The FEFISOL fund was set up in 2011 by SIDI and its partners. In addition to its financial support, it proposes a technical assistance (TA) facility to African rural players. After conducting some 140 TA projects in Africa, SIDI and Alterfin are set to launch a second fund in 2022, with the aim of further deepening its social and environmental approach to the funded companies.

Financing and TA: fertile ground for the growth of agricultural companies in Africa

Gabrielle Orliange, Head of social and environmental performance, SIDI/FEFISOL [in Private Sector & Developpement, Proparco’s magazine, 4th quarter 2021]

In Africa, the traditional banking sector takes little interest in microfinance and the rural sector. Yet technical assistance (TA) for agricultural companies, combined with an appropriate range of financing, plays a crucial role in the sustainable development of the continent. It is for this reason that the FEFISOL fund proposes a technical assistance facility to rural players, in addition to its financial support. In this context, it provides its clients with specialized service providers that help them strengthen their viability and improve their productivity, while ensuring that the livelihoods of smallholders are preserved.

Since it was set up just 10 years ago, FEFISOL has financed 139 support projects for 51 clients in 22 African countries. Over two-thirds of the beneficiaries are small microfinance institutions (MFIs) going through a consolidation process[1] or farming entities. A quarter of the technical assistance projects supported by the fund are related to financial issues, such as accounting and strengthening internal control.

The technical assistance program strengthens the impact of the financial support. For the beneficiary, the two tools for action are complementary: the FEFISOL loans allow companies to increase their activity, while the technical expertise helps them secure this growth by improving their efficiency. In terms of the management of the fund, the technical assistance in turn gives the investment officers a better understanding of how the beneficiary companies operate, which improves operational efficiency.

The TA services offered by FEFISOL are especially noteworthy because they provide a customized response to the client’s needs. The client is closely involved in the entire process, including in the selection of the service provider. This effective ownership is also strengthened by the direct financial contribution that each client must make to the project[2].

INVOLVING THE CLIENT IN ALL THE PHASES OF THE PROCESS

The needs of FEFISOL’s clients have changed considerably during the decade. For nearly two years now, due to the economic crisis caused by the Covid-19 pandemic, the requests sent to the fund have mainly been to cover equipment that was not included in their annual budget. MFIs have asked for assistance with liquidity management during the crisis. FEFISOL has responded to this need by organizing online training on this issue with partners.

The independent evaluation of the facility conducted in 2019 took stock of the impact of the technical assistance on the beneficiaries. Many TA missions respond to opportunities and needs for fundamental changes in the beneficiary institutions. In many cases, the TA projects have triggered an extensive transformation process. By giving clients the possibility to test innovations more quickly and easily, they contribute to accelerating the implementation of optimal solutions.

Several lessons can be learned from these ten years of operation. The main one is still the need for the client to take ownership of the technical assistance project. In this respect, its involvement in the process is crucial, from the definition of its needs for a customized solution to the management of the consultant. It is also necessary to maintain a certain degree of agility throughout the implementation of TA projects to ensure an effective response.

ADDRESSING THE CHALLENGE OF EVALUATING THE IMPACT OF PROJECTS

Further down the line, the main challenge for this type of mechanism is to evaluate the impact of TA programs on the beneficiaries. However, with its possibility of allocating successive financing and its processes to monitor its clients’ performance, FEFISOL does have effective tools to characterize and document this impact over time.

To support this upscaling, a FEFISOL 2 fund is set to be launched in March 2022. Following on from FEFISOL 1, it will continue to offer financial and technical services to rural MFIs and agricultural companies, with the aim of deepening its social and environmental approach to projects. In this respect, the TA facility will have a compartment dedicated to improving sustainable agricultural practices and financing agriculture, while maintaining its “customized” approach in order to meet all the needs of its clients.

[1] Tier 3 MFIs whose total assets are less than USD 5m

[2] This compulsory contribution – at least 15% of each mission – accounts for the relatively low average amount for TA projects.

 

 

10 December 2021