Support to Job Creation in the Agri-Food Sector and Rural Space

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In 2019, the Government of Netherlands and the World Bank established the Tunisian Rural and Agricultural Chains of Employment Program (TRACE) to help respond to the job creation and small holder inclusion challenges in the agri-food sector and rural areas. TRACE is a hybrid Trust Fund (TF), financed by a Dutch contribution of US$23.1M, and will be implemented until the end of 2026. The program's development objective is to create jobs in the agri-food sector by strengthening the productivity and resilience of small- scale producers, and competitiveness of agribusiness cooperatives and SMEs in selected agri-food sub-sectors through better access to knowledge, innovations, and financial services. To stimulate job creation, TRACE acts on four dimensions: (i) addressing the mismatch between the supply and demand of skills in the agri-food sector; (ii) expanding the network and professionalism of producer organizations and agri-SMEs able to connect producers to market opportunities and required services; (iii) developing the range and quality of financial and non-financial services for farmers, agribusiness SMEs, and value chain stakeholders; and (iv) improving the business environment and policy framework to stimulate the growth of a market-oriented and private sector-driven agri-food sector. Activities under Dimensions 1, 3 and 4 are Bank-Executed TF (BETF) activities. Under Dimension 2, it is proposed to establish a fourth entrepreneurship support matching grant project to continue supporting Producer Organizations (POs) and small Small and Medium-sized Enterprises (SMEs) to develop their business and create more jobs through technical and financial assistance. This proposed project will be implemented by Microfinanza as a Recipient-Executed Trust Fund (RETF) project. The proposed RETF project will cover the four governorates in the North-West of Tunisia and capitalize on the activities previously undertaken by two other TRACE RETF projects (P174017 & P175641) in the same region. The proposed RETF project will be composed of three components:Component 1 - Technical assistance to POs and SMEsThe implementation of the entrepreneurship support project will require technical assistance (TA) to SMEs and POs for preparing and selecting technically sound and financially and commercially viable beneficiary sub-projects. Microfinanza – the implementing agency – will deliver this TA directly or through technical partners. The agency will disseminate information to potential POs and SMEs, with a special focus for youth and women entrepreneurs, to select candidates through both an open counter system and calls for proposals depending on the target. This dissemination will include facilitating the dialogue with relevant authorities, private sector associations, and other stakeholders to ensure that the investment sub-project submissions are consistent with the nature of the region and the opportunities and constraints of the sector. The Project will help POs and SMEs develop technically sound and commercially viable businesses through tailored TA. This TA will be delivered individually or in cohorts, based on the specific needs and maturity of the applicants’ sub-projects. The TA will ensure that investment sub-project proposals submitted to the Project have a strong potential to be profitable and sustainable, ensuring business growth and creating jobs, while also improving producers’ resilience and economic inclusion.To ensure the success of selected investment sub-projects, the implementing agency will also provide TA during implementation, either directly or by linking POs and SMEs with specialized technical and managerial expertise. The implementing agency will provide this second phase of TA directly and/or act as a facilitator to help POs and SMEs access additional support from public and private service providers and connect with larger business enterprises and agro-industries to receive advice in order to properly adjust to market requirements. The assistance will be provided individually to more developed POs and SMEs as a form of acceleration support, while less developed POs and SMEs will be grouped into cohorts to achieve economies of scale in the incubation of their initiatives. The overall objective of the technical assistance is to professionalize and expand businesses, increase bargaining power in value chains, improve financial and technical resources, and network to share experiences and best practices. Increasing the scale, productivity, and resilience of business activities will ensure sustainability of the jobs created and will generate additional jobs over time, while indirectly generating job creation for suppliers and clients of the POs and SMEs supported.Component 2 - Grants for agri-food and rural job creation The TRACE entrepreneurship support project will provide non-reimbursable financial contributions (matching grants) to investment sub-projects submitted by POs and SMEs engaged in agri-business activities with the overall objective to help business growth and job creation. For more developed candidates that receive acceleration support, matching grants will be capped to 30% of the cost of the proposed investments. Furthermore, this category of beneficiaries will be required to obtain credit from a bank, leasing company and/or supplier. The maximum grant size for acceleration beneficiaries will be 90,000 TND. For less developed candidates that receive incubation support, grants will be capped to 90% of the cost of the proposed investments. Obtaining credit will be encouraged, but it will not be a requirement for this category of beneficiaries. The maximum grant size for incubation beneficiaries will be 20,000 TND for SMEs and 70,000 TND for POs. For both categories of beneficiaries, the grants will finance small-scale equipment and inputs as well as soft activities (technical and managerial training and advice, marketing guidance and market intelligence, etc.).Eligible activities will cover the wide range of opportunities offered by the agri-food sector and agro-rural entrepreneurship. These activities can range from farming production and processing to agro-service providers (input and technology supplies, advisory services, etc.) and post-harvest operations (storage, processing, packing, etc.). Eligible investment initiatives also include the valorization of cultural and natural resources through handy crafts and rural tourism. Investment sub-projects will therefore be in, but not limited to, agro-industry, agro-food, apiculture, aromatic and medicinal plants, valorization of natural resources, and agro-tourism.Selection will prioritize investments with high job creation potential that are technically sound, commercially viable and environmentally and socially sustainable. Other factors to be considered include tangible scale, identified markets, and partnerships with other producers, private aggregators, agro-industries and other commercial entities. Selection will be done through an open counter system and competitive calls for proposals with differentiated criteria and financing thresholds depending on the type of beneficiary and the type of support (incubation or acceleration). Applicants will benefit from technical assistance delivered by the Project to improve the quality of proposals. SMEs and POs which have been successful in achieving 70% of the objective of their first investment projects and continue to have a high potential for job creation will be eligible for a second grant without going through the competitive selection process. The objective is to ensure impact sustainability and encourage successful SMEs and POs to continue creating jobs. A regional Technical Committee will be responsible of the selection of incubation proposals and monitoring of their implementation. It will include representatives from regional governmental entities, experts, and private sector representatives. The Technical Committee will also