To address the financing challenges in the agricultural sector, the Government of Uganda, several non-governmental organizations, and donor project agencies put in place several supply-side financial initiatives and policies to make the sector more attractive, especially to the youth population, to boost the level of food production.
Uganda is home to 46 million people and hosts the world’s second-largest youth population. Obtaining a decent job in Uganda is one of the most challenging tasks for most youth of all categories. Over 87% of the youth in Uganda work in insecure, low-income and often unsafe informal-sector jobs or in family income generation activities with little or no pay at all (African Economic Research Consortium, February 2022).
Agribusinesses in Uganda face barriers in obtaining and expanding finances to scale up their businesses. They are mostly not investment ready when searching for potential investors and are unaware of what these investors are searching for. Consequently, they fail to articulate their business value in the appropriate light. Furthermore, the knowledge of the availability of the necessary financing from alternative sources is still low given the demand, while the supply of financing is becoming more efficient and sustainable.
The Ministry of Water and Environment in partnership with the Nordic Development Fund and the African Development Bank designed the ENABLE Youth Program Uganda to support Uganda’s youth, aged between 18 and 35 years, to develop scalable and sustainable enterprises across different value chains within the agricultural sector.
This program was executed between 2018 and 2022 and aimed to upgrade specific value chain technical skills of young people (with particular attention to women), adopt innovative agricultural business management practices, expand entrepreneurship education, entrepreneurial ecosystem development, and access expansion capital.
Truvalu Uganda has recognized the need for prospective entrepreneurs and management of agri-SMEs
Business Development Services Support BDS activities centered around turning business concepts into successful enterprises. The BDS are a wide range of non- financial services provided to the agripreneurs to help them improve the performance of their businesses, access to markets and the ability to compete.
The program has created vast impact for the participating agripreneurs by helping them navigate the dynamic processes of entrepreneurship. Its activities set the agripreneurs on an entrepreneurial journey that not only defined their business ideas, but provided them with key capabilities to execute them in a vastly changing business environment. A strong emphasis on business management skills training and business validation before financing appeared crucial in changing attitudes and empowering the youth.
Impact cut across many dimensions of the entrepreneurship eco-system including social support in terms of gender inclusion, market dynamics (dealing with the competition and access to markets), regulatory environment (entry regulations and taxation), entrepreneurial motivation and mindset & skills (opportunity recognition, leadership and management skills), access to financing, technology, and innovation.
Most of the agribusinesses that participated in the ENABLE Youth programme were in the phase of ideation, but the support they received assisted them build their agri-startups and even in the advent of the outbreak of the COVID-19 pandemic and the subsequent lockdowns, a survival rate over 70% of the agribusiness was achieved with over 400 jobs created.
The programme contributed to the creation of local jobs, the professionalization of SMEs and the concrete sale of agri products. It contributes to SDG 5 (Gender Equality), SDG 8 (Decent work and income), SDG 12 (Responsible consumption and production) and SDG 13 (Climate action).
The agricultural sector still attracts less financing in comparison to other sectors (36% share of total credit) and services (52%) (EPRC, 2020). Bank finance is of limited help to high potential SMEs due to regulation and a limited credit risk appetite, leaving out the small-scale farmers.
External financing is vital to businesses as it provides them with the resources they require to develop new products, expand production capacity and access new/wider markets. Raising capital is a critical step for businesses to build long term growth and achieve sustainability. However, for these businesses to secure financing for their business needs, they must be investment ready.
This implies the ability to describe the logic, rationale, and internal workings of their businesses with sufficient clarity to enable investors, lenders, and/or potential partners to make a determination of value. It also means robust internal capacity to absorb the financing in a meaningful manner, implement a sound investment project and bring the investment to social and economic value. All this needs due preparation.
Truvalu Uganda has a strong interest in helping agribusinesses grow as much as possible by combining opportunities for access to investment financing with technical assistance facilities that provide the agri-SMEs with the expertise they need to thrive. The goal of Truvalu Uganda is to pull more equity financing to the Ugandan agribusiness sector through investment readiness support. Equity financing can come with capital-plus strategies where capital investments are complemented with ands-on management expertise, helping companies grow, improve operations and meet regulatory obligations. This co-entrepreneurship model features Truvalu as an impact investor.
With its rich experience, Truvalu Uganda aims to expand its investment readiness model, focusing on reducing the risks of agri-SMEs through improving their investment readiness levels. Lower risks and well-built business cases increase their ability to attract both investors and high investment amounts. Our investment’s readiness level tool helps to assess the probability of the businesses attracting financing prior to engagement and providing support.
For the ENABLE Youth program, Truvalu Uganda developed a unique methodology of financing agribusinesses, focusing on the imparting of agribusiness management skills to the youth before providing them with the enterprise scale-up financing.
The design and implementation of this program was innovative in its holistic approach and included conducting an ecosystem analysis at the design stage, setting clear objectives and a clear target audience, focusing on inclusiveness especially for young women and remaining adaptable. It encompassed initial field visit assessments, mobilization and recruitment of the agripreneurs, training and mentoring, coaching and the provision of business development services support and fund management.
A key component of the programme was to select, train and mentor youth with agribusinesses in preparation for the receipt and utilization of financing to re- capitalize their enterprises.
Young people from five regions in Uganda worked their way through a series of competitive selection rounds involving a business training “Boot Camp” and intensive one-on-one preparation with mentors and technical advisors to a final live pitch session in front of an Investment Committee composed of representatives from the private sector, banking industry, government and donors.
The investment readiness program matches what the entrepreneurs want from their agribusinesses and what investors are looking for to find the most suited investors for them.