About
The 15 member states of the Economic Community of West African States (ECOWAS) are particularly vulnerable to climate change and are ranked among the lowest in terms of readiness to improve their resilience. Therefore, investment in adaptation measures is urgently needed.
Smallholder farmers in the region manage 80% of the farmland and as such are directly confronted with the impacts of climate change. Despite that, public and private investments are lacking in agriculture due to perceived risk, high transaction costs and low returns coupled with limited technical expertise of climate change and climate smart agriculture among financial institutions.
In addition, financial services are not flexible nor affordable enough for smallholders’ needs. This aspect combined with high upfront costs and lack of technical knowledge among smallholder farmers have kept the rates of adoption of CSA technologies low.
The Solution
The WAICSA is the only fund blending private and public investments with specific focus on increasing the uptake of climate smart agricultural practices and technologies by smallholder farmers in West Africa. It does so by building capacity of local finance institutions to design loan products with CSA adoption conditionalities. The provision of credit guarantees and subsidized interest rates loans for smallholders and agribusinesses of ticket size below USD 1 million makes credit more accessible to smallholders while the technical guidance on CSA implementation bridges the knowledge gap.
Implementation and Impact
The development of the West African Initiative for Climate Smart Agriculture is being led by the Economic Community of West African States (ECOWAS) Commission, who will also ensure the general guidance. The Fund facility will be managed by the ECOWAS Bank for Investment and Development (EBID), while the Technical Assistance facility will be managed by the Regional Agency for Agriculture and Food (RAAF).
All 15 ECOWAS Member States, totalizing 2,459,840.00 km2 of agricultural land, will be eligible to access the WAICSA.
Design
The Fund facility will be capitalised by three types of potential investors: impact investors, concessional funds and contributions from the ECOWAS member states. The Fund facility will provide subsidized rate loans and guarantees to local finance institutions who will make those available to agribusinesses and smallholders’ organisations based on CSA adoption conditionalities. Equity investments into agribusinesses are also a possibility, although the fund will predominantly operate through loans.
The TA facility will be funded through grants from both ECOWAS Member States contributions and donors and will provide support to local finance institutions for the design of loan products integrating CSA conditionalities and for establishing monitoring systems. Another share of the TA facility will be directed towards research and definition of CSA practices and technologies adapted for local needs and support to smallholder farmers organisation for their implementation.
The two components: Fund Facility and the Technical Assistance Facility will be allocated approximately 80% and 20% of the resources, respectively.
Flickr photo credit: Arne Hoel/World Bank