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IFC Agribusiness Global Agriculture and Food Security Program and New Innovations in Financing Agriculture 20 th Brussels Development Briefing on Financing Agriculture in Africa and ACP Countries September 15, 2010

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IFC Agribusiness Global Agriculture and Food Security Program and New Innovations in Financing Agriculture. 20 th Brussels Development Briefing on Financing Agriculture in Africa and ACP Countries September 15, 2010. - PowerPoint PPT Presentation

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Page 1: IFC Agribusiness Global Agriculture and Food Security Program  and New Innovations in Financing Agriculture

IFC Agribusiness

Global Agriculture and Food Security Program and New Innovations in Financing Agriculture

20th Brussels Development Briefing on Financing Agriculture in Africa and ACP Countries

September 15, 2010

Page 2: IFC Agribusiness Global Agriculture and Food Security Program  and New Innovations in Financing Agriculture

1. IFC Agribusiness Portfolio Overview

2. Global Agriculture and Food Security Program (GAFSP) Private Sector Window

3. Recent Examples of Innovative Agri-Financing in Africa

2

Page 3: IFC Agribusiness Global Agriculture and Food Security Program  and New Innovations in Financing Agriculture

IFC Agribusiness Portfolio Overview Agri-related Investments

(including Syndications)

FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY090

200

400

600

800

1000

1200

1400

1600

1800

2000

2200

FertilizersFood RetailAgri IT/TelecomsAgri infrastructureEquity FundsRural and Trade FinanceAgribusiness Production and Processing

US

$ m

illion

s

2.0 bn

1.4 bn1.3 bn

848 m

483 m546 m

347 m 304 m

120 m

406 m

The active portfolio of agri-related investments was $3.9 billion at FYE09 (excludes Trade Finance) IFC has significantly increased its agri-financing in recent years

Africa6% Middle

East/North Africa

2%South Asia11%

East Asia11%

Latin America45%

Europe and Central Asia

25%

IFC'S AGRIBUSINESS PORTFOLIO BY REGION

Food Retail12%

Fertilizers6%

Agri Infra-structure

4%Agribusiness Production

and Process-ing

75%

Equity Funds3%

IFC'S AGRIBUSINESS PORTFOLIO BY SECTOR

3

Page 4: IFC Agribusiness Global Agriculture and Food Security Program  and New Innovations in Financing Agriculture

Global Agriculture and Food Security Program (GAFSP)

Private Sector Window (PSW) In 2009, G8 announced at L’Aquila a program to address food security and

improve incomes of poor in IDA countries. Global Agriculture and Food Security Program created with separate Public and

Private Sector windows to deliver on this objective. IFC selected to set up and directly manage the Private Sector Window for

the GAFSP; World Bank to be Trustee of Public Sector Window. WBG Board approved GAFSP Framework January 2010 GAFSP launched in April 2010 with $880 million from United States, Canada,

South Korea, Spain and the Gates Foundation

GAFSP

Public Sector Window

Private Sector Window

Small Holders, SMEs Improving Productivity Improving Access to Finance Fostering Innovation and

Technology Climate ChangeWB is

Trustee Managed by IFC

Objectives

4

Page 5: IFC Agribusiness Global Agriculture and Food Security Program  and New Innovations in Financing Agriculture

GAFSP Private Sector Window - Overview

Mandate: • Use limited resources to support and demonstrate new and

innovative financing aimed at increasing the commercial potential of small and medium sized agri-businesses and farmers.

• Help increase productivity, improve market access and reduce risks associated with financing agribusiness SME’s by using innovative financial structures and technical assistance support.

Initial Donors: • PSW will be operational with the CAD 50 m contributed by Canada. • US intends to participate in PSW by December 2010 as well.

5

Target:Raise additional Funds to achieve a size of US$500 m PSW allowing initiative to extend reach, and deploy a wide range of innovative financial instruments, and provide technical assistance.

Page 6: IFC Agribusiness Global Agriculture and Food Security Program  and New Innovations in Financing Agriculture

GAFSP: Products & Targets

6

Products Potential TargetsDebt First Loss Cover • First Loss Facility for small holders, MSMEs

LT / ST • Farmers, small holders, and MSMEs

Equity Direct / Fund of Funds

• MSMEs • To be deployed through direct investments by IFC

and Private Equity SME FundsImpact Investing • Early stage project development companies, funds

with social and development impact objectives

Advisory Services / Technical Assistance

• Increase access to agri and farmer finance• Improve farmer productivity and market links• Advertising & disseminating information to small

holders

Target: PSW will target smallholders, farmers, MSMEs, directly or indirectly through banks, financial intermediaries, micro finance institutions, private firms and equity funds.

