The IDH Farmfit Fund has acquired a 21 percent stake in farm lending fintech company LendXS, which was established by the Financial Access Group.
IDH Farmfit Fund CEO Roel Messie told Agri Investor that the €100 million vehicle had chosen to take an equity stake in order to “cement the partnership and align strategy” between the two entities.
“It creates a synergy that is expected to unlock access to credit for many farmers,” Messie said in a separate statement. “LendXS will enable rural lenders to better assess the risk and lower the costs of providing credit to farmers. The IDH Farmfit Fund will be able to support these lenders with funding and risk mitigation.”
LendXS works by collecting individual farmer data. This is then used to enable lenders to smallholders to make “a reliable cashflow-focused assessment of the credit risk to these farmers,” explained LendXS CEO Eelko Bronkhorst.
“LendXS provides an electronic tool for credit scoring,” he added. “This lowers both the risk as well as the acquisition costs for the lender, which could be a rural lender or a value chain actor. As a preferred partner of the fund, LendXS will be able to get access to the potential investees of the fund, which are financing farmers or considering to do so. The fund will benefit, because it will take risk on the farmers, and this risk will be lower and more predictable with the LendXS tools.”
The company seeks to work with commercial banks with a rural finance strategy, funds, credit cooperatives and other non-bank financial institutions and agribusiness companies or traders providing financing to smallholder suppliers.
The start-up was founded in 2019 by Financial Access Consulting Services BV (FACS), the former ING Bank emerging markets banking advisory subsidiary. LendXS has operations in Kenya, Ghana, Uganda and Côte d’Ivoire.
The IDH Farmfit Fund was launched at the January 2020 World Economic Forum in Davos and has deployed €2 million to date. Its investors include the Dutch Ministry of Foreign Affairs, Unilever, Mondelez, JDE Peet’s, FMO and Rabobank.
The US Development Finance Corporation has also provided a guarantee of $250 million for transactions, covering 50 percent of the senior debt on investments.
In its summary of the vehicle, IDH said the fund was “expected to raise billions of euros to address the $170 billion financing gap in smallholder farming finance”.