Presentation on theme: "IFC Agribusiness Global Agriculture and Food Security Program and New Innovations in Financing Agriculture 20th Brussels Development Briefing on Financing."— Presentation transcript:
1 IFC Agribusiness Global Agriculture and Food Security Program and New Innovations in Financing Agriculture20th Brussels Development Briefing on Financing Agriculture in Africa and ACP CountriesSeptember 15, 2010
2 1. IFC Agribusiness Portfolio Overview 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 Africa2
3 IFC has significantly increased its agri-financing in recent years 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
4 Global Agriculture and Food Security Program (GAFSP) Private Sector Window (PSW) In 2009, G8 announced at L’Aquila 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 2010GAFSP launched in April 2010 with $880 million from United States, Canada, South Korea, Spain and the Gates FoundationGAFSPPublic SectorWindowPrivate SectorSmall Holders, SMEsImproving ProductivityImproving Access to FinanceFostering Innovation and TechnologyClimate ChangeWB is TrusteeManaged by IFCObjectives4
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 SME’s 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.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.5
6 GAFSP: Products & Targets Potential TargetsDebtFirst Loss CoverFirst Loss Facility for small holders, MSMEsLT / STFarmers, small holders, and MSMEsEquityDirect / Fund of FundsMSMEsTo be deployed through direct investments by IFC and Private Equity SME FundsImpact InvestingEarly stage project development companies, funds with social and development impact objectivesAdvisory Services / Technical AssistanceIncrease access to agri and farmer financeImprove farmer productivity and market linksAdvertising & disseminating information to small holdersTarget:PSW will target smallholders, farmers, MSMEs, directly or indirectly through banks, financial intermediaries, micro finance institutions, private firms and equity funds.
7 Program Roll-out Phase I Phase II Target Size: US$100 millionDue to limited funds, selective investment products to achieve quick resultsMajority of initial deployment though local intermediariesInvestments complemented by Advisory ServicesTarget Size: US$500 millionIn parallel with implementation of Phase I, fund raising for Phase 2 will be launched Q1,2011.Larger fund pool allows for the use of more innovative instruments, such as:Impact investing funds,Agri marketplace developmentScaling up interventions with FIsAdditional Advisory Services programs7
8 Recent Examples of IFC’s Innovative Agri-Financing in Africa 8
9 Stanbic Ghana (SBG) – Short Term Funding (Cocoa) The Project“Hybrid” of Risk Sharing Facility (“RSF”) and Partial Credit Guarantee (“PCG”).Increases Stanbic Ghana’s activity in the sector by enabling it to exceed Single Obligor Limit to Licensed Buying Companies (“LBCs”), and exceed sector limits.Up to US$ 40m seasonal financing (< 1 year) to LBCs, from US$ 19m in (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.SBGIFCLBC ACocobodLBC BLBC CLBC DLBC ELBC FIFC GuaranteeSBG GuaranteesOverdraftsCocobod LoansPortfolio of pre-approved LBCs (Off takers)IFC RoleIntroduce a new, innovative agribusiness guarantee productContribute sector and E&S ExpertiseSupplement SBG’s evaluation of LBCs – initial and on-going.Let me illustrate with a few examples from recent and current projects we are engaged in.In Ghana, IFC partnered with Stanbic to expand significantly access to finance for small cocoa farmers. Working through cooperatives, Standard Bank provides crop finance to the Licensed Buying Companies, which further finance individual growers within their respective systems.IFC works with Stanbic to identify and appraise the LBCs, and in so doing work with them to improve their practices, including environmental and social impact assessment.IFC then shares the full risk with Stanbic, for up to 50%, allowing them to double the amount of business they would otherwise be able to take on.This project helped increase the amount of financing available to these companies and the farmers they serve from less than $20M to $80M.
10 Export Trading Group (ETG) – Guarantee for Agri-Trade The ProjectRisk Participation up to 33% of US$120 million (collateral and overdraft).Supports one of Southern and East Africa’s largest agricultural supply chain operators to expand its trading and processing businesses, including purchases from small farmersIn 2008/09, ETG traded over 1.2 million tons of products from 60,000 farmers. Expects to increase traded volume to 2.7 million tons by 2011/12.Will create over 1,000 jobs, mostly in rural areasIFC RoleMobilize/supplement resources for agri-sector development from local financial institutionsProvide advice on commercial, technical, environmental and social issuesSupport ETG’s corporate practices improvementLocal BuyersETG(ETC)Standard CharteredBankFarmersKey: Flow of fundsCollateral ManagerExport Trading Group is a trading company with extensive reach into a number of products’ supply chains in East Africa. IFC is providing a guarantee for ETG’s obligations which will help them double their operations over the next 2 years. In addition to the financing, IFC is working with ETG to improve their coprorate practices, particularly with respect to ensuring adherence to sound Environmental and Social practice throughout their supply chains.Risk ParticipationIFC
11 Ethiopian Coffee – Cooperative Financing (Pending) The Project3 Year Renewable Guarantee facility (up to US$ 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 farmersAssets: Facility uses 20% for equipment loans; 80% for working capitalLoss Sharing [75%]IFC RoleFinancial structuring guidance for using stocks as collateral, rather than mortgagesImprove access to financing and markets for coffee farmersDemonstration Effect: Attract further financing to sectorContribute sector ExpertiseIFC riskBANKNGO riskIn Ethiopia, IFC is partnering with Technoserve and the Gates Foundation to in their East African Coffee initiative, to develop and participate in a financing structure for the coffee sector whcih will bring significantly increased crop finance to Ethiopia’s most important export sector.In this structure, IFC, local NGO and commercial banks each participate in different capacities for the portfolio of loans generated by the banks; the NGO in a first loss capacity, IFC at the senior level, and commercial banks at both the first loss and senior level. The structure will work to maximize the otherwise limited financing available from commercial banks, and help expand over the long term banks’ ability to provide finance.
12 Thank You Rajesh Behal Principal Investment Officer Washington, DC Currently, IFC is also working with a number of other projects to bring innovation into agrifinance. These include:Esoko, a Ghanaian firm providing a mobile phone based information management system for farmers, helping manage risks as well as get accurate timely price information;Development of a warehouse receipts system of financing in Ethiopia, which will allow farmers to store goods for the short term to take advantage of more favorable prices.Global Index Insurance Fund, which will provide index based weather insurance for farmers.We look forward to expanding our partnerships with many of the organziations represented here at the AGRA forum, and with others who can help Africa capitalize on what should be one of its’ comparative advantages and great sources of sustainable growth – competitive commercial agriculture.