Deals

FMO to form JVs with agribusinesses in Africa

The Dutch development finance institution has partnered with sustainable trade initiative IDH to launch the initiative.

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Dutch development finance institution FMO has launched an agriculture initiative with IDH, a sustainable trade initiative. The partnership will form joint ventures with large agribusiness traders to provide loan financing to African farmers which microfinance banks are still not providing.

The partnership will also provide input and training to farmers and is part of a wider global effort to fill funding gaps in Africa’s agriculture sectors.

Each joint venture with an agribusiness will be around €50 million in size, with around €5 million going to each programme, regionally or contractually.

FMO, which is 49 percent owned by the private sector including agri heavyweights Monsanto and Rabobank, will encourage third party investment once the programme has been tried and tested, according to Anton Timpers, senior investment officer, agribusiness, food & water at FMO.

The farmers already have trading relationships with big agribusinesses such as Cargill and Olam, said Timpers. So the partnership is stepping in to accelerate what the traders are already doing and co-finance them. The partnership will also train the farmers in good practice and work to group like-minded farmers to help them realise their potential, he added.

After a five year period, FMO hopes the farming groups and co-operatives will become more like SMEs, and will migrate their financing needs to the microfinance banks. With a five year track record, these banks are likely to be much more receptive to them, argued Timpers.

The initiative will target coffee, cotton and cocoa farming to start with, later moving onto cash crops.

FMO has 15 percent of its portfolio allocated to agri, although it has only invested around 6 percent so far.

FMO does invest into agriculture funds and recently committed $10 million to Rabo Equity Advisors’ India Agribusiness Fund II, the food and agriculture private equity fund. It is also invested in Phatisa’s African Agriculture Fund, agroforestry fund Moringa, Injaro Agricultural Capital Holdings’ impact fund and was also an investor in Rabo’s first India fund. The DFI makes commitments of $10 million and above.

It requires returns of 6 percent and above.