The Concept of Innovation Funds for Agricultural Transformation (IFAT)

The Innovation Fund for Agricultural Transformation (IFAT) is a proposed in-country agricultural funding initiative to support the transformation of the agriculture sector in the developing countries in Africa, through the Integrated Agricultural Research for Development (IAR4D) concept. The IAR4D concept fosters the generation of innovations, sustainability of smallholder farmer's livelihood, increase food security, promotion of sustainable natural resource management and rapid reduction in rural poverty by changing the way agricultural research and development activities are conducted. The IAR4D concept has been demonstrated to yield high returns to investment in agricultural research for development by ensuring high adoption of superior technologies leading to increased productivity of farms in combination with sustainable use of natural resources. This is followed by increased income for the farmers and other stakeholders along the value chain which in turn leads to rapid reduction in poverty. The use of the IAR4D concept as a framework for agricultural Research and Development (ARD) activities in the different countries of will, however, require a different financing arrangement from the current scenario in most Africa countries. Capital for an agricultural endeavour will necessarily need to be at a much lower interest rate compare to the current bank rate which ranged from 18% to 32% across the countries in sub-Saharan Africa. Agricultural capitals with lower interest rate will have a direct positive impact on the competitiveness of commodities produced in the Africa counties compared to commodities from other countries in the West and Asia where the interest rate on agricultural capital is in the single digit range. Such loan may not be too profitable for the financial institutions; as such it requires special institutional arrangements for its sourcing and sustainable management. This paper proposes that IFAT should be drawn from alternative sources such as the mandatory social responsibility contribution from large private sector establishments. It could also pool fund from somewhat redundant pension funds available in some countries, from grants from development partners and government fund. The management of the IFAT fund could be handled by a national innovation platform which will carry out the overall governance of the fund through a Steering Committee that will be charged with the responsibility to direct the use and application of the funds through selected commercial banks. This will enable the fund to deliver its objective of developing structures that would ensure sustained access to innovative agribusiness financing by entrepreneurs and farmers to promote and improve agribusiness investment to enhance food security goals, create jobs and reduce poverty.