Emerging Insight: The power of technical assistance to unlock investments in the agricultural sector

One of the main bottlenecks that investors encounter in the agricultural sector in developing contexts is capacity gaps of the companies that they want to invest in. These gaps can relate to financial education, governance, administration, accounting, production techniques and market access, and this reduces the creditworthiness of companies in the agricultural sector. In order to mitigate and overcome these gaps, public and private investors in agriculture usually combine their investments with technical assistance to their recipients.

The Food and Agricultural Organization of the United Nations (FAO) recently published a report highlighting the main challenges, benefits and opportunities of such facilities. Technical assistance facilities that support agricultural investments are crucial to mobilize public and private investments towards financially underserved agribusinesses.

The report describes how technical assistance facilities can offer services at different levels, such as to the individual agri-business or farmer; to an intermediary organization (such as a cooperative of producers or a financial institution); or by supporting the development of local infrastructure needed for investment. The activities of the facilities can also directly support the associated investor, for example by carrying out feasibility studies for possible investments in specific value chains or impact assessments of investee companies.

The FAO report was based on desk research, interviews and analysis of six impact investing initiatives.

This includes the Africa Agriculture and Trade Investment Fund, where the ILO serves as a sustainability advisor. In this role, the ILO builds the capacity of stakeholders in sustainability management and provides support to the fund’s technical assistance facility in related topics. The report provides recommendations for impact investing actors designing or implementing technical assistance facilities alongside their investments in this sector. This includes:

• Balancing matching funding or cost-sharing requirements to better align the objectives of the technical assistance facility with the recipient company.
• Settings clear goals and regularly monitoring technical assistance initiatives, including establishing eligibility criteria for recipient companies and projects.
• Ensuring that the terms of technical assistance projects meet the needs of recipient companies and the expectations of investors, including when providing pre-investment technical assistance that may not always lead to a subsequent investment.

Check the report to find out more about how different investors designed and implemented their technical assistance facilities in the agricultural sector.