This post is features Rebecca Egan, a senior nutrition advisor in the Center for Nutrition. She leads USAID’s nutrition financing partnerships with other U.S. government departments and the private sector.

At last month’s Tokyo Nutrition for Growth (N4G) Summit, the U.S. government announced plans to invest $11 billion in nutrition. That seems like a lot of money, but the bigger question is why are we still talking about nutrition financing?

Despite major commitments made by the U.S. government and many others at global summits like the one in Tokyo, global funding for nutrition remains severely under resourced to address malnutrition and the numerous pathways to improved nutrition. We need $3-10 billion dollars each year for the next 10 years to address the large financing gap, which means we have to think differently about how we meet our global nutrition targets. 

That is why USAID joined the U.S. International Development Finance Corporation (DFC) and the Eleanor Crook Foundation (ECF) to form the Global Nutrition Financing Alliance. The Alliance will mobilize at least $100 million of financing over five years to tackle the root causes of malnutrition in low- and middle-income countries, address the effects of COVID-19 on malnutrition and food insecurity, and leverage private sector solutions to reduce malnutrition globally. 

What makes the Global Nutrition Financing Alliance so unique?

We know that millions of people globally depend on agriculture to feed their families and yet cannot afford a healthy diet. As more and more consumers, including the rural poor, are increasingly relying on markets for their food, the private sector has a key role to play as the interface between markets and consumers. According to a 2017 Lancet paper by Herrero et al., small- and medium-sized enterprises (SMEs) in sub-Saharan Africa deliver about 75% of all food consumed. Despite their significance, SMEs generally struggle to access financing to improve and scale their businesses. 

Deploying $100 million dollars is a great start, but more importantly, the Alliance is an opportunity for DFC to demonstrate that targeted financing can lead to change across food and health systems. And USAID can help make sure these investments are generating the intended impact on nutrition and improved diets. Our technical expertise across the nutrition and agriculture sectors, coupled with our reach and capacity to achieve development outcomes in local contexts, will focus financing investments on those that will have a  nutrition impact. USAID is establishing a set of tools to standardize our approach to evaluate if a company’s products or services can meaningfully impact people’s nutrition. And we will develop metrics to measure impact. 

The Alliance provides a stronger framework for the USAID and DFC collaboration and allows the U.S. government to bring in additional donors and partners to help us reach our nutrition goals. These types of  joint efforts provide proof of principle to crowd in others and encourage greater investment that will ultimately lead to better diets and nutrition.

How is USAID tangibly addressing the nutrition financing gap?

USAID, ECF, the Global Alliance for Improved Nutrition (GAIN) and Incofin Investment Management launched the Nutritious Foods Financing Facility (N3F), a first-of-its-kind investment fund that will bolster SMEs and promote well-nourished communities in sub-Saharan Africa.

N3F differs from other investment funds as its singular aim is to demonstrate how direct loans to SMEs across the food system can contribute to positive nutrition outcomes by increasing the supply and consumption of safe, nutritious foods on the continent. While some recent funds address “the hidden middle” in the agriculture sector, the N3F is a first of its kind in being focused on improving diet quality and nutrition. 

The fund won’t finance just any business producing foods. It has been structured so that investments will focus on nutrition first, meaning products and services that improve the quality and cost of healthy foods that local people eat. Other evaluation criteria include food safety and environmental impact. 

Furthermore, the N3F expects to have an outsized impact on women-owned and women-led SMEs, qualifying for the 2X challenge by having at least 30% of all loans target women-owned or led businesses. 

Can you explain for the nonfinance folks out there how the N3F will work?

The N3F is a blended finance, open-ended debt financing fund targeting qualified SMEs in the nutritious foods sector. In the first five years of the fund, the N3F will make loans of $500,000 to $3 million to 45-60 SMEs along the full agrifood value chain. The N3F expects to begin lending once $10 million has been raised, and the fund is expected to eventually grow to $50-60 million over five years.

The N3F will also provide direct support to identified SMEs by bundling loans with vital technical and business assistance. The team at GAIN will provide direct support to local SMEs with business planning, training and market assessment. There will also be a strong evaluation component to better understand the fund’s overall impact across the food environment.

I'm going to ask you to jump in a time-traveling spaceship and blast five years in the future. What will success for nutrition financing look like at that point?

In five years, the ideal scenario would be for nutrition financing, with a particular focus on the food system, to be commonplace. I’d love to see development finance institutions (DFIs) around the world valuing nutrition investments in the way that they value gender and food security investments — not only because nutrition investing can be profitable but because of its outsized impact on people’s health, wellbeing and productivity, which we need to put a financial value on as well. In this future world, the N3F is one among many nutrition investment funds, and the tools that USAID developed under the Global Nutrition Financing Alliance have been vetted by global stakeholders and are being adopted by DFIs and donors.