Blended finance funds – directing capital to rural agriculture

Published on

May 14, 2015

AgDevCo co-founder, Chris Isaac, shares his insights on unlocking agriculture potential through blended finance. 

Investing in Agriculture in Sub-Saharan Africa is estimated as being 11 times more effective in reducing poverty than investment in any other sector. Last year, "private equity investment reached $8.1 billion. However, investors are unsurprisingly betting on financial services, consumer goods, and property." Financial capital is simply not reaching the rural agricultural sector.

Chris Isaac argues that the lack of capital flow is halted for these three main reasons:

  1. Logistics costs are too high
  2. Agriculture is inherently risky and requires expert knowledge
  3. Most agribusiness investment opportunities are small and early-stage

This short op-ed calls the private sector to immediate financial action, detailing how and why private sector players need to get involved. Blended finance funds “have an ability to invest with new entrepreneurs and early-stage businesses, allowing them to build a track record, which should help them access later rounds of commercial capital.” Investments in rural agriculture can help fuel economic growth, reduce poverty, and demonstrate that agriculture can indeed be a more profitable business.

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Following Isaac's post in mid-2015, AgDevCo announced an innovative blended finance facility for African farmers in partnership with Root Capital and KfW.  Read more about the facility, LAFCo, in this article from ImpactAlpha.

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About the Author(s)

Learning Lab Partner

AgDevCo is a specialist agriculture impact investor that has established a Smallholder Development Unit (SDU) with support from the MasterCard Foundation (MCF). The SDU will work with rural agricultural enterprises to develop equitable outgrower schemes in eight African countries. Activities will include providing training and better quality inputs for farmers, implement mobile technology solutions, and brokering long term purchase contracts. The SDU aims to develop 25 “outgrower schemes” over 5 years that will improve the livelihoods of up to half a million farmers.

Press release: AgDevCo and The MasterCard Foundation partnership

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