AV Ventures, ACDI/VOCA’s impact investing subsidiary, recently completed its investment in AgroCenta, a technology-driven agricultural platform provider in Ghana. The funding made by AV Ventures is part of a US$790,000 pre-Series A investment round with other participating international institutions, including Shell Foundation, the United Kingdom’s Foreign, Commonwealth and Development Office, and Rabo Foundation, with support from AgroCenta’s strategic advisor, Qbera Capital. With the newly secured funding, AgroCenta will widen the reach of its smallholder farmer financial inclusion programs and secure crop purchases, mainly from smallholder farmers, at fair and transparent market prices to service offtake contracts.
For AV Ventures, the investment is part of its long-term strategy of providing innovative and catalytic capital to support growth-oriented small- and medium-sized enterprises (SMEs) like AgroCenta that make up the “missing middle” of investment — too large for microfinance but too small or too early-stage to attract private equity investors. These SMEs are often the backbone of economies and potential drivers of innovation, but too often they miss out on financing that could enable their growth and longevity.
“AV Ventures believes AgroCenta’s innovative business model has the potential to scale not only on a national level but also across borders. The funding comes at an inflection point for the company, as it embarks on a larger fundraising effort to increase its smallholder farmer outreach in the cereals value chain and support post-COVID recovery efforts in Ghana.”Geoffrey Chalmers, AV Ventures managing director
AgroCenta’s CEO Francis Obirikorang and cofounder Michael Ocansey highlighted the importance and criticality of the investment: “This is a significant milestone for AgroCenta, having the support of leading institutions, particularly with the COVID-19 backdrop, underlining the strength of AgroCenta and the importance of its mission. The demand for agricultural raw materials from offtakers in the brewery, manufacturing, and consumer sector is increasing exponentially because of the easing of COVID-19 restrictions that were put in place by the government of Ghana. Hence, this capital injection will help to secure purchases at fair and transparent prices from smallholders — a much needed lifeline for many who are at the proverbial bottom of the pyramid.”
Poor Access to Markets and Services Limits Smallholder Farmers’ Potential
Poor infrastructure and logistics prevent many smallholder farmers in Ghana from accessing large, urban markets where they could obtain better prices for their crops. Many of these farmers lack information on fair market prices, which leaves them susceptible to selling at low prices to middlemen. Without a strong credit history, many of them also have limited access to finance for purchasing high-quality agricultural inputs that would enable them to scale beyond subsistent production.
AgroCenta’s Digital Platforms Boost Financial Inclusion
Founded in 2016, AgroCenta operates two integrated digital platforms in Ghana, CropChain and LendIt, to help address challenges related to smallholder farmers’ access to markets and financial services.
CropChain is an integrated agricultural supply chain management platform that provides smallholder farmers with access to markets. Farmers use the platform to advertise their produce, while large offtakers or buyers of selected cereals use it to make purchases or enter long-term offtaker purchase contracts with AgroCenta. AgroCenta leverages the platform to source cereals directly from smallholder farmers to supply to large offtakers who have contracts with the company. This allows AgroCenta to earn margins between the price it pays farmers and the contractually agreed upon price with offtakers.
LendIt is a platform that allows smallholder farmers to access financial services, such as mobile payments, microloans, crop insurance, and pensions, from partnering financial institutions. AgroCenta provides credit scoring services to the partnering financial institutions on LendIt using proprietary data gathered through CropChain. Access to a strong pool of creditworthy, low-risk farmers who have been pre-assessed by AgroCenta can potentially minimize loan default rates and improve operational efficiencies for financial institutions. These institutions provide revenue to AgroCenta in the form of annual subscription fees and commission on interest in exchange for access to the platform and the initial credit assessment of farmers undertaken by AgroCenta.
The digital services AgroCenta provides along the selected cereals value chain also improve the repayment of loans by smallholder farmers. The services provide farmers with an end market through the offtaking of produce and through facilitating the provision of high-quality agricultural inputs, which maximize their yields and productivity. To date, the average farmer on CropChain has increased their income by 35 percent and their crop yields by 40 percent, while reducing their food waste by 25 percent. AgroCenta has also made strides to promote gender and social inclusion; nearly half of its CropChain users and more than half of its microloan borrowers on LendIt are female smallholder farmers.
Leveraging ACDI/VOCA and AV Ventures’ Efforts in Cereals and Poultry Value Chains
With this investment, AV Ventures also plans to leverage ACDI/VOCA’s substantial footprint in Ghana’s cereals and poultry value chains through the implementation of multiple flagship agriculture projects funded by USAID and USDA in Ghana. By providing AgroCenta with capital, coupled with market linkages through ACDI/VOCA, AV Ventures will support the company to bring much-needed efficiencies to the cereals and poultry value chain in Ghana.
This investment also complements AV Ventures’ existing portfolio companies operating in Ghana’s poultry and cereals value chains. The investment will connect producers of cereals with large-scale users of maize and soybeans, such as poultry producers, to improve access to high-quality, affordable poultry feed.
Read more about AV Ventures’ efforts in West Africa and Central Asia.