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June 08, 2012
Fund Seeks to Improve the Lives of East African Farmers
    by Robert Kropp

The Global Impact Investing Network publishes a case study of the African Agricultural Capital Fund, which invests in environmentally sustainable agriculture projects to benefit the rural poor in sub-Saharan Africa.


SocialFunds.com reported yesterday on an Ernst & Young survey of investment in Africa. The survey found that despite lingering negative perceptions, compelling reasons for increased private investment in Africa exist already.

The Global Impact Investing Network (GIIN) announced in September the launch of an equity fund that invests in environmentally sustainable agriculture projects to benefit the rural poor in sub-Saharan Africa. Yesterday, GIIN published a case study of the African Agricultural Capital Fund (AACF).

When the fund launched, four members of GIIN's Investors' Council—JP Morgan, the Bill & Melinda Gates Foundation, the Gatsby Charitable Foundation, and the Rockefeller Foundation—invested $25 million. As the case study points out, the US Agency for International Development (USAID) provided a 50% debt guarantee to JP Morgan, as well as a technical assistance facility designed to help mitigate risk.

Pearl Capital Partners (PCP), an African agricultural investment fund manager based in Uganda, is the fund manager. "In discussion with the investors," the case study states, PCP "established AACF’s portfolio-level targets of improving the lives of at least 250,000 smallholder farmer households and helping them realize an increase of $80 in annual income within five years of an investment."

The technical assistance facility, which will provide business and financial training to investees, is necessary because of "the emerging nature of the formalized East African agricultural sector… AACF's target investees are likely to be under-resourced and may not have skills or systems necessary to adapt to business or market challenges."

Luther Ragin, CEO of GIIN, stated at the launch, "This unique collaboration between diverse investors will result in increased capital to the sustainable African agricultural sector and a more rigorous focus on generating social and environmental benefits."

The case study concludes, "The African Agricultural Capital Fund's goal is to improve the livelihoods of smallholder farmers by investing in agricultural enterprises that engage them in their business models… Though the process was resource intensive, it demonstrates how diverse stakeholders—a fund manager operating in East Africa, a UK foundation, two US foundations, a U.S. government agency, and a global commercial investor—worked together to create an investment that accommodates each of their financial and social objectives."

 

 
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