Swiss private stakeholder mobilises expertise for IFAD to advance the Sustainable Development Goals
Swiss international cooperation considers private sector engagement key to achieving the goals set out in the 2030 Agenda. In order to strengthen private sector engagement, Switzerland also supports priority multilateral organisations. As of 24 June 2020, IFAD's ABC Fund is being managed by the Geneva-based Bamboo Capital Partners, which engages in social impact investing. The fund provides smallholders and small- and medium-sized agribusinesses with capital to grow their operations and increase production.
Thanks to its investment in Socak Katana, a farmers' cooperative based in Côte d’Ivoire, the Agri-Business Capital Fund is helping to improve the lives of more than 2,700 cocoa producers and their families. © Bamboo Capital Partners
Around the world, smallholders and small- and medium-sized agribusinesses, which process their products for the local market, find it difficult to access the capital they need to grow their operations and step up productivity. One of the primary reasons why they are underserved is the higher-than-average risks associated with agricultural investment. This means that few private investors are active in the agricultural sector, let alone the smallholder segment in developing countries. It is estimated that boosting the production of smallholders in Africa, Asia and Latin America will require a capital injection of around USD 200 billion. Achieving growth on this scale would improve the food security and health situation for millions of people.
It would also create jobs, which is particularly important given the growing number of young people, especially in developing countries, who are looking for work. In Africa alone, 10 to 12 million young people enter the labour market every year. They need employment opportunities and an alternative to migration.
Investing in rural SMEs and local agribusinesses is essential to spur productivity, improve incomes and livelihoods and importantly create jobs, particularly for rural youth and women.
IFAD's ABC Fund is managed by private sector company
Swiss international cooperation considers private sector engagement key to achieving the goals set out in the 2030 Agenda. In order to strengthen partnerships with the private sector, Switzerland also supports its priority multilateral organisations, which include the International Fund for Agricultural Development (IFAD). Bamboo Capital Partners, a Swiss financial services provider, is rising to this investment challenge. The Geneva-based company, which engages in social impact investing, manages the Agri-Business Capital Fund (ABC Fund) in close cooperation with IFAD. As of 24 June 2020, the ABC Fund has begun distributing capital to smallholders. Emanuele Santi, ABC Fund Manager at Bamboo Capital Partners, explains:
The ABC Fund is an impact fund that provides financing solutions to the agricultural community in developing countries. It provides loans and equity investments to support carefully selected farmers' organisations, rural SMEs and financial institutions in low- and middle-income countries. To qualify for support, local agribusinesses and institutions must demonstrate a potential for high growth and job creation. They must also show that they contribute to social development in their respective local community and country.
Dragon Farming: investing in soya beans
Take our most recent investee, the Ghanaian company Dragon Farming, which makes meal, full-fat soya and oil from raw soya beans. Dragon Farming is committed to delivering innovative and environmentally sustainable products that satisfy the nutritional needs of farmed animals in Ghana and beyond.
The loan from the ABC Fund will enable Dragon Farming to scale up its operations to meet customer demand and increase the volume of soya beans it buys from farmers' organisations. Higher production levels mean that around 14,000 smallholders will be able to sell their soya beans to Dragon Farming. The loan will reduce the company's production costs while boosting its profitability. Given the planned increase in production, Dragon Farming will also be able to expand its workforce, including its share of female employees. As well as the loan, the company will receive technical assistance to further strengthen its strategy, business development and production processes.
A shared agenda
Our work with UN organisations like IFAD and public donors such as the Swiss Agency for Development and Cooperation (SDC) towards achieving the Sustainable Development Goals (SDGs) of the 2030 Agenda goes back many years. As a private sector representative, Bamboo Capital Partners brings its market development expertise and investment capital. As an impact investor, we are working to reach the same objectives, particularly the SDGs, as the SDC and other public donor organisations:
- Poverty reduction
- Job creation
- Promotion of gender equality and empowerment of women
- Environmentally sustainable agriculture
- Climate-smart food production
The SDC is supporting IFAD, the main initiator of the ABC Fund, with a one-time contribution of CHF 9.3 million to the fund. The fund builds on agricultural networks as well as the country-specific, regional and global programmes of IFAD and Bamboo Capital Partners, and creates synergies that bolster its impact and efficiency.
