15 Nov 2018
Businesses, banks and donors jointly invest in profitable smallholder value chains
Today, IDH launches the 100 M EUR IDH Farmfit Fund and 30M EUR IDH Farmfit Business Support facility. Together, they will spark banks and companies to make impactful investments in smallholder agriculture that are now perceived too risky. This will enable 5 million smallholder farmers to invest in their farms, increasing their yields and profitability. This is a game changing private-public initiative to break the cycle of rural agricultural poverty, stimulating sustainable economic growth and food security.
Farmfit was launched today at IDH 10 year event with 600 of its partners present. Her Majesty Queen Máxima of the Netherlands attended the IDH event in her capacity as the UN Secretary General’s Special Advocate for Inclusive Finance for Development. She spoke about the importance of tailored loans, insurances and saving opportunities for smallholder farmers and their families in developing countries.
IDH Farmfit Business Support, based in Nairobi and the Netherlands, will provide intelligence and technical support to companies and banks, to develop cost efficient smallholder inclusive business models, that are profitable for everyone. IDH Farmfit Business Support is funded by the UK Department for International Development and the Bill & Melinda Gates Foundation with 30 million EUR.
IDH Farmfit Business Support will work with companies and banks who want to build smallholder-inclusive supply chains, helping them build sustainable business models that provide critical services to smallholder farmers (such as training and access to inputs, finance, technology and information). It provides tools to analyze the viability and effectiveness of business and helps to identify areas for innovation, like improved technology, digital finance, and gender inclusion. It also publicly shares key insights, so that companies do not have to reinvent the wheel but can learn from and benchmark against others.
Farmfit Business Support builds on 10 years of IDH experience in supporting companies to develop sustainable, inclusive value chains. This international experience is now being expanded into local and regional food chains.
The 100 million EUR IDH Farmfit Fund will initially be funded by four leading companies–Jacobs DE, Mondelez, Unilever and Rabobank—and the Dutch government, with additional de-risking guarantees from the US government. It takes high risk positions in smallholder financial transactions, reducing the cost and risk of investing in smallholders.
The IDH Farmfit Fund is set up to scale investments in sustainable agribusinesses that provide inputs, services and credit to smallholder farmers. Fund will “crowd in” investment from commercial lenders by de-risking the investments with partial guarantees from USAID. The investments will channel through local and international companies and banks, bringing affordable credit and other services, currently only scarcely available. As farmers use financial products and develop positive financial track records, the risk for investors will decrease and commercial financiers will be able to provide lower cost financing suited to the needs of farmers. A new generation of farmers will be empowered to lift themselves from poverty, creating jobs and more robust local economies in Africa and other developing markets.
To learn more about Farmfit listen to our latest podcast with Roel Messie, Chief investment Advisor to the Farmfit Fund
Sigrid Kaag, Minister for Foreign Trade and Development Cooperation the Netherlands, said we are going where nobody else has gone before, making sure sustainability is sound business for all. The Dutch government is ready for it.”
Frederic Larmuseau, Chief Executive Officer of Jacobs Douwe Egberts has committed to invest in the Fund. “Smallholder coffee farmers around the world face challenging economic, social and environmental issues while trying to earn a living from coffee. JDE believes the Farmfit Fund is an innovative way to provide smallholder farmers access to critical finance and financial training while empowering farmers to make the choices that benefit their families and the environment.”
Marc Engel, Chief Supply Chain Officer of Unilever: “Smallholder farmers often lack access to markets, to financial support, and to information and training. Without them, they are constrained when it comes to investing in their farms. By working in partnership with IDH and using the FarmFit fund, we believe we can create enormous opportunities for smallholder farmers to advance sustainable agriculture practices, increase yields, improve livelihoods and reduce environmental impacts such as deforestation”
Cathy Pieters, Global Director Cocoa Life at Mondelez, said that “Making cocoa growing a prosperous business for smallholders is essential to achieve a truly sustainable cocoa supply chain. Delivering the right services and inputs to the right farmers at the right moment is critical. While through Cocoa Life we have developed the structure and channels to do this effectively, we know more is needed to build more opportunities. Working with IDH provides a multiplier to our Cocoa Life program to have more impact and be able to innovate at scale.”
Joost Oorthuizen, Executive Director of IDH The Sustainable Trade Initiative aims at first closure by end of May 2019. “Only through cooperation we can achieve market transformation, putting smallholder farmers at the core of value chains, rather than at the far end. Today’s commitment of brands, traders and finance signals the emergence of poor farmers in Africa, Asia and Latin-America as an investment class. These farmers are key to regional future food security and are key to many supply chains. At IDH we are proud to build public-private partnerships such as Farmfit, and help create innovative business models for sustainable trade. This is like a snowball gathering speed, with more and more companies joining as the concepts become clear and proven. We are grateful for the confidence of these initial investors and look forward to welcoming more.”
Beth Dunford, Assistant to the Administrator in the U.S. Agency for International Development (USAID) Bureau for Food Security: “Donor capital alone is not enough to close the gap in smallholder finance. Both private companies and financial institutions will need to play a catalytic role in supporting businesses that efficiently serve smallholder farmers. Thus, USAID sees the unique combination of public and private resources in the Farmfit Fund as an important step towards creating a breakthrough in smallholder agriculture finance. This partnership is game changing at scale, that is why we are excited about Farmfit.”