The development impact of concessional finance to agri-business: a rapid evidence review
Authors:   Commercial Agriculture for Smallholders and Agribusiness (CASA), Hague Mathias , Obanubi Michael , Shaw Michael , Tyler Geoff 
Published: May 2024

The provision of concessional finance has become an increasingly important tool to support enterprise development, especially where financial markets are underdeveloped. For the purposes of this research, concessional finance is defined as that which is extended on terms and/or conditions that are more favourable than those available from the market. This can be achieved, for example, via lower risk adjusted return expectations; terms and conditions that would not be accepted/extended by a commercial financial institution; and/or by providing financing to a borrower/recipient not otherwise served by commercial financing. Risk mitigation tools, guarantees and first-loss products are also included when they are provided on concessional terms. The Foreign, Commonwealth & Development Office (FCDO) of the United Kingdom (UK) has committed funding to a range of concessional finance investors in the agriculture sector, including significant sums for the CDC Group (the UK's development finance institution), AgDevCo (a specialist agribusiness impact investor), the Global Agriculture and Food Security Program (GAFSP) Private Sector Window, and the Africa Enterprise Challenge Fund (AECF). FCDO also makes smaller contributions to more specialized institutions as well as collaborative interventions with other donors in the agriculture sector. These organizations cover the spectrum of investment themes, from close-to-market interest rates for more established businesses to long-term, low- or no-interest debt with packages of advisory support for early stage or highly innovative business models. They deploy a wide range of instruments, some funded, which includes all types of concessional debt and equity; and others unfunded, which covers risk mitigation tools, guarantees and first-loss products when they are provided on concessional terms. Implementing partners use different methods for monitoring and reporting the performance of the concessional funding provided by donors, using both customized measurement mechanisms or those based on more broadly accepted standards such as the Donor Committee for Enterprise Development (DCED). Research ranges from light touch human interest case studies to more formal longitudinal analysis using rigorous statistical survey methods. Academic institutions are increasingly contributing quality research, particularly to the assessment and understanding of development impact, often in partnership with impact investors. Donors themselves both directly engage in research but also provide the majority of the funding for evidence-based learning in both investors and academia. After more than a decade of concerted investment and innovation in the concessional finance space, particularly in sub Saharan Africa and South Asia, there is increasing interest in understanding whether these interventions are providing the development impacts expected and which financing tools and institutions are most effective for different types of farmer and or food market systems. These lessons will allow good practices to be replicated in future and implementation modalities to be improved to maximize development impact and financial performance.