carousel | April 29, 2016

Root Capital Secures $50 Million from OPIC to Lend to Smallholder Farmers

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Root Capital will be able to make a larger dent in the huge shortfall in financing for smallholder farmers in Latin America and Africa.

The nonprofit agricultural lender has secured a $50 million lending facility from the Overseas Private Investment Corporation, or OPIC. The new facility includes $30 million of new capital, Root Capital told ImpactAlpha.

In 15 years, Root has made nearly a $1 billion in loans to more than 600 small agriculture businesses in Latin America and, more recently, sub-Saharan Africa. This has generated $1.5 billion in total revenues for these businesses, of which $980 million has been paid directly to 1.2 million farm families. OPIC is Root’s largest source of debt finance.

“This facility is indispensable as we continue charting the course of our business, pushing the frontiers of agricultural finance, and supporting agricultural businesses as they generate stable employment for millions in some of the world’s poorest, most environmentally sensitive places,” Willy Foote, Root Capital founder and CEO, said in a statement.

Social lenders like Root play a key role in demonstrating the viability of lending to smallholder farmers, who still grow the bulk of the world’s food and represent the biggest source of employment in many developing countries.

A new report estimates an annual, unmet demand for finance of $150 billion among smallholder farmers in sub-Saharan Africa, Latin America, and South and Southeast Asia. Even doubling the projected annual growth of smallholder finance from 7 percent to 14 would only halve that gap by 2025, according to the report from the Initiative for Smallholder Finance and the Rural and Agricultural Finance Learning Lab.

Social lenders like Root Capital, Oikocredit and Triodos provide roughly $350 million of the current level of $50 billion in capital supplied each year, formally and informally to agriculture producer groups. “While small in relative volume, social lenders play an important catalytic role in the space, preparing farmer organizations for access to formal capital markets,” the report says.

Root’s other lenders have included the International Finance Corp., the Bill and Melinda Gates foundation, Trillium Asset Management Corp., and the Calvert Foundation.

Elizabeth Littlefield, OPIC’s president and CEO, has been a leader in leveraging private capital for social development goals. “OPIC’s continued partnership with Root Capital will further generate social and financial returns for small farmers in vulnerable environments, sustainably improving their livelihoods and cultivating prosperity in their communities,” she said in a statement.

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Image credit: Root Capital