The Organic Development Finance Fund will focus on supporting organic producers in developing countries and facilitating their access to global markets.
ODF, a collaboration between Tradin Organic, a specialist in the sourcing, processing and distribution of organic ingredients, USAID West African Trade and Investment Hub and GIZ, Germany’s main development agency, was initiated last year to provide affordable finance to organic agricultural companies in low-income and emerging countries.
The foundation’s focus is on helping to facilitate access to export markets for certified organic growers, producers and processors by connecting them with selected global buyers, thereby strengthening organic and regenerative agricultural value chains in support of sustainable development.
ODF has already disbursed several loans to organic producers working closely with smallholder farmers in countries such as Togo, Sierra Leone, Brazil and Mexico for products including orange juice, soy, cocoa and cashew nuts, in what it described as a ‘proof of concept phase’ and says it is now ready to scale-up its operations with the launch of the fund.
The fund will provide producers with working capital loans and expects to support up to 20-30 producers depending on size, and generate both a social and environmental impact across the UN SDGs of No Poverty (SDG 1), Decent Work and Economic Growth (SDG 8), Reduce Inequalities (SDG 10), Responsible Consumption and Production (SDG 12), Climate Action (SDG 13), Life on Land (SDG 15) and Partnerships (SDG 17).
The fund will have a blended capital structure, combining risk-tolerant capital with additional development and private sector investment, and aims to raise €40m by 2025. Fount said they were already in discussions with a number of potential investors and hoped to also secure technical assistance funds to aid investees in their sustainable development.
Speaking to Impact Investor, Bob Assenberg, partner at Fount and manager of the fund, explained: “The Fund aims to support and strengthen high potential agricultural SMEs in developing counties that are active in organic production by providing affordable seasonal trade finance and facilitating access to global markets through partnerships with international buyers.”
Bas Kalshoven, a member of the management board at ODF, added: “Since the start, ODF has provided eight affordable loans to organic agriculture companies in various low-income countries to increase organic production and achieve a sustainable impact on the environment and people. Together with FOUNT we will continue to expand our investments in longstanding sustainable relationships between smallholder farmers, exporters and importers.”
Organic and sustainable agriculture
Assenberg said that organic farming was important to sustaining and enhancing the health of the environment and humans by avoiding the use of synthetic pesticides and fertilisers, relying on crop rotation and intercropping, and emphasising closed nutrient cycles, whereby nutrients remain or are returned to the soil through natural means.
“Organic agriculture takes a pro-active approach and considers the medium and long-term effect of agricultural interventions on the agro-ecosystem,” he said. “By producing food while establishing an ecological balance to prevent soil fertility or pest problems, organic farming has a positive impact on soil, water, biodiversity and climate change. The producers we work with will also have to comply with organic certification standards which prescribe strict measures.”
Fount, which already has experience of investing in sustainable agriculture through its management of the Agri 3 Fund, said it had established a significant network of agricultural producers, trading companies, other types of agricultural companies and service providers in developing countries as well as in other regions of the world.
“We have also gained in-depth insights into numerous production cycles for different crops and commodities in several countries and the opportunities and challenges with regard to financing,” said Assenberg. “AGRI3, like ODF, is also based on long-term partnerships and cooperation and aims to achieve environmental and social impact with an adequate financial return. So, there are lot of lessons that have been learnt and contacts to be shared between the funds.”