Characterizing and modelling of a matching grant for financing agribusiness innovation in Eastern Africa; a case of Bioinnovate Africa

Abstract

Innovation financing is vital for economic diversification and growth of agribusinesses in Eastern Africa. It makes agribusiness firms more competitive and sustainable in the long run. Yet, access to innovation financing remains a challenge for most agribusinesses in the region. Investors in agribusiness innovations usually require agribusiness firms to provide matching grants (co-funding) to finance innovation activities. However, it is often not clear what these matching grants constitute for agribusinesses and investors, and how they should be executed during and after project implementation. In addition, agribusinesses matching grants preference and constraints are not known and what influences agribusiness firms’ choices of matching grants are yet to be identified. This study aimed at characterising matching grants by developing a framework for costing matching grants; identifying constraints faced by agribusinesses while providing matching grants; and, established firm characteristics and institutional factors that influence agribusinesses choice of matching grants. The study utilised a mixed method research design by employing both quantitative and qualitative tools in studying agribusiness firms that are beneficiary of BioInnovate Africa phase II grants. The latter is a regional science and innovation-driven initiative implemented by the International Centre of Insect Physiology and Ecology, Kenya. An online survey of 30 agribusiness firms distributed across Burundi, Rwanda, Kenya, Uganda, Ethiopia and Tanzania was carried out, and 12 key informant interviews done as part of the study. Data was analysed using qualitative content analysis and generalised structural equation modelling (Gsem) multiple multinomial logistic model (Mml). The study developed a matching grant costing framework and, analysed constraints that agribusiness firms faced while providing matching grant. The results showed that firm size, ownership structure, management structure, location, and age significantly affected the choice of matching grants. In addition, institutional factors such as firm practices and guidelines also influenced the choice of matching grants. The study recommends the need to address the binding constraints and customise matching grant based on a firm’s structure and need. The results of the study may be used to inform the policies and practices on financing agribusiness innovations for grantors and grantees. The recommendations may be taken by investors and used to guide in allocation of innovation grants to agribusinesses in Eastern Africa.