May 8, 2020

By Lynda Kiernan

The International Fund for Agricultural Development (IFAD) has made its first direct investment in the private sector, allocating $9 million to Bamboo Capital’s Agri-Business Capital (ABC) Fund. 

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. Bamboo Capital Partners, which committed €50 million (US$56 million) in seed capital, is managing the fund in partnership with Injaro Investments. 

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 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, in February 2019.

This latest investment from IFAD was made possible due to a contribution from the Swiss Agency for Development and Cooperation, and is being made with the intention of helping small-scale farmers and micro-, small, and medium sized rural enterprises in developing countries.

Under IFAD’s private sector engagement strategy adopted in September 2019, investment can now be made by the financial institution directly in private sector entities and funds targeting rural SMEs and small-scale producer cooperatives.

“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.

“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.”

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. 

Aligning with this mission, ABC Fund’s mandate is to provide “catalytic financing to underserved yet profitable segments of agribusiness value chains in developing countries”. This mandate was reflected in the fund’s first investment shared by GAI News in January of this year, when it invested in Socak Katana, a cocoa cooperative based in Côte d’Ivoire.

With more than 2,700 members, Socak Katana procures, processes, stores, transports and sells cocoa beans to both domestic and international buyers. It also provides technical assistance and training to its member-farmers.

As of the beginning of this year, the cooperative is Fairtrade certified, with 54 percent of its farmers UTZ certified. It sources from approximately 8,400 hectares (20,757 acres) under cultivation, and has a total production capacity of 6,000 metric tons.

“This first investment is a symbolic moment for the ABC Fund,” said de Schrevel in a release announcing the investment. “A few months after its incorporation, the fund is already contributing towards supporting livelihood and creating jobs for cocoa farmers’ communities in Côte d’Ivoire. This is the first step on our journey to transform small-scale farming in developing countries and we look forward to announcing further investments in due course.”

Lynda Kiernan is Editor with GAI Media and daily contributor to the GAI News and Agtech Intel platforms. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.com.