Description
The Food Securities Fund aims to provide working capital loans to sustainable agriculture companies in emerging and developing markets. It has been developed by Clarmondial with input from leading institutional investors, agribusinesses, and conservation organizations. The Fund season-long working capital loans to agricultural aggregators (cooperatives, processors, traders) in emerging markets, addressing the common gap of timely and affordable credit.
Structured and launched by Clarmondial, the fund combines an innovative investment approach with a regulated open-ended fund structure suitable to institutional investors, allowing it to deliver impact at scale. Conservation International and WWF are founding members of the Fund’s Impact Advisory Board, and Clarmondial also received support from Convergence, Good Energies Foundation and Climate KIC. The risk blending of the fund comes from a USAID commitment of USD 37.5 million in credit guarantees, through the Bureau for Food Securities and the DFC, and from value chain partners e.g. larger corporates. The Global Environment Facility (via Conservation International) has committed USD 15 million to the initiative.
Stage of Implementation
In March 2021, the Fund successfully began operations with a first investment in coffee production in East Africa to reach nearly 4000 smallholder farmers operating agroforestry systems and using organic and regenerative practices.
Actors Involved
- Fund manager: Clarmondial is an independent investment advisory company focused on solutions for social and environmental businesses and their funders. Clarmondial has leveraged Convergence funding to complete design work to launch the Fund.
- Accelerator funding: Convergence has provided a design funding grant to support structuring work that is required to launch the fund. This grant funding fills a critical gap in structuring these kinds of financial instruments that have significant potential to draw in private investment but where private investors do not have risk appetite to enter the instrument at the earliest stage.
- Institutional investors: The fund is seeking capital from institutional investors to lend to responsible local agricultural aggregators (e.g. cooperatives, traders, and processors) in developing countries, primarily in the form of working capital.
DFIs and bilateral ODA: The fund has received a USAID commitment of USD 37.5 million in credit guarantees and the GEF has committed an additional USD 15 million. This capital is critical to de-risk institutional investor investment and to align risk appetite among financing parties.
Criteria
- Strength of agriculture SMEs: The fund targets local SMEs which require better access to appropriate financing and will thus be most successful in markets where there are sufficient SMEs operating which the Fund can evaluate and potentially lend.- Strong institutional investor pool: The fund will also function best in countries or regions with strong untapped debt capital markets and stakeholder environments including strong institutional investors. Private banks, insurance companies and pension funds are targets and 90% of pension fund assets in Africa are concentrated in four countries: South Africa, Botswana, Namibia, and Nigeria.
Applicable Countries
The Fund has an initial focus on Sub Saharan Africa and plans to have at least 20 developing and emerging countries included in its portfolio. Per the ASAP SME Directory, countries with strong agriculture SME ecosystems include: Kenya, Rwanda, South Africa, and Ghana.