Page 7: IFC Agribusiness Global Agriculture and Food Security Program  and New Innovations in Financing Agriculture

7

Phase I Phase II

7

Program Roll-out

Target Size: US$500 million

• In parallel with implementation of Phase I, fund raising for Phase 2 will be launched Q1,2011.

• Larger fund pool allows for the use of more innovative instruments, such as:

–Impact investing funds, –Agri marketplace development

–Scaling up interventions with FIs

–Additional Advisory Services programs

Target Size: US$100 million

• Due to limited funds, selective investment products to achieve quick results

• Majority of initial deployment though local intermediaries

• Investments complemented by Advisory Services

Page 8: IFC Agribusiness Global Agriculture and Food Security Program  and New Innovations in Financing Agriculture

Recent Examples of IFC’s Innovative Agri-Financing in Africa

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Page 9: IFC Agribusiness Global Agriculture and Food Security Program  and New Innovations in Financing Agriculture

Stanbic Ghana (SBG) – Short Term Funding (Cocoa)The Project

• “Hybrid” of Risk Sharing Facility (“RSF”) and Partial Credit Guarantee (“PCG”). • Increases Stanbic Ghana’s activity in the sector by enabling it to exceed Single Obligor Limit to Licensed Buying Companies (“LBCs”), and exceed sector limits.

• Up to US$ 40m seasonal financing (< 1 year) to LBCs, from US$ 19m in 2007-08 (2 LBCs)

• LBCs selected and appraised by IFC. • IFC provides up to 50% PCGs to LBCs on an individual basis.• Guarantees (can be) renewed on an annual basis.

SBGIFC

LBC A

Cocobod LBC B

LBC C

LBC D

LBC E

LBC F

IFC Guarantee

SBGGuarantees

Overdrafts

CocobodLoans

Portfolioof pre-

approved LBCs (Off takers)

IFC Role• Introduce a new,

innovative agribusiness guarantee product

• Contribute sector and E&S Expertise

• Supplement SBG’s evaluation of LBCs – initial and on-going.

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Page 10: IFC Agribusiness Global Agriculture and Food Security Program  and New Innovations in Financing Agriculture

Export Trading Group (ETG) – Guarantee for Agri-Trade

The Project• Risk Participation up to 33% of US$120 million (collateral and overdraft). • Supports one of Southern and East Africa’s largest agricultural supply chain operators to expand its trading and processing businesses, including purchases from small farmers

• In 2008/09, ETG traded over 1.2 million tons of products from 60,000 farmers. Expects to increase traded volume to 2.7 million tons by 2011/12.

• Will create over 1,000 jobs, mostly in rural areasIFC Role

• Mobilize/supplement resources for agri-sector development from local financial institutions

• Provide advice on commercial, technical, environmental and social issues

• Support ETG’s corporate practices improvement

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Local BuyersETG(ETC)

Standard Chartered

Bank

Farmers

Key: Flow of funds

Collateral Manager

IFCRisk

Participation

Page 11: IFC Agribusiness Global Agriculture and Food Security Program  and New Innovations in Financing Agriculture

Ethiopian Coffee – Cooperative Financing (Pending)The Project

• 3 Year Renewable Guarantee facility (up to US$ 10 million p.a.) • Assists coffee cooperatives to i) acquire wet mills for coffee processing, and ii) working capital. Ethiopia portion of US$ 50 million East Africa Coffee Initiative managed by TechnoServe and funded by Gates Foundation.

• Unique partnership - First-loss provided by local NGO; IFC takes Senior Loss; Banks share both First Loss and Senior Loss.

• Collateral: coffee purchases from farmers• Assets: Facility uses 20% for equipment loans; 80% for working capital

IFC Role• Financial structuring guidance

for using stocks as collateral, rather than mortgages

• Improve access to financing and markets for coffee farmers

• Demonstration Effect: Attract further financing to sector

• Contribute sector Expertise

11

IFC riskBANK

NGO risk

Loss Sharing [75%]

Page 12: IFC Agribusiness Global Agriculture and Food Security Program  and New Innovations in Financing Agriculture

12

Rajesh BehalPrincipal Investment OfficerWashington, [email protected]

Thank You