Sustainable business models and improved financing opportunities for the agriculture sector

Project description

Project title: Initiative for the promotion of agricultural value chains
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Tunisia
Lead executing agency: Ministère de l’Agriculture, des ressources hydrauliques et de la pêche (Ministry of Agriculture, Water Resources and Fishing)
Overall term: 2015 to 2019

Context

The agriculture sector plays an important role in Tunisia’s Social Plan. Almost a fifth of the labour force works in this area. In the less developed regions of Tunisia, farming is the main economic activity, employing over 40 per cent of the labour force in the North-West region and more than a third in the Central-West region. In spite of this, however, the agriculture sector generates less than 10 per cent of the country’s gross domestic product. Tunisian agriculture is dominated by family-run enterprises. Over half of all farms work less than five hectares of land. Investment in agriculture accounts for less than 10 per cent of total investment in the overall economy.

One of the barriers to growth in the agricultural sector is the lack of access to loans. Less than 10 per cent of all farmers are granted loans. Banks are reluctant to invest in this sector because of the low profit margins, the frequent droughts, the absence of a loan guarantee mechanism and alternative types of security. Smallholders are particularly disadvantaged. They seldom receive loans and many struggle with debt.

Objective

Associations of smallholders and processing and marketing enterprises in the Central-West and North-West regions are implementing sustainable business models with the support of improved advisory services.

Approach

The project aims at an easier access to funding for smallholders and small and medium-sized enterprises (SMEs). It collaborates with various actors in the agricultural sector in rural areas of the Central-West and North-West regions, combining investment promotion with advice on planning and implementing business models for specific value chains. The project is working in three fields of activity:

  1. Associations of smallholders and SMEs in the food industry are given advice on planning investments and implementing business models. They thereby learn how to make independent and well-informed investment decisions.
  2. Selected sustainable business models are implemented as pilot projects. These models must be financed from external sources and additionally meet various social, economic and environmental sustainability criteria, such as protection of the environment and improved working conditions for employees. The enterprises can invest in resource-friendly and environmentally sound technologies (such as small-scale irrigation, storage, processing and marketing) that will improve their productivity and profitability.
  3. The lessons learned from successful examples of investment and new business models are documented and made available to a wider audience. State investment promotion agencies and private financial service providers learn from the experiences gained in the project and are able to offer better services to smallholder organisations and SMEs. The best practices on the ground demonstrate potential opportunities to smallholder organisations and processing businesses, encouraging them to carry out investments themselves.

The project’s lead executing agency is the Tunisian Ministry of Agriculture, Water Resources and Fishing, and in particular its Planning Directorate. On the regional level, the project’s state partner is the agricultural authority of each governorate.

The project is part of a special initiative of the German Federal Ministry for Economic Cooperation and Development (BMZ) that is designed to stabilise and promote development in North Africa and the Middle East. Through the projects that make up this special initiative, BMZ is helping to open up economic and social prospects for people in the region. Within this context, an additional sum of more than EUR 300 million has been earmarked for projects carried out by GIZ and other implementing organisations in the period from 2014 to 2021. The thematic focus is on youth and employment promotion, economic stabilisation, democracy and stabilising neighbouring countries in crisis situations.

Results

The project has to date collaborated on two initiatives in the olive oil industry that have helped seven associations of smallholders to invest in technologies and infrastructure. It has also launched an analysis of funding in the agriculture sector. In addition, the project has identified a number of potential pilot projects and set up seven regional cells to promote investment in the agriculture sector. Here, the aim is to strengthen dialogue and cooperation between representatives of the Tunisian administration, banks and microfinance institutions. Access to information on funding and awareness of business models are to be improved.