March 2, 2022

By Lynda Kiernan-Stone, Global AgInvesting Media

Bank of America announced it has made a $5 million capital commitment to the Agri-Business Capital Fund (ABC Fund), marking the first investment in the fund from a corporate global financial institution. 

Managed by Palladium’s asset management business Bamboo Capital Partners, The ABC Fund was launched at the International Fund for Agricultural Development (IFAD) annual Governing Council in Rome in February 2019 as a blended-finance impact fund with an initial funding target of €200 million (US$224 million), and a mission to deploy capital in support of rural SMEs in developing countries that generate jobs for rural women and youth, and that promote sustainable agriculture initiatives with a focus on climate change adaptations solutions. Its launch was made in partnership with the European Union, the Organization of African, Caribbean and Pacific States (OACPS), the Luxembourg Government, the Alliance for a Green Revolution in Africa (AGRA), and IFAD. 

“Bank of America’s backing shows how public and private sector capital can come together to deliver additional impact,” said Thouraya Triki, chair of the board of directors, ABC Fund, noting the difference that the fund is making for thousands of rural women and families around the world. “This is a first-of-a-kind investment in the ABC Fund, and we hope it to be the first of many.”

Mission-driven to address the financing and capacity gaps challenging smallholder farmers and SMEs, the ABC Fund offers a range of products including loans and tailored equity, made available either directly to farmers’ organizations and SMEs, or indirectly through financial intermediaries.

A large part of this work centers around contributing to food security, ensuring and creating rural jobs, and driving the progress toward achieving the UN’s Sustainable Development Goals. 

“The Fund will help to address the impacts of climate change on rural farming as well as drive more innovation in the sector to help meet the SDGs,” said Dan Letendre, managing director of environmental, social, and governance with Bank of America. “Through this investment, Bank of America is supporting higher rural employment and access to inclusive business opportunities, and a more sustainable agribusiness today and for the future.”

To reinforce the impact its investments can generate in agribusiness value chains, the fund also integrates technical assistance support to help strengthen the capacities of its targeted organizations.

In 2020, the International Fund for Agricultural Development (IFAD) chose the ABC Fund to be its first direct investment in the private sector, with a commitment of $9 million.

At the time, additional significant commitments were received from the European Union, African, Caribbean and Pacific Group of States (‘ACP’), the Luxembourg Government, the Alliance for a Green Revolution in Africa (‘AGRA’), and IFAD contributes to the Technical Assistance Facility that will support the fund.

“The private sector’s involvement in the eradication of hunger and poverty was crucial before the COVID-19 crisis,” said Gilbert F. Houngbo, president of IFAD in May 2020.

Access to necessary funding and financing has been a long-standing challenge to rural SMEs in developing markets. However, with the spread of COVID-19 and the socio-economic fallout it has brought, SMEs are facing even more difficult circumstances.

Even before COVID-19, funding needs totaling $240 billion far exceeded the available $70 billion, according to IFAD, resulting in a funding gap of $170 billion. Of this demand, 70 percent of the demand from smallholders in Latin America, sub-Saharan Africa, and South and Southeast Asia were left unmet. 

Houngbo continued, “Now it has become even more important as we work to reduce some of the immediate impacts of the crisis and plan for a longer-term recovery when it is over. More than ever, we need to join forces with the private sector to help small-scale producers and rural SMEs preserve and create jobs for those who are more likely to be left behind.”

The commitment from Bank of America makes the ABC Fund truly a blended fund, with public sector investments attracting commercial investors. So far, the fund has made more than 20 investments in nine countries – Benin, Bolivia, Burkina Faso, Côte d’Ivoire, Ecuador, Ghana, Kenya, Mali, and Uganda – and with a robust pipeline of impact-yielding investments, expectations are that additional private sector investors will follow. 

“This investment from Bank of America is a resounding endorsement of the ABC Fund’s blended finance model that seeks to crowd in private commercial capital to supplement the first-loss tranche provided by mission-driven impact investors,” said Jerry Parkes, CEO, Injaro Investments, a $49 million impact fund focused on SME investments across ag value chains in West Africa. “Most importantly, this additional capital enables the ABC Fund to support more rural agricultural SMEs and farmer cooperatives. We are thrilled with this development and look forward to welcoming more private commercial investors to join us on this journey.”

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– Lynda Kiernan-Stone is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Oilseed & Grain News. She can be reached at lkiernan-stone@globalaginvesting.com.