open dialogues and share perspectives. If you would like to get in touch or contribute to the forthcoming research, please reach out to Matt Shakhovskoy from ISF Advisors ([email protected]) or Mikael Hook at the RAF Learning Lab ([email protected]).

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Footnotes

  1. Sumba, Daudi (ed), The Hidden Middle: A Quiet Revolution in the Private Sector Driving Agricultural Transformation, Alliance for a Green Revolution in Africa (AGRA), 2019
  2. Dalberg and KfW, Africa Agricultural Finance Market Landscape, 2018
  3. TechnoServe, Challenges and Responses for Africa's Food Processors Facing COVID-19,  April 15, 2020
  4. Joanna Kakissis, “The Netherlands’ Huge Flower Sector Wilts As Coronavirus Hurts Business”, NPR, March 25, 2020
  5. James Thurlow, "COVID-19 lockdowns are imposing substantial economic costs on countries in Africa," IFPRI, May 8, 2020
  6. Population Council, Ministry of Health Kenya, “Kenya: COVID-19 Knowledge, Attitudes, Practices, and Needs,” 13-14 April 2020
  7. Manuel Hernandez, Soonho Kim, Brendan Rice, and Rob Vos, "IFPRI's new COVID-19 Food Price Monitor tracks warning signs of stress in local markets", IFPRI, May 5, 2020
  8. Seneshaw Tamru, Kalle Hirvonen, and Bart Minten, "Impacts of COVID-19 crisis on vegetable value chains in Ethiopia," IFPRI, April 13, 2020
  9. Global Alliance for Improved Nutrition, Impact of COVID-19 on Food Systems: A Situation Report, May 13, 2020
  10. CASA Webinar: Rethinking Agri-Business Investments Through the Pandemic, Cofounder and Managing Partner of Omnivore, Mark Kahn, May 7, 2020
  11. African Fertilizer and Agribusiness Partnership (AFAP), “COVID-19 Impact Assessment on the AgriSMEs and Farming Communities of Ghana, Malawi, Mozambique, Tanzania, and Uganda,”  2020
  12. TechnoServe, Challenges and Responses for Africa's Food Processors Facing COVID-19,  April 15, 2020
  13. RAFLL stakeholder interview, April 2020
  14. James Thurlow, "COVID-19 lockdowns are imposing substantial economic costs on countries in Africa," IFPRI, May 8, 2020
  15. Caravela Coffee, Harvest Arrives, Along with the Pandemic, April 28, 2020
  16. FAO, Women in Agriculture Closing the gender gap for development, 2010-2011
  17. International Labour Organisation (ILO). Care Work and Care Jobs for the Future of Decent Work. 2018
  18. Helen Lewis, "The Coronavirus Is a Disaster for Feminism," The Atlantic, March 19, 2020
  19. CommDev and IFC, Gender and Covid-19, 2020
  20. Nzekwe Henry, “Unclear Directive on COVID-19 Lockdown is Crippling African Logistics and Causing Shortages,” WeeTracker, April 1, 2020
  21. OECD, Coronavirus (COVID-19): SME Policy Responses,  2020
  22. FINCA, “FINCA International Launches Emergency Fund for COVID-19,”  April 13, 2020
  23. Covid-19: Relief promises for Africa’s small businesses”, DW, April 2, 2020
  24. Dalberg and KfW, Africa Agricultural Finance Market Landscape, 2018
  25. Council on Smallholder Agricultural Finance and USAID, “CSAF Financial Benchmarking,” July 2018
  26. Dalberg and CSAF, The Economics of SME lending in East Africa, December 2018
  27. IFC, Women-Owned SMEs: A Business Opportunity for Financial Institutions,  2014
  28. 2SCALE, How our private sector partners in 2SCALE are dealing with COVID-19,  April 23, 2020
  29. Ethiopia Garners $1.8bln from Export in Eight Months”, Ethiopian Monitor, April 4, 2020
  30. Dalberg and CSAF, The Economics of SME lending in East Africa, December 2018
  31. USAID Business Resilience Analysis COVID-19, 2020
  32. The Small and Growing Business Sector and the COVID-19 Crisis: Emerging Evidence on Key Risks and Needs”, Aspen Network of Development Entrepreneurs, May 2020
  33. COVID-19 Impact Assessment on the AgriSMEs and Farming Communities of Ghana, Malawi, Mozambique, Tanzania, and Uganda”, African Fertilizer and Agribusiness Partnership, 2020
  34. Accesso, “Acceso stepping up to the challenges presented by COVID-19,” April 21, 2020
  35. Sohini Mitter, "Coronavirus: This agritech startup is fixing food supply chain with e-mandis," Your Story, April 22, 2020
  36. Ashirul Amin, “The impact of COVID-19 on financial lives in eight countries, over two weeks,” BFA Global, 2020
  37. Arnobio Morelix, “The Impact of COVID-19 on Global Startup Ecosystems: Global Startup Survey. Second Installment. Startup Genome,” Startup Genome, April 16, 2020
  38. Technoserve, Challenges and Responses for Africa's Food Processors Facing COVID-19, April 15, 2020
  39. Ibid.

This briefing series is made possible by the generous support of the American people through the United States Agency for International Development (USAID). The contents are the responsibility of ISF Advisors and the Rural and Agricultural Finance Learning Lab, and do not necessarily reflect the views of USAID or the United States Government.


COVID-19 Emergency Brief 3 Pathway 4

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ISF Advisors
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ISF is an advisory group committed to transforming rural economies by delivering partnerships and investment structures that promote financial inclusion for rural enterprises and smallholder farmers. Combining industry-leading research with hands-on technical expertise, ISF develops practical, profitable, and sustainable financial solutions.

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This research was made possible through support from the U.S. Government's Feed the Future initiative.

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