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Impact fund backs Madagascar vanilla farmers

L3F, an impact fund backed by four major multinationals, will invest €2m in a project aimed at helping smallholder farmers triple their revenue while improving the quality of vanilla.

Impact investment firm Livelihoods Ventures is investing €2 million to help vanilla farmers in Madagascar increase their revenue and improve vanilla quality.

The investment is being made through the Livelihoods Fund for Family Farming (L3F), a vehicle created in 2015 by French dairy company Danone; US food manufacturer Mars, Inc; Firmenich, a Swiss fragrance and flavor company; and Veolia, the French environmental services company. The project is being managed by Fanamby, a Madagascan biodiversity-focused NGO.

“This project, with 3,000 family farms, aims to tackle not only quality and traceable vanilla production but also food security for farmers and biodiversity conservation,” the companies said in a joint statement.

L3F’s €2 million will pre-finance Fanamby and farmers for the implementation and monitoring of the vanilla production component of the project which includes farmers’ training on sustainable practices to increase vanilla productivity and quality through agroforestry techniques, a spokesperson for Livelihoods Funds told Agri Investor.

The funds will also go towards a new farmer-owned cooperative that will be established with the support of Fanamby. The cooperative will connect producers more directly to markets, collect the vanilla, cure it and export it to the project partners.

Danone, Firmenich and Mars have partnered with Prova, a French supplier of raw ingredients to the confectionary food industry, and have committed to purchasing vanilla produced by the project.

According to the statement, L3F will be gradually refunded through a results-based fee paid by the four companies which buy the vanilla and benefit from the project. Project monitoring and evaluation will be carried out through a shared governance with all stakeholders.

The project will support farmers operating in the north of Madagascar where 80 percent of global vanilla production is concentrated. Livelihoods Ventures estimates that as a result of the project around 60 percent of the crop value will go back to farmers as opposed to the 5 to 20 percent they currently receive.

In order to address food security, the project will also focus on rice production and crop diversification and will provide farmers alternative economic opportunities through clove production and poultry farming. “Co-financing from development organizations is currently under discussion for [these] components of the project,” the spokesperson said.

L3F, an evergreen fund, will invest a total of  €120 million in projects in Africa, Asia and Latin America over the next 10 years, with the aim of converting 200,000 farms to sustainable agricultural practices. The Madagascar vanilla project is the first to launch, but there are 10 projects in the pipeline at different stages of development, the spokesperson explained.