Agri-SME finance: Navigating volatility in the wake of the war in Ukraine

Wednesday, July 6, 2022

Jul 06, 1:30 PM – 5:00 PM

The war in Ukraine began in February 2022, and evidence of its impact on global food systems continues to grow. Yet, much uncertainty remains around its effect on different actors in the agriculture sector, particularly agri-SMEs and the institutions that finance them. While it is understood that most enterprises are facing inflationary pressures, especially related to the increased cost of inputs and fuel, it is less clear how enterprises operating at different stages of the value chain (upstream, midstream or downstream) are being affected. Indeed, this latest economic shock is compounding existing challenges brought on by the COVID-19 pandemic, climate change and internal conflicts in some cases. Agri-SMEs operating in different contexts are facing a range of challenges such as the need for alternative sources of supply, new markets to sell their products as well as responses to increasingly localized markets.

Similarly, the financial sector is being affected in different ways depending on the country and sector of operation. Financiers must navigate the current cost of capital, perception of risk associated with agriculture and SME investments, as well as the risk assessment and management tools available. Relatively little is known about the immediate and long term impacts of these considerations, which will largely determine whether the financial ecosystem around agri-SMEs can absorb higher costs and risks, or support agri-SMEs in adapting to evolving market dynamics. As new information emerges on the immediate and long-term impact of the war in Ukraine on food systems, a structured reflection on the implications for access to finance in the agriculture sector is needed, both in terms of key challenges and opportunities.

With this in mind, SAFIN is organizing a virtual event that will explore how the conflict has affected this particular group of actors across the most effected regions of the globe, including Africa, the Middle East and South East Asia. The session is designed for practitioners from the agriculture investment ecosystem, both global and local, as well as agri-SMEs themselves to ensure that both supply and demand side issues are covered. The event will feature three consecutive panels, starting with representatives of agri-SMEs active across the most affected geographies and value chains. These enterprises will share their experiences of the challenges and opportunities the crisis is presenting on their operations, the resulting financial implications and future consequences on their businesses. A panel of financial service providers active in these regions will then discuss how recent events are affecting their portfolio and funding activities including assessment of risk and their approach to addressing the financial needs of agri-SMEs in their current portfolio and beyond. Finally, the discussion will turn to international financing experts from the public, private and philanthropic sectors to explain how they are addressing the situation broadly and in relation to agri-SME finance within existing interventions.

Key questions

The discussion will revolve around the following questions:

  • How have different types of SMEs been affected in terms the shifting costs of inputs and outputs, and market dynamics according to their context (activity and region of operation)?
  • What financial or non-financial solutions are most relevant to address these issues?
  • What potential opportunities could or have already emerged due to higher prices or the emergence of stronger regional trade alliances?
  • What are the costs and risks affecting investment decisions related to the agriculture sector, particularly in SMEs, as a result of the conflict?
  • What are local financial service providers currently doing to address the challenges agri-SMEs currently face as a result of these crises?
  • How can we make sure that the actions and additional resources channelled by international actors to affected regions and sectors are designed to support the role of SMEs in local food systems?
  • What are the expected long-term implications of the war on food systems, trade, agricultural finance and food security?

Organized in collaboration with the International Fund for Agricultural Development (IFAD), the International Finance Corporation (IFC) and the Good Food SME Hub.