Innovative impact fund to create jobs for rural youth in developing countries
Rome, 15 February 2019: The International Fund for Agricultural Development (IFAD), the European Union, the African, Caribbean and Pacific Group of States (ACP), the Government of Luxembourg and the Alliance for a Green Revolution in Africa (AGRA) are launching today the Agri-Business Capital (ABC) Fund to spur economic and social development in rural areas.
The purpose of this innovative impact fund, launched at IFAD’s Governing Council, is to boost investments in rural and agricultural micro, small and medium sized enterprises (MSMEs) and farmers organizations as a means to create jobs for rural young people in developing countries.
Today’s generation of youth is the largest ever: there are 1.2 billion young people in the world. They are two to three times more likely than adults to be unemployed. In Africa alone, 10 to 12 million young people arrive on the job market every year. While having a global mandate, the fund will initially focus on countries from the African, Caribbean and Pacific regions.
“Today’s launch of the ABC fund is an important step for all of us. This initiative will serve a group of actors which are still too often left out but have a huge potential– small farmers, their organizations, and rural MSMEs. We are helping them have the means to be the engine of rural areas transformation,” said IFAD President Gilbert F. Houngbo.
The ABC Fund will provide funding to rural and agricultural MSMEs so that they can grow their businesses. This segment of the market struggles to access funding. The demand for loans from smallholder farmers is estimated at $200 billion in Sub-Saharan Africa, South and South-East Asia, and Latin America alone.
“Our African, Caribbean and Pacific members have great expectations of the ABC Fund. We look forward to having the Fund respond to specific needs in the three regions and supporting the implementation of our new approach to structurally transform the ACP agriculture sector,” said Patrick Ignantius Gomes, Secretary General of the ACP Secretariat, alluding to the benefits of the Fund.
The ABC Fund is based in Luxembourg and its investment portfolio will be managed by two investment companies: Bamboo Capital Partners and Injaro Investments.
The ABC Fund aims to raise €200 million euros over the next ten years.
It will provide funding, including loans, adapted to the needs of MSMEs farmers organizations and agri-preneurs. Loan size will range from €200,000 to €0.8 million in the case of direct investments and from €20,000 to €200,000 in the case of indirect investments through financial intermediaries.
IFAD and AGRA will work closely with the fund manager to identify attractive and impactful investment opportunities in promising MSMEs. About 70 percent of IFAD projects include a value chain component. The Fund will build on IFAD’s 40 years of experience in rural areas, its extensive field presence and a strong expertise of agro-businesses and smallholder agriculture. AGRA has focussed on developing private sector capacity for technology adoption and scale up in Africa and will build on this work to roll out the fund across the continent.
“In Africa, small rural agri-businesses are critical to agricultural transformation by delivering previously unavailable, inaccessible and unaffordable services to millions of smallholder farmers. AGRA is delighted to partner with IFAD, EU, and the Government of Luxembourg on this unique and game-changing fund that will provide loans of below 1 million euros which is what most agri-businesses need to grow,” said AGRA President Dr. Agnes Kalibata.
“Bamboo is proud to collaborate with IFAD on a forward looking investment strategy, focused on smallholder farmers’ productivity, market access, domestic value creation and climate resilience,” said Jean-Philippe de Schrevel, CEO, at Bamboos Capital Partners.
The European Union and the ACP have contributed 45 million euros through the EDF. Luxembourg and AGRA have committed a further 5 and 4.5 million euros respectively. This funding is expected to help de-risk investments into the fund therefore mobilizing additional resources from private sector investors.
Private sector investments to smallholder farming and off-farm activities in rural areas are needed to supplement official development assistance (ODA), and to reach the sustainable development goals, in particular to end poverty and hunger and produce food sustainably for a growing world population.
Estimates show that $180 billion will need to be invested in rural areas annually in developing countries to reach the zero hunger goal alone.
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IFAD has invested in rural people for 40 years, empowering them to reduce poverty, increase food security, improve nutrition and strengthen resilience. Since 1978, we have provided US$20.4 billion in grants and low-interest loans to projects that have reached about 480 million people. IFAD is an international financial institution and a specialized United Nations agency based in Rome – the UN’s food and agriculture hub.