USAID Bureau for Resilience and Food Security (RFS) Support to Agriculture-Oriented Funds
By Lisa Gans, INVEST Senior Investment Advisor
USAID’s Bureau for Resilience and Food Security (RFS) engaged INVEST, a USAID initiative that mobilizes private capital for better, more sustainable development results, to strengthen and support USAID Missions to build resilient communities and countries, enhance their well-being and improve food and water security to reduce hunger, poverty and malnutrition. Through this engagement, RFS is supporting a portfolio of four investment funds, which are targeting companies that align with Mission-level goals around agriculture, resilience and water, sanitation and hygiene (WASH). The supported firms are operating across different geographies, provide different types of capital and are at different stages of growth, but are united in their alignment with Mission goals and strategies.
The process for identifying those funds was an intensive one. USAID RFS, with the support of INVEST, released a call for Expressions of Interest from funds that had investment goals and focus aligned with RFS priority countries and sectors. In response to this initial request for Expressions of Interest, 39 firms made submission. Nine of those were invited to submit full proposals, which were vetted and evaluated by a committee of technical experts, and a total of four awards were made. The terms of each contract provide for different types of support, targeted to the stage and need of each fund. The funds selected were:
Dalberg Advisors with Pomona Impact: Pomona Impact supports and invests in small growing businesses across Mexico, Central America, Colombia and Ecuador in agriculture, basic services (including health, education, housing, energy and water) and the digital economy to help profitably scale their impact. This partnership offered an opportunity to support Pomona Impact’s investment in the Northern Triangle in high-impact agriculture, nutrition or WASH-focused businesses, while also providing technical assistance to Pomona and investee companies from Dalberg. With Dalberg’s help, Pomona developed and refined investment impact screening criteria, developed its pipeline and refined their operations and capital deployment approach. Select portfolio companies received training and support, including presentation of a learning platform that offered best practices and tools for firms to build their skillsets in people management; strategic problem solving; environmental, social and governance (ESG) standards; and impact measurement. The learning program was designed to be replicable by Pomona for use in onboarding future pipeline firms. USAID RFS is providing $475,000 for this work.
FINCA Ventures: FINCA Ventures targeted equity and convertible note investments in early stage companies with prospects for both growth and social impact in USAID RFS priority countries with Country Development Cooperation Strategies focused on agriculture, food security and water and sanitation. USAID is providing $500,000 in direct catalytic capital to support four investments in aligned sectors, and to support an additional capital raise from other sources of $3.5 million. FINCA’s pipeline is Africa-focused and aligned with USAID Mission objectives in several countries, including Kenya and Tanzania. It’s investments included a company that turns surplus and ripe produce sourced from smallholder farmers and mid-size farms into affordable and nutritious foods with a long shelf life, an expanding cashew producer, a fruit company modernizing its infrastructure to avoid postharvest loss and a franchise for the distribution of essential goods, including clean water.
Aceli Americas: Aceli sought to adapt an innovative model from East Africa to Latin America with the goal of mobilizing $200 million in private sector lending to agricultural small- and medium-sized enterprises (SMEs) that build inclusive prosperity for 300,000 rural households in regions vulnerable to conflict, illegal activity, migration and deforestation. Priority countries include Guatemala, Mexico and Honduras. USAID RFS is providing $350,000 in support for an assessment of the market and business planning around establishment of the fund.
MCE Social Capital: MCE is in the design stage for MCE AgriResilience Fund-I, a $40 million agriculture-focused, blended finance fund with a focus on frontier markets and climate-smart agriculture. The fund will invest debt capital ($250,000-$3 million tickets) in approximately 30 agricultural enterprises and rural financial institutions in priority USAID markets, across value chains and agricultural activities (e.g., financing, production, processing and trading). Priority countries include Kenya, Ghana and Indonesia. USAID RFS is providing $200,000 catalytic support to defray the start-up costs (fund design, legal structuring, investment pipeline development, marketing and investor pipeline development) for the fund.
For each of these engagements, USAID RFS has been coordinating with Missions to ensure support for the fund’s investments and alignment with Mission objectives. These four investments also serve as a portfolio for learning and better understanding of best practices in the use of blended finance in support of mission-aligned funds.