OPIC commits $50m to Root Capital for smallholders

Non-profit agricultural impact investor Root Capital has received a $50 million commitment from the US government to finance small and medium Latin American and African agribusinesses.

The US Overseas Private Investment Corporation (OPIC) is the anchor investor in Root Capital, which has provided $946 million in loans to more than 600 rural agribusinesses since its foundation in 1999. The fund targets lending activity that either directly or indirectly supports smallholder farmers.

Root Capital provides lending and financial training to rural agribusinesses that source much of their raw material from smallholder farmers. In 2015, it dispersed $154 million in loans to small and medium sized agribusinesses.

Other backers include impact investors, non-profits and non-governmental organisations, including the Bill and Melinda Gates Foundation, the International Finance Corporation, the Skoll Foundation and Good Capital. The fund’s portfolio includes cocoa, coffee and produce operations in Latin America and Africa.

Impact investment firms are increasingly looking to improve smallholders’ production. According to a report from the Yale Center for Business and the Environment published in January, impact investors see the potential for strong social and financial returns by strengthening access to training, equipment and supply chains, particularly with now that markets which reward good environmental practice have emerged. Barriers to investment include high upfront costs and long return horizons.

OPIC first invested $10 million in Root Capital in 2010. The agency provides self-sustaining investment capital, political risk insurance and support for private equity investment in emerging economies. OPIC has committed $4.1 billion to private equity funds in emerging markets since 1987.