About
Climate change is impacting agricultural productivity in West Africa. Smallholder farmers, who supply up to 80% of produce in the region, are among the most vulnerable to its effects. Climate-smart agriculture (CSA) can offer smallholders a way to better absorb climate shocks and sustainably increase productivity and income.
Yet public and private investments into agriculture remain insufficient, due to high transaction costs and the risks associated with the sector. Coupled with unaffordable financial services and lack of information, the high upfront costs of implementing CSA practices limit the ability of smallholder farmers in West Africa to adopt CSA practices.
Innovation
The West African Initiative for Climate-Smart Agriculture (WAICSA) is the only West Africa-led blended finance fund with a specific focus on increasing the uptake of CSA practices by smallholder farmers. By mobilizing public and concessional capital, WAICSA is able to provide subsidized interest rate loans to smallholders’ organizations and agribusinesses of ticket size below US$ 1 million, thus making credit more accessible. WAICSA also builds the capacity of local financial institutions to design loan products with CSA adoption conditions, helping bring additional resources to this sector. In addition, technical guidance on CSA implementation is provided to bridge the knowledge gap and further support smallholders to adopt these practices and comply with loan conditions.
Impact
An initiative led by the Commission of the Economic Community of West African States (ECOWAS), WAICSA will target six of the 15 ECOWAS member states in its pilot phase, with the objective of being replicated in all 15 states after the concept is proven.
At scale, WAICSA has the potential to improve the food security of 90,000 smallholder farming households in the region and convert over 185,000 hectares to climate-smart agriculture. The fund can also contribute to mitigating up to 2 million tonnes of CO2 emissions a year, which is equivalent to over 4 billion miles of driving.
Design
WAICSA is composed of a Financing Facility (80% of the fund), managed by the ECOWAS Bank for Investment and Development (EBID), and a Technical Assistance Facility (20% of the fund), managed by the Regional Agency for Agriculture and Food (RAAF).
The Financing Facility offers subsidized-rate loans, guarantees, and equity investments to agricultural businesses and smallholder organizations, both directly and through local financial institutions. It uses guarantees and blended finance, including contributions from ECOWAS Member States and investments from the fund manager, to de-risk and crowd-in private investments. Embedded into WAICSA’s financial products are conditions meant to incentivize the adoption of CSA by smallholders, thus reducing their exposure to climate risk.
The Technical Assistance Facility is financed through grants and subsidies from ECOWAS and donors. It supports financial intermediaries to design loan products that integrate CSA conditionality and guides smallholders in implementing locally adapted CSA practices. In this way, the Technical Assistance Facility further de-risks investments, ensuring favorable conditions for repayment of loans by providing support for CSA practices that offer improved productivity and income.
Flickr photo credit: Arne Hoel/World Bank
