The small Agribusiness Development Fund - Frequently asked questions

What is it?

It is a joint initiative of the European Commission and the Government of Uganda to contribute to the development of Uganda's agriculture and to the improvement of rural livelihoods, incomes and food security. The project purpose is to support the development of Small and Medium Enterprises (SME) engaged in agribusiness by improving their access to Business Development Services and to long-term finance.

It foresees two main components:

  • Establishment of a Small and Medium Agribusiness Development Fund (SMADF), to invest, with equity and other medium term financing tools, in small and medium agribusinesses based in Uganda having viable investment plans:. The expected total amount of the SMADF is USD 30million, with a duration of each investment between 3-8 years
  • A matching grant facility, entirely funded by the EU/GoU project, to support the development of capacity of targeted agribusinesses or businesses upstream/downstream the value chain, by co-funding consultancies for the provision of Business Development Services (BDS) 

A Financing Agreement has been signed between the European Commission and the Government of Uganda for a total amount of 15 million Euro (approximately 51.65 billion Uganda Shillings), divided into the following components:

  1. Direct investment in the Fund: 10 million Euro
  2. BDS Matching grant scheme: 3 million Euro
  3. Support to the establishment phase: 0.6 million Euro
  4. Operational costs, evaluation and contingencies: 1.4 million Euro

The European Development Fund (EDF) component will be managed by the International Fund for Agricultural Development (IFAD). IFAD will represent the project's share in the Board of Directors of the Fund, and will supervise the Fund Manager management of the BDS Matching Grant Facility.

When will it be implemented?

The recruitment of the Fund Manager is underway. Once completed, there will be an establishment phase of approximately one year, in which the Fund set-up and governance will be determined. During this phase, the Fund Manager will also approach interested co-investors in the SMADF, and potential investees, in order to build an initial pipeline.

Therefore, investees should expect to preliminarily submit their investment plans/ideas to the Fund Manager tentatively in the second half of 2015, and receive first funding in 2016.

Contacts with prospective investors, on the other hand, will start already during the first half of 2015, with confirmation of commitments in the second half of 2015.µ

How targeted agribusinesses can benefit?

Targeted agribusinesses will have the possibility to submit their business plans to the SMADF Fund Manager, who will appraise them and, if considered viable and investment worthy by the SMADF (ie: with good return potential and matching the SMADF's investment policies), will submit them to an independent Investment Committee. He/she will also advise on the most appropriate financing mechanism.

The proposals will be evaluated on the basis of their potential return on investment, and of social and environmental criteria, which will be agreed by the Board of Investors representing the fund's shareholders.

The SMADF will not provide grants (except for the BDS matching grant facility, see below). The possible funding mechanisms will be finalised by the Fund Manager and approved by the Board of Investors, and will be based on equity and quasi-equity self-liquidating funding tools (ie: subordinated/mezzanine debt, convertible bonds, etc.): investment by the SMADF will be on the medium term (tentatively 5-8 years).

The maximum investment will be 35% of prospective investment and 35% of the company's equity. This means the SMADF will never assume control of the business, but will be in the position to monitor and advise the company to protect its investment.

The investees and the Fund Manager will jointly evaluate the target company before and after the investment: in case of equity investment, the business plan will also include a foreseen exit strategy of the SMADF at the end of the investment.

Finally, target investees might also benefit from professional advice on their business plan from the Fund Manager during the appraisal phase.
During the establishment phase, the Fund Manager will organize a series of public events to present the initiative to potential stakeholders, including prospective investors and investees.

What is the BDS matching grant facility?

Agribusinesses will also have the possibility of accessing a Business Development Services (BDS) matching grant facility, with the same timing and modalities of the SMADF investment component. The facility, entirely funded by the project (and not by the co-investors of the SMADF) will contribute up to 50% of consultancies for BDS, in order to improve the capacity in specialised sectors agreed by the beneficiaries and the Fund Manager: ie, obtaining international certification to access export markets or internationally recognised quality certification (ie: FSC, ISO, Fair Trade, etc.), improving financial management/internal audit processes, specialised technical training in agro-processing, etc.

Criteria for target agribusinesses for the BDS Matching Grant Facility will be similar (and in many cases complementary) to the ones for equity investment by the SMADF.

Who can benefit?

Small and medium growth oriented agribusinesses based in Uganda with viable investment projects. Agribusiness can include foreign shareholders, but have to be registered in Uganda. Investment plans will have to prove a strong growth potential, and to match the Fund's social and environmental criteria: for example, investments with a positive multiplier effect on smallholder farmers will be encouraged, while projects involving destruction of primary forests will be discouraged. Further criteria for target agribusinesses (turnover, number of employees, etc.) will be detailed during the establishment phase and agreed by all investors alongside the other policies of the fund.

Why does this project target comparatively bigger companies while excluding smallholder farmers?

The process of identification, pre-selection, appraisal and monitoring/follow up of each investment is expected to be quite demanding, and feasible only on a small scale. Given the minimum and maximum amounts per investment, the SMADF is expected to directly invest in around 25-35 companies.

Moreover, the investees are required to have a good starting capacity, in terms for example of respecting international financial accountability standards and raising the complementary amount with self-financing and/or commercial bank loans. These conditions are out of reach for the overwhelming majority of smallholders and micro agribusinesses. However, they can benefit from the SMADF from increased and better access to markets, outsourcing/out-grower/contract farming schemes, increased employment opportunities, etc.

It is important to note, however, that the European Commission in partnership with the Government of Uganda has implemented and will continue to fund several projects and initiatives more adapted to smallholder farmers and micro agribusinesses through the 11th European Development Fund (EDF). Negotiations between the EU and the Government of Uganda and project designs are still underway, but we can confirm the amount for funding the agriculture and food security sector under the 11th EDF in Uganda will be higher than the one under the 10th EDF.

Who can invest in the SMADF fund?

The Fund Manager will look for co-investors from all sectors (development finance institutions, foundations, private investors, investment funds and banks, agribusinesses looking to enter/expand in the Ugandan market, etc.) to complement the project's 10 million Euro (approximately 13 million USD), to arrive to the target of the first closing, which is 30 million USD.

The fund will be professionally managed under a private equity orientation: although the SMADF investment policies will include social and environmental corporate social responsibility criteria, financial sustainability (including profit) will be a central criterion.
A Private Placement Memorandum will detail the contractual relationships with the investors, including duration of the investment, dividend policies, fund governance, fund manager remuneration, etc.

The project will entirely subsidize the establishment phase: from the moment the fund will be registered as an autonomous legal entity, the Fund Manager will be paid by the fund, although the project will still provide for 2 years a partial subsidy, in order to provide an incentive to reduce risk and attract a high profile fund manager.

Depending on the success of the fund, and on the demand and commitments of the investors, further closings could be organised.

Timeline for implementation

Note: This timeline is purely indicative. Actual duration of each phase will depend on internal and external factors, including actual level of demand and nature of the investments, decisions by the Board of Investors, performance of the investments, etc.


3 quarter 2014

1 half 2015

2 half 2015





Recruitment fund manager








Fund Establishment








Co-investors providing commitment








Agribusinesses submitting investment proposals and investment phase








Management phase (investments follow-up)








Disinvestment phase








BDS Matching Grant Facility








Project closure, final audit and evaluation








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