Inclusive Finance in Somalia's Livestock Sector (IFSLS)

The overall objective of the intervention The Swedish contribution to IFSLS, set for an 18-months implementation period, has an overarching goal to create conditions for increased incomes, resilience and assets for micro- and small-enterprises in Somalias livestock value chain through improved financial inclusion. This will be achieved through two interconnected Outcomes that address both supply- and demand-side constraints: Outcome 1 (Supply side): Banks and MFIs have improved ability to provide tailored and inclusive savings, financing and other Sharia-compliant financial products and services to MSMEs, producer groups and other market actors in key livestock value chains. - Output 1.1: Banks and MFIs are better able to provide in-demand financial products and services to underserved customers along key livestock value chains - Output 1.2: Evidence-informed intervention(s) designed and implemented to address lack of affordable and appropriate financing for Banks and MFIs. Outcome 2 (Demand side): MSMEs, producer groups and other formal and informal associations within the livestock value chain are better able to equitably access, use and benefit from financial products and services. - Output 2.1: Input and service providers, processors, traders and wholesalers and savings and loan associations in the livestock sector have improved levels of financial understanding and ability to productively engage with relevant Banks and MFIs. - Output 2.2: Women and youth in producer, marketing groups and in the livestock value chain are better able to gain equal access to financial products and services. Theory of Change The underlying assumption of the IFSLS program is that by partnering with financial institutions and strengthening the capacity of market actors, the barriers to accessing finance will be reduced. This, in turn, will lead to the growth of the livestock sector, increased business incomes, and improved economic resilience for smallholder producers and traders in Somalia's key livestock trade corridors. Through its alignment with the RLP, the IFSLS program not only contributes to the development of Somalia's livestock value chain but also enhances the overall impact of regional efforts to build food security and economic resilience across the Horn of Africa. The target group The IFSLS programme aims to support low-income, yet economically active individuals and groups inside Somalias livestock value chain to enable them to start, expand, or increase their business in the sector. The entry point for this endeavour will be primarily through groups - micro- and small-enterprises primarily, as well as business/producer cooperatives - with the programme aiming to support participants in both the livestock sectors core market functions (livestock producers and small-to-large brokers across live animal, milk and meat value chains, addressed in detail in project document, p. 22-25) as well as those engaged in important supporting functions, which are described in detail in annex 1 to the programme document. Selection of direct beneficiaries will build on findings from market research and studies which will be done during the initial 3 months of Inception Phase, working closely alongside the partner Financial Institutions (KIMS Microfinance and IBS) to identify the particular groups in which a lack of equitable and affordable access to financial services and products is currently having the most detrimental impact. The programme has an explicit ambition to include women and youth with a target of minimum of 40%. A gender equality and social inclusion (GESI) analysis will be done to complement the market analysis, to identify the barriers restricting equal access to financial products and services for women, youth and other marginalized groups in the livestock sector. Analysis will guide the design of specific interventions and selection of beneficiaries. The identification and selection of direct beneficiaries will also be conducted through a 'clustering' approach. This method leverages existing groups or clusters to identify MSMEs, producer groups, and other formal and informal associations within the livestock value chains targeted by the program. Clusters will serve as gateways to broaden access to financial products and services, within and along the livestock trade corridors. This strategy broadens the concept of "community" into trade corridors, with success resulting from increased trade and business connections among different market actors in the livestock value chain. Three trade corridors have already been selected, where there are clusters of communities centered around improved market linkages, for example through milk collection, livestock marketing, and input access. The chosen trade corridors for the IFSLS programme align with those of the regional RLP programme, namely: - Tog Wajaale (Somalialand) - Galkaayo (Galmudug) - Afmadow (Jubaland) By the end of the intervention, the IFSLS programme aims to create changes in the attitudes, relationships, and behaviors of several key groups involved in Somalia's livestock value chain. Financial Institutions (FIs): Banks and microfinance institutions (MFIs) are expected to improve their capacity to design and deliver financial products tailored to the needs of micro, small, and medium enterprises (MSMEs), producer groups, and other market actors in the livestock sector. This includes incorporating gender-sensitive approaches to better serve women and youth. Livestock Value Chain Actors: MSMEs, producer groups, and other actors within the livestock value chain are expected to gain increased financial literacy and better access to financial products and services. These groups, especially women and youth, will have improved engagement with financial institutions, leading to more equitable access to resources necessary for their economic activities. Women and Youth: The programme specifically targets women and youth within the livestock sector, aiming to change the existing gender dynamics and power relations. By improving their access to financial services and empowering them economically, the programme seeks to challenge traditional norms and increase the participation of these groups in the economic sphere. Overall, the intervention is designed to foster more inclusive financial systems and empower marginalized groups, leading to sustainable and resilient economic growth and poverty reduction in Somalia's livestock sector.