[{"bbox": [96, 152, 1134, 270], "category": "Text", "text": "enterprises (MSMEs)²⁴. Small-scale farmers lack working capital to procure inputs at the beginning of the season, while small aggregators lack the financing to buy from small-scale producers. Small firms in Zambia face challenges accessing credit due to high collateral requirements imposed by lending institutions, which can be up to 200%-250% of the value of loans²⁵."}, {"bbox": [96, 297, 1134, 386], "category": "Text", "text": "Lending institutions do not have the necessary infrastructure, skills and data to effectively market financial services to the smallholder farmer segment. This, coupled with high transaction costs of reaching remote rural populations, creates barriers to accessing finance²⁶."}, {"bbox": [96, 412, 1134, 790], "category": "Text", "text": "A 2016 survey²⁷ on growth-oriented agro-processing SMEs confirms that access to finance and the cost of finance remain impediments to growth for agro-processing SMEs. 42% of agro-processing SMEs cited the cost of finance as one of the three biggest obstacles to growth, and 20% cited access to finance as a constraint. The cost of finance was the second most widely cited impediment, behind utility problems. In total, about 20% of food processors report access to finance as the most significant obstacle affecting the operations of their businesses. In terms of relative severity, 28% of food processors report access to finance as a “major” or “very severe” business obstacle²⁸. The lack or shortage of capital for both small-scale farmers and MSMEs to engage in production and value-added operations is linked to the limited capacity of smaller actors to make investments and their exclusion from financial services. For example, companies running out-grower schemes are often limited in the numbers of farmers they can support with inputs on credit due to working capital constraints. The MSME agro-processing sectors do not have enough initial capital outlay to buy from aggregators and cooperatives, and to invest in processing equipment."}, {"bbox": [96, 819, 1134, 1104], "category": "Text", "text": "Introducing a matching grant facility into the project presents a viable solution to these intertwined problems. By providing financial incentives that match the investments made by farmers and other stakeholders, this facility could catalyse significant improvements across the sector. It would encourage investment in farm improvements and infrastructure, foster greater participation in market-integrated value chains through enhanced knowledge and market incentives, and accelerate the transition towards sustainable agricultural practices by mitigating financial risks and fostering collaboration among stakeholders. Matching grants can act as a catalyst for innovation, driving the development and testing of new business models and technologies in the agricultural sector. This not only fosters a more dynamic environment but also empowers firms to scale up solutions faster and maximise their positive impact on smallholder farmers."}, {"bbox": [96, 1108, 1134, 1196], "category": "Text", "text": "Furthermore, by addressing the financial barriers to sustainable transformation, a matching grant facility could unlock new opportunities for growth, sustainability, and resilience in Zambia's agricultural sector, making it a compelling component of the project's strategy to overcome the identified challenges."}, {"bbox": [96, 1223, 1069, 1253], "category": "Section-header", "text": "## Green skills development to support a sustainable increase in agrifood systems productivity"}, {"bbox": [96, 1281, 1134, 1339], "category": "Text", "text": "There is a pressing need to continue addressing the shortfall in skills and skills development among farmers, especially those engaged in pioneering new agri-food value chains focused on climate-smart"}, {"bbox": [85, 1380, 1144, 1454], "category": "Footnote", "text": "²⁴ As the National Gender Policy 2023 states “Over 90 percent of MSMEs operate in the informal sector of which the majority are women and incomes are low. According to the International Trade Centre SME Competitiveness Survey 2018, women-owned MSMEs in Zambia represent 30 percent of the total MSMEs”."}, {"bbox": [85, 1454, 993, 1503], "category": "Footnote", "text": "²⁵ Zambia Access to Finance Study for partner Country Zambia Project No. 2018/399297/1 FINAL REPORT\nJanuary 2019. AECOM. Funded by the European Commission"}, {"bbox": [85, 1502, 993, 1550], "category": "Footnote", "text": "²⁶ Zambia Access to Finance Study for partner Country Zambia Project No. 2018/399297/1 FINAL REPORT\nJanuary 2019. AECOM. Funded by the European Commission."}, {"bbox": [85, 1550, 1144, 1622], "category": "Footnote", "text": "²⁷ This was a World Bank survey of 50 purposely selected (non-representative) sample of agro-processing SMEs conducted in 2016 to inform the preparation of the World Bank's Zambia Agribusiness and Trade Project. Cited, in Agriculture Finance Diagnostic, Zambia, The World Bank, 2019."}, {"bbox": [85, 1622, 646, 1646], "category": "Footnote", "text": "²⁸ Agriculture Finance Diagnostic, Zambia, The World Bank, 2019."}, {"bbox": [1027, 1682, 1144, 1706], "category": "Page-footer", "text": "Page 11 of 32"}]