This discussion paper from the Global Alliance for Improved Nutrition (GAIN) looks at new models for investing in nutritious foods, particularly in low and middle income countries (LMICs). Research has shown that small and medium enterprises (SMEs) in LMICs are an important vehicle for bringing safe and nutritious foods to market for consumers - but to do this effectively, SMEs need financing and technical assistance.
This paper that argues "private capital has considerable potential to fill this financing gap and that so called 'blended finance' is a particularly promising approach for unlocking more investment in SMEs in nutritious food value chains." By bringing together different types of investors, institutions and capital (e.g. private capital, development finance institutions, philanthropic donors and government aid), blended finance can help unlock new funds while de-risking investments and stimulating positive social impacts. To make this case, the authors examine the current food system investment landscape, including the challenges of financing food system SMEs; introduce mechanisms that could better support SMEs in nutritious food value chains; and provide potential actions for the future.
Key messages include:
- With greater access to financing and technical support, SMEs - which produce the bulk of food consumed in LMICs - can play a larger role in increasing the availability and affordability of safe, nutritious foods.
- However, there is currently a large gap in funding available to support SMEs in nutritious food value chains.
- The growing field of blended finance represents a significant opportunity to leverage public and private financing to incentivise and support these companies to prove more nutritious foods.
- Attractive investors to blended finance mechanisms requires: making the case that nutritious food is a compelling theme for investment; identifying viable investment opportunities with SMEs in nutritious value chains; and developing metrics that allow investors to select the right SMEs and track the social impact of their investments.
To learn more, read the full discussion paper: Blended finance: A promising approach to unleash private investments in nutritious food value chains in frontier markets
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A blog from the authors that helps contextualise some of this discussion: It’s time for investors to embrace nutritious foods. They highlight some of the work GAIN is doing in this space, including a newly established Nutritious Foods Financing Facility (N3F) - a blended finance platform designed to demonstrate how investment in SMEs can increase the supply and consumption of safe and nutritious foods in Sub-Saharan Africa. Also, this opinion piece: To improve diets and tackle climate change, support SMEs in low-income countries