The IDH Farmfit Fund is the world’s biggest ever public-private impact fund for smallholder farmers. The Fund’s innovative financing model makes investments in smallholder farmers attractive, it de-risks investments in smallholder farming and helps drive sustainable impact by lowering risks and costs for both farmers and investors.
Today, there are at least 270 million smallholder farmers in Africa, Asia and Latin America producing over 70-80% of the worlds food supply. They are a significant share of the poorest people in the world. Until now smallholder farmers have had no access to affordable long term finance that allows them to invest in their farms, increase productivity, and align with the best practices of climate smart agriculture. Through this they will be able to exit the cycle of poverty.
My dream is that 10 years from now the best bonds in New York will be linked to smallholder farmers and the IDH Farmfit Fund will be the basis for making this happen.
The Fund de-risks investments into smallholder value chains by using a number of de-risking tools. As a result it catalyzes commercial investors to invest into smallholders and other actors in the value chain. In addition the IDH Farmfit Fund draws on the integrated approach of IDH Farmfit Business Support and IDH Farmfit Intelligence.
The EUR 100 million IDH Farmfit Fund takes the highest risk positions in an investment, taking responsibility for the first losses incurred. The Fund is also supported by a second loss guarantee facility from USAID (up to USD 250 million) which provides a significant element of reassurance for investors.
Unique fund structure
The IDH Farmfit Fund is facilitated by IDH and supported by a unique coalition of partners, including commercial banks, development banks, government bodies and value chain companies. The coalition supporting the fund encompasses major value chain companies including Unilever, Mondelez, Jacobs DE; finance including Rabobank, as well as development agencies from amongst others the US, UK, Denmark and the Netherlands.
Starting with EUR 100 million, the Fund is expected to raise billions of Euros to address the USD 170 billion financing gap in smallholder farming finance. The Fund is backed by significant funding from the Dutch Ministry of Foreign Affairs and guarantees from the US Agency for International Development .
The Fund completes IDH’s offer to help companies make the most of their smallholder farming engagement, and the Fund operating alongside IDH Farmfit Business Support and IDH Farmfit Intelligence. IDH Farmfit Business Support works with prospective investors to develop sustainable business models and concessional financing, while IDH Farmfit Intelligence provides access to robust data sets.
Listen to the podcast where Roel Messie, IDH’s Chief Investment Officer is joined by Catalina Eikenberg and Carolin Ehrensperger from Neumann Kaffee Gruppe (NKG), the world’s leading green coffee service group. They discuss new ways of smallholder farmer financing, with the potential to improve the lives of millions of farmers. This is an excellent example of how the IDH Farmfit Fund works.
Key requirement: Attributable benefit to smallholder farmers
Geography: Developing countries (DAC List of ODA Recipients)
Sectors: food, staple and cash crops including, cocoa, coffee, cotton, palm oil, tea, aquaculture, soy, cassava, rice and other commodities.
Instruments: guarantees, subordinated loans, equity or mezzanine financing.
Use of funds: asset finance, input loans, working capital, capex, renovation and rehabilitation.
Tenor: up to 10 years.
Transparency and integrity are key values of the IDH Farmfit Fund. We have incorporated clear policies and codes related to our work processes and work environment.
IDH Farmfit Fund (the Fund) is a blended fund that deploys capital to de-risk investments in smallholder farming. The Fund’s social objective is to increase smallholder income in emerging markets. This document describes the Fund’s sustainability approach.
The IDH Farmfit Fund is committed to measurable impact and is therefore classified as dark green in alignment with Article 9 of Regulation (EU) 2019/2088 on sustainability related disclosures in the financial services sector (SFDR).
As part of the SFDR regulation (EU 2019/2088), please find here the Article 10 (SFDR) Website Disclosure, describing how sustainability risks and considerations are integrated into investment decisions.
The IDH Farmfit Fund reports on the Principal Adverse Impact (PAI) indicators as defined by Article 4 of SFDR. This includes the mandatory indicators as well as one additional social and one additional environmental indicator. The first reference period covers 1 January 2022 to 31 December 2022.
The full PAI disclosure over 2022 is available here.
Remuneration statement Fund Manager, IDH Farmfit Fund
IDH Investment Management, the Fund Manager of the IDH Farmfit Fund, aims to enable its employees to fulfil its mission to the very best of their abilities. The staff of the Fund Manager are primarily motivated by its mission, objectives and the content of their work. The Fund Manager has adopted a fair, transparent and equitable remuneration system. The remuneration package comprises several fixed components, combined with modest variable components attached to the achievement of impact targets. The remuneration is subject to approval by the Supervisory Board of the Fund Manager.