A sustainable contribution with potential for the futur
Bamboo Capital Partners is an impact investing platform which provides innovative financing solutions to businesses in emerging markets. Through our investments, we serve the needs of low- and middle-income populations, thus catalysing lasting impact. We bridge the gap between seed and growth-stage funding through a full suite of finance products – from debt to equity – which we activate unilaterally or through strategic partnerships. Bamboo Capital Partners has invested in over 30 emerging and frontier markets since 2007, improving 184 million lives in the process. Bamboo Capital Partners offers unparalleled expertise in improving the lives of the most marginalised communities around the world while delivering strong financial returns.
The ABC Fund represents a great opportunity for the public and private sectors to work together. Through the fund, the public sector offers finance to smallholders and SMEs in the agricultural value chain at below-market rates. Capital costs and the investment risk can therefore be reduced, which in turn will attract more private investors. The money is spent sustainably to help people and organisations for whom traditional sources of funding are often beyond their reach. The combined mobilisation of public resources and private expertise has much potential for the future.
"Public-private development partnerships are essential to achieving Swiss international cooperation objectives"
The private sector figures prominently in Switzerland’s strategy for international cooperation. It plays a central role in creating jobs and promoting sustainable development. Private sector companies power the economic growth that can offer a way out of poverty. Their innovative drive, expertise, distribution channels, investment opportunities and potential in the vocational training sector make them key to the implementation of international cooperation activities. The example of IFAD and the ABC Fund shows how Switzerland takes a targeted approach to promoting the local private sector in developing countries. Christian Frutiger, Head of Global Cooperation at the SDC, explains what these partnerships can offer the SDC and its Global Programme Food Security.
For the SDC, how important is a company like Bamboo Capital Partners?
The SDC is committed to strong and innovative partnerships between IFAD and the private sector. The ABC Fund is IFAD's pioneering tool to implement its new private sector engagement strategy and to make its partnerships with the private sector more effective.
It was created by IFAD and received initial contributions from Switzerland, Luxembourg and the European Union. Now the fund is being managed by a professional impact investor. The ABC Fund invests in small- and medium-sized agribusinesses that cannot access capital because they are either too big for microfinance institutions or too small for the commercial banking sector. This gap in microfinance is known as the 'missing middle'. With the fund's help, these local SMEs can grow into strong medium-sized companies.
Special financial and market knowledge is needed to manage a complex fund like this one. Partnering with Bamboo Capital Partners makes sure that the ABC Fund is managed professionally.
What are the SDC's objectives in food security?
In 2019, 135 million people were affected by acute food insecurity – the highest number in four years.
The SDC's Global Programme Food Security works to advance international and regional policies on food security and nutritional practices. This covers everything from the right to food to farmers' rights. Our work focuses on international standards and institutional and technical innovations that support the development of efficient, sustainable, agroecological and resilient food systems. Based on the SDC's project experience and Swiss expertise, the global programme promotes such areas as global agricultural research, the exchange of new technologies, responsible investment and agricultural biodiversity.
Through its contribution to the ABC Fund, the SDC helps increase food security, promotes ecologically sustainable farming methods, and creates jobs and income for small farmers and the rural population.
Would it be possible to reach our international cooperation goals without partner organisations in the private sector?
In July 2015, the international community made a clear statement in the Addis Ababa Action Agenda that the 2030 Agenda for Sustainable Development cannot be achieved without the expertise and capital of the private sector.
Consequently, our international cooperation goals cannot be reached without public-private development partnerships. The SDC is pursuing more private sector partnerships to reach its objectives, an approach that has also been recommended by Parliament and the Federal Council for some time.