Investment in sustainable food production in developing countries is heavily constrained by
- high country and sector specific risks,
- poor primary data and information asymmetries between financial institutions and potential borrowers in rural financial markets,
- the mismatch between investment needs of farmers and producing companies and different pools of capital, e.g. development finance institutions, banks, pension funds, insurance capital, and
- high transaction costs and small ticket size.
These constraints lead to insufficient pipelines of bankable projects. One solution to remedy these deficiencies is blended finance. This paper presents a snapshot of current challenges and opportunities associated with blended finance and calls for a radical sectoral shift in agriculture, using commercial banks, development finance institutions and other financial intermediaries as enablers for food systems transformation.
The authors propose six actions for blended finance to help enable and boost the transition towards sustainable food systems, contributing to positive environmental, social and economic outcomes.
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