The International Fund for Agricultural Development and impact investment platform Bamboo Capital Partners have announced the launch of a fund designed to de-risk small loans to agricultural entrepreneurs in developing countries.
Announced at the annual meeting of IFAD member states, the Agri-Business Capital (ABC) Fund will focus on generating private-sector investment in small and midsize rural enterprises, farmers' organizations, and smallholder farmers' groups, which have had limited access to finance because traditional institutions view them as too risky. Launched with initial commitments of €50 million ($56 million) from IFAD, the European Union, the government of Luxembourg, the Alliance for a Green Revolution in Africa, and the African, Caribbean and Pacific Group of States, the fund hopes to raise €200 million ($225 million) over the next ten years.
According to IFAD, the fund will work through financial institutions to provide loans of between €20,000 ($22,500) and €200,000 ($225,000) to SMEs, while providing direct loans to investees of between €200,000 and €800,000 ($901,500). Additional commitments in the form of blended finance — a combination of public and private sector capital — will be used to supplement the "first loss" capital already raised.
"Small and medium-sized enterprises can be an engine for development and offer rural communities a pathway out of poverty and hunger, but only if they can access the resources they need," said IFAD president Gilbert F. Houngbo. "The launch of the ABC Fund is an important step to realize the huge potential of small farmers, their organizations, and most importantly, young people."
According to Bamboo Capital Partners, which will manage the fund in partnership with Injaro Investments, 2.5 billion people globally rely on agriculture for their livelihoods, and the demand for impact investments in rural agriculture is growing as a way to advance the United Nations' Sustainable Development Goals.
"The launch of the ABC Fund is a momentous milestone for the impact investing industry," said Jean-Philippe de Schrevel, founder and managing partner of Bamboo Capital Partners. "The support of organizations such as IFAD, the EU, and the Luxembourg government...is testament to the maturity of the industry."