Small- and medium-sized enterprises (SMEs) represent more than 50 percent of global employment and are crucial to achieving ACDI/VOCA’s mission of increasing economic prosperity and social inclusion. The International Finance Corporation estimates the financing gap for these SMEs — often described as the “missing middle”— as $5.2 trillion every year. SMEs lack financing because they are too large for microfinance institutions but too small for large traditional investors. These viable businesses would benefit from patient capital or longer-term, flexible financial products and technical assistance to invest, upgrade, and grow.
ACDI/VOCA’s subsidiary, AV Ventures LLC, formed in 2017 to help close this gap by providing innovative, catalytic financing to agribusiness SMEs in select emerging markets where we work. Such investments provide better economic opportunities for communities and generate social impact through more inclusive, responsible supply chains.
Our first fund, AV Ventures Ghana, a $3.6 million blended finance vehicle, has created more than 100 new jobs. The fund has also linked more than 2,000 smallholder poultry farmers to markets, increasing incomes by 20 percent, and linked more than 500 micro entrepreneurs — 40 percent of whom were women — to capital. This successful pilot fund creates a viable path toward a regional West Africa Fund and is a major part of our long-term vision of a “bridge to investability.” And we’ve been busy in 2020 supporting our investee partners, making investments, and building out new impact investing initiatives.
2020 AVV Accomplishments
Launch of Central Asia Impact Fund
Warc Group Ghana Investment
Launch of Impact for Northern Kenya Fund
Furuz, Tajikistan, Loan
Investee Spotlight: Warc Ghana
In 2020, AV Ventures invested $500,000 in the Warc Group to support the expansion of its operations in Ghana. Warc Group runs agricultural production and consulting operations in West Africa. The investment comes in the form of a risk-sharing, revenue-based loan with a return linked to the Warc Group’s revenue growth. With the support of AV Ventures, Warc Ghana will replicate Warc Group’s Service Delivery Unit (SDU) model by enabling 3,000 smallholder grain farmers to access markets, trainings, inputs, and mechanization services to help them improve their productivity and incomes. Positive impacts of the investment include:
Promotes Environmental Benefits Warc Ghana will continue the use of its sustainable, no-till farming methodology with smallholder farmers. This will improve soil fertility and result in positive environmental impact. Copes with Pandemic Disruptions The COVID-19 pandemic caused disruptions in Ghana’s local supply chains that jeopardize food security. The revenue-based loan provided to the Warc Group injects new liquidity into the food and agricultural sectors, sharing risk with Warc Ghana and enabling them to increase the production of maize and soybeans and bridge the supply gaps caused by COVID-19. Transfers Knowledge and Skills Through the SDU model, Warc Ghana trains smallholder farmers, which allows the farmers to benefit from new knowledge of agronomic practices, skills, and connections. This will help smallholder farmers improve their yields, land use, and incomes, thereby facilitating their eventual transition from subsistence to commercial farmers.
Navigating Turbulence in 2020
In 2020, despite severe supply chain disruptions and a 77 percent decline in foreign inflows to Africa and Central Asia, according to the United Nations Conference on Trade and Development, AV Ventures supported its portfolio of investee companies, while adding three exciting new investments in two regions totaling more than $1.2 million. In addition to Warc Group, this includes investments in AgroCenta, an early-stage agri-tech company in Ghana that uses its mobile platform to provide farmers with access to market information, crop storage, delivery solutions, and financial services as well as Furuz, a microfinance institution in Tajikistan with 4,283 clients, 1,280 of whom are women.
Supporting Resilience through Financial Inclusion
In December 2020, AV Ventures and AV Frontiers successfully closed and disbursed a $300,000 loan to Furuz, a microfinance institution in Tajikistan. The loan will provide liquidity when other sources of funding are scarce, allowing this high-potential microfinance institution to recover from COVID-19 and support its country’s economic revival. Furuz is using the money to help citizens affected by the pandemic rebound, providing a lifeline in a dry funding landscape.