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IFC Agribusiness Global Agriculture and Food Security Program and New Innovations in Financing Agriculture 20 th Brussels Development Briefing on Financing.

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Presentation on theme: "IFC Agribusiness Global Agriculture and Food Security Program and New Innovations in Financing Agriculture 20 th Brussels Development Briefing on Financing."— Presentation transcript:

1 IFC Agribusiness Global Agriculture and Food Security Program and New Innovations in Financing Agriculture 20 th Brussels Development Briefing on Financing Agriculture in Africa and ACP Countries September 15, 2010

2 1. IFC Agribusiness Portfolio Overview 2. Global Agriculture and Food Security Program (GAFSP) Private Sector Window 3. Recent Examples of Innovative Agri-Financing in Africa 2

3 IFC Agribusiness Portfolio Overview Agri-related Investments (including Syndications) The active portfolio of agri-related investments was $3.9 billion at FYE09 (excludes Trade Finance) IFC has significantly increased its agri-financing in recent years 3

4 Global Agriculture and Food Security Program (GAFSP) Private Sector Window (PSW) In 2009, G8 announced at LAquila a program to address food security and improve incomes of poor in IDA countries. Global Agriculture and Food Security Program created with separate Public and Private Sector windows to deliver on this objective. IFC selected to set up and directly manage the Private Sector Window for the GAFSP; World Bank to be Trustee of Public Sector Window. WBG Board approved GAFSP Framework January 2010 GAFSP launched in April 2010 with $880 million from United States, Canada, South Korea, Spain and the Gates Foundation In 2009, G8 announced at LAquila a program to address food security and improve incomes of poor in IDA countries. Global Agriculture and Food Security Program created with separate Public and Private Sector windows to deliver on this objective. IFC selected to set up and directly manage the Private Sector Window for the GAFSP; World Bank to be Trustee of Public Sector Window. WBG Board approved GAFSP Framework January 2010 GAFSP launched in April 2010 with $880 million from United States, Canada, South Korea, Spain and the Gates Foundation GAFSP Public Sector Window Public Sector Window Private Sector Window Private Sector Window Small Holders, SMEs Improving Productivity Improving Access to Finance Fostering Innovation and Technology Climate Change Small Holders, SMEs Improving Productivity Improving Access to Finance Fostering Innovation and Technology Climate Change WB is Trustee Managed by IFC Objectives 4

5 GAFSP Private Sector Window - Overview Mandate: Use limited resources to support and demonstrate new and innovative financing aimed at increasing the commercial potential of small and medium sized agri-businesses and farmers. Help increase productivity, improve market access and reduce risks associated with financing agribusiness SMEs by using innovative financial structures and technical assistance support. Initial Donors: PSW will be operational with the CAD 50 m contributed by Canada. US intends to participate in PSW by December 2010 as well. 5 Target: Raise additional Funds to achieve a size of US$500 m PSW allowing initiative to extend reach, and deploy a wide range of innovative financial instruments, and provide technical assistance. Target: Raise additional Funds to achieve a size of US$500 m PSW allowing initiative to extend reach, and deploy a wide range of innovative financial instruments, and provide technical assistance.

6 GAFSP: Products & Targets 6 ProductsPotential Targets DebtFirst Loss Cover First Loss Facility for small holders, MSMEs LT / ST Farmers, small holders, and MSMEs EquityDirect / Fund of Funds MSMEs To be deployed through direct investments by IFC and Private Equity SME Funds Impact Investing Early stage project development companies, funds with social and development impact objectives Advisory Services / Technical Assistance Increase access to agri and farmer finance Improve farmer productivity and market links Advertising & disseminating information to small holders Target: PSW will target smallholders, farmers, MSMEs, directly or indirectly through banks, financial intermediaries, micro finance institutions, private firms and equity funds. Target: PSW will target smallholders, farmers, MSMEs, directly or indirectly through banks, financial intermediaries, micro finance institutions, private firms and equity funds.

7 7 Phase IPhase II 7 Program Roll-out Target Size: US$500 million In parallel with implementation of Phase I, fund raising for Phase 2 will be launched Q1,2011. Larger fund pool allows for the use of more innovative instruments, such as: –Impact investing funds, –Agri marketplace development –Scaling up interventions with FIs –Additional Advisory Services programs Target Size: US$100 million Due to limited funds, selective investment products to achieve quick results Majority of initial deployment though local intermediaries Investments complemented by Advisory Services

8 Recent Examples of IFCs Innovative Agri-Financing in Africa 8

9 Stanbic Ghana (SBG) – Short Term Funding (Cocoa) The Project Hybrid of Risk Sharing Facility (RSF) and Partial Credit Guarantee (PCG). Increases Stanbic Ghanas activity in the sector by enabling it to exceed Single Obligor Limit to Licensed Buying Companies (LBCs), and exceed sector limits. Up to US$ 40m seasonal financing (< 1 year) to LBCs, from US$ 19m in 2007-08 (2 LBCs) LBCs selected and appraised by IFC. IFC provides up to 50% PCGs to LBCs on an individual basis. Guarantees (can be) renewed on an annual basis. SBGIFC LBC A Cocobod LBC B LBC C LBC D LBC E LBC F IFC Guarantee SBG Guarantees Overdrafts Cocobod Loans Portfolio of pre- approved LBCs (Off takers) IFC Role Introduce a new, innovative agribusiness guarantee product Contribute sector and E&S Expertise Supplement SBGs evaluation of LBCs – initial and on-going. 9

10 Export Trading Group (ETG) – Guarantee for Agri-Trade The Project Risk Participation up to 33% of US$120 million (collateral and overdraft). Supports one of Southern and East Africas largest agricultural supply chain operators to expand its trading and processing businesses, including purchases from small farmers In 2008/09, ETG traded over 1.2 million tons of products from 60,000 farmers. Expects to increase traded volume to 2.7 million tons by 2011/12. Will create over 1,000 jobs, mostly in rural areas IFC Role Mobilize/supplement resources for agri-sector development from local financial institutions Provide advice on commercial, technical, environmental and social issues Support ETGs corporate practices improvement 10 Local Buyers ETG (ETC) Standard Chartered Bank Farmers Key: Flow of funds Collateral Manager IFC Risk Participation

11 Ethiopian Coffee – Cooperative Financing (Pending) The Project 3 Year Renewable Guarantee facility (up to US$ 10 million p.a.) Assists coffee cooperatives to i) acquire wet mills for coffee processing, and ii) working capital. Ethiopia portion of US$ 50 million East Africa Coffee Initiative managed by TechnoServe and funded by Gates Foundation. Unique partnership - First-loss provided by local NGO; IFC takes Senior Loss; Banks share both First Loss and Senior Loss. Collateral: coffee purchases from farmers Assets: Facility uses 20% for equipment loans; 80% for working capital IFC Role Financial structuring guidance for using stocks as collateral, rather than mortgages Improve access to financing and markets for coffee farmers Demonstration Effect: Attract further financing to sector Contribute sector Expertise 11 IFC risk BANK NGO risk Loss Sharing [75%]

12 12 Rajesh Behal Principal Investment Officer Washington, DC RBehal@ifc.org Thank You


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