A new special fund has been created by the Canadian government and the African Development Bank Group to assist Africa's small and medium-sized enterprises (SMEs) in the agricultural sector.

The Agri-Food SME Catalytic Financing Mechanism intends to boost and de-risk investment for agriculture SMEs, expand agricultural value chains, and enhance food security across the continent.

The announcement was made during the Dakar 2 Africa Food Summit, on January 27.

The African Development Bank, which is hosting the mechanism, received funding from Canada in the amount of CAD 100 million ($73.5 million). Around 65% of Africa's food is produced, processed, or transported by small and medium agribusinesses, but they have a $180 million yearly funding deficit.

The mechanism will offer financial intermediaries, such as agribusinesses, microfinance organizations, and impact funds, concessional financing and technical support. The funding and support are intended to give the intermediaries the ability to lend money to agri-SMEs that employ women and companies that increase their resilience to climate change.

The Bank Group's Affirmative Finance Action for Women in Africa's (AFAWA) goal of bridging the $42 billion access to finance gap for women-led SMEs and accelerating their growth would be aided by the Agri-Food SME Catalytic Financing Mechanism.

According to Dr. Beth Dunford, the Bank's Vice President for Agriculture, Human and Social Development, there is a strong commitment to addressing the financing gap for SMEs and creating an environment that encourages private sector investments in climate-smart, gender-oriented agricultural solutions.

She said that the Agri-Food SME Catalytic Financing Mechanism will open doors for these companies in Africa, particularly for women and young people.

The Mechanism is the Bank's first blended financing facility that is specifically aimed towards SMEs that are involved in every step of the agricultural value chain. It raises public money to lower the risk associated with agricultural finance, rallies support to increase the bankability of SMEs, and works with capital providers to make banks more "agriculture-friendly."

The greatest method to increase food security in Africa, according to Anita Vandenbeld, Parliamentary Secretary to Canada's Minister of International Development, is to collaborate with small and medium-sized farm and food businesses.

According to her, the Agri-Food SME Catalytic Financing Mechanism would enhance resilient growth and climate adaptation through a joint commitment between Canada and the African Development Bank.

"It will also help African SMEs to pursue climate smart models, and support women by shifting attitudes that perpetuate gender gaps in financial inclusion,” said Anita.

The Mechanism, which is set up as a multi-donor trust fund, is open to and encourages involvement from other development partners. The Mechanism will boost the amount of attractive capital de-risking agri-SMEs and leverage more private sector finance toward effective agri-food sector investments by partnering with the financial instruments of the African Development Bank.

A high-level continental gathering, the Dakar 2 Summit was hosted by President Macky Sall of Senegal and the African Development Bank Group. Its theme was 'Feed Africa: Food Sovereignty and Resilience'. There were 34 heads of states present.

In order to mobilize high-level political will and financial resources toward Africa's agricultural transformation, the Dakar 2 Summit also attracted agriculture and finance ministries, central bank governors, members of the corporate sector, farmer organizations, and development partners.