FAFIN, a private equity fund providing growth capital to small and medium-sized enterprises across the agriculture value chain in Nigeria, held its first close on $34 million at the end of January.
Managed by Sahel Capital, a West Africa-focused fund manager and advisory firm, the fund is targeting $100 million.
The first close included a €10.5 million commitment from the Federal Ministry of Agriculture and Rural Development (FMARD) of Nigeria, one of the fund’s key sponsors.
“FAFIN is currently the only fund focused on agricultural finance in Nigeria,” said Mezuo Nwuneli, managing director of Sahel Capital. “There is a real need – SMEs, and firms in the agricultural sector in particular, have a difficult time sourcing financing for their operations. Less than 5 percent of most Nigerian bank’s loan portfolios tend to be agricultural sector focused.”
Other investors in the fund include Nigeria Sovereign Investment Authority, which committed $10 million after running its own investment decision process independent of FMARD, according to Nwuneli.
German agency KfW Development Bank is another sponsor of the fund and has committed to a Technical Assistance Facility for portfolio companies. NMARD also committed $1 million to the facility that will provide portfolio companies with business development and technical services, supply chain management, extension support and market facilitation services.
FAFIN has two preferred TA providers: International Fertiliser Development Centre and Technoserve, the non-profit organization that develops business solutions to poverty by linking people to information, capital and markets, according to its website.
DFIs, foundations and pension funds looking for diversification in their investment portfolios are also considering investing in the fund, he added.
The fund will provide quasi-equity investments to portfolio companies, and also to intermediaries for on-lending to the sector. This will include structured royalties, convertible debt and preferred equity. Each deal will be around $500,000 to $5 million in size.
The impact goals of the fund are employment and revenue generation and smallholder financing.