International Fund for Agricultural Development Partner in Sustainability

November 2018

IFAD and the Private Sector

IFAD

• Investments in rural people to eliminate hunger and poverty, since 1978

• Targeted investments for rural transformation in over 100 countries

• Efforts to advance the Sustainable Development Goals (SDGs), notably no poverty and zero hunger in rural communities

Private Sector

• Investments in more sustainable value chains in developing countries to improve:

• long-term profits;

• brand value; and

• diversify their consumer base

• Agribusinesses depend on cocoa, peanuts, coffee and tea grown by smallholder farmers

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UN agency

• Contribute to achievement of SDGs by 2030

• Collaborate and work in alignment with other UN agencies, in particular FAO and WFP

International Financial Institution

• Provide loans and grants to Member State governments to finance government-implemented projects

• Mobilize cofinancing from Member States, multilateral institutions, companies, and project participants

• Catalyst of public and private investments in agriculture and rural enterprise development

IFAD: UN agency andInternational Financial Institution

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SO 2

Increase poor rural people’s benefits

from market participation

SO 1

Increase poor rural people’s productive

capacities

SO 3

Strengthen the environmental

sustainability and climate resilience of poor rural people’s economic activities

Rural people overcome poverty and achieve food

security through remunerative, sustainable and

resilient livelihoods

IFAD’s strategic vision and objectives for private sector

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Principles of engagement andmainstreaming priorities

IFAD’s work will consistently adhere to five

principles of engagement: targeting; empowerment;

gender equality; innovation, learning, scaling up;

and partnerships

These principles are at the core of IFAD’s

identity and values, and cut across the delivery

of all its development results

IFAD leverages the synergies across climate, gender,

nutrition and youth, and cross-sectoral partners to

ensure our impact will last well beyond 2030.

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IFAD11 PoLG: US$3.5b

• Core contributions

• Sovereign borrowing

Domestic cofinancing

• Boost in MICs, particularly NEN and LAC

• Facilitated by increased project size

• Governments, private sector and beneficiary contributions

International cofinancing

• Focus on climate change and fragile states

• Level-up to best performing regions, such as ESA and APR

Private sector

• New vehicles of engagement

• Improved measurement

How: IFAD as “an assembler of development finance”

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Current partnerships with international companies and foundations

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IFAD and multinational partnerships –successes

IFAD and Mars

• Indonesia: strengthening smallholder cocoa farmer output

• IFAD: US$4 million; Government: US$525k; Mars: US$325k – led to doubling in harvest for many smallholders

• Second phase starting now with national extension workers

• Expanding to Cambodia and India with smallholder peanut and rice farmers

• IFAD’s funding may leverage twice that of Mars (US$500k/US$1 million)

Challenges: co-funding partnerships take time to build, align on geographies and commodities

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IFAD and Olam

• Nigeria: Creating markets and providing finance for smallholder rice farmers

• Financing: IFAD: US$74.8 million; Government: US$15.6 million; beneficiaries: US$8 million; Olam (infrastructure and farmer credit): US$57 million

• Results: 4,976 smallholder farmers cultivating 6,609 ha; Olam purchased 25,200 MT of rice paddy from smallholders for US$9.8 million; 25,000 people in remote villages benefited; 3,795 jobs created beyond farming, mainly for youth and women in value chain enterprises

• Next steps: aim to expand the model throughout IFAD’s investments in country

Key success factors: dedicated partnership leads among IFAD, Government of Nigeria and Olam

IFAD and multinational partnerships –successes (cont’d)

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IFAD and Hilton

• Argentina: Link smallholder farmers to Hilton’s supply chain in Buenos Aires

• Results: Hilton to source vegetables from local farmers cooperatives. Delivery arrangements proceeding for Hilton to buy from IFAD-supported cooperatives. Hilton to display the produce visibly, and ready to integrate any preserved foods into its local produce shop

• Next steps: aim to expand and strengthening the partnership in IFAD’s investments in Kenya, Nigeria and Sri Lanka

Challenges: co-funding partnerships take time to build, align on geographies and commodities, and lack of understanding from the private sector of the realities faced by smallholder farmers in rural areas

IFAD and multinational partnerships –successes (cont’d)

Additional examples & lessons of engagement

with private sector - the case of China

• IFAD’s existing instruments for private sector engagement - the Private Sector Strategy 2012-2018

- Country strategies and projects as entry points for private sector engagement

- Partnership with domestic companies dominates:

– IFAD loans to governments include financing for financial institutions, matching grants to leverage private sector investments

– Public-private-producer-partnerships (4Ps model)

– New Agribusiness Capital (ABC) fund

- Global MoUs with Multinational companies on the rise

- Grants from some Foundations

I. The typical case of engagement with domestic companies -

the 4Ps model (matching grants + GF)

• Starting point: Acknowledgement that there are a

multitude of smallholder producers who

could serve as suppliers to

agribusinesses, but for a number of

reasons (…) are not linked/connected to

markets

• Public interest: Move poor smallholders out of poverty

• Private interest: Potential suppliers

Potential for PPP (1) Public sector: invests in public goods

(2) Private sector: invest in private goods

(3) Both: share risks/benefits

The model:

How the model was applied in China:

• Starting point: Provide incentives to agribusiness to engage in our target

areas/with our target group

• How: Co-finance (i.e. providing matching grants) Business Plan

proposals from agribusinesses for the development of

business at the condition that they enter in fair

contractual arrangements with our target group (e.g.

purchase, dividends, land rental, wages)

• Matching grants: - Trainings/Advisory Services

- Inputs

- Production infrastructures/equipment

- Post-production

- Marketing & branding, certification

• Different models in China

4P model in China

II. An example of unsuccessful partnership with

a Multinational (Unilever)

• Unilever and IFAD signed a corporate MoU seeking collaboration at

country level

• In China several attempts to operationalize it, but: (1) working in different

geographical areas, (2) different time-horizons

• Lessons learnt?

III. An example of “promising” partnership with a

Multinational (Ant Financial)

• Ant Financial is one of the largest Fin-Tech companies in China, part of

the Alibaba Group

• The model – role of Ant Financial:

- Ant Financial supports the project in determining potential of BPs

(capacity that neither IFAD nor Government have)

- Ant Financial can link/provide services (financial, insurance, etc.) to

promising business plans

• Interest in expanding beyond China

• Interest on collaborating on global themes of common interest

• Main difference from Unilever model: bottom-up

IFAD’s private sector strategy:2012 strategy

Objective: Reduce rural poverty by deepening its engagement with the private sector

Strengthening IFAD’s existing instruments• Include the private sector as stakeholders for consultation and/or potential partnerships at country level

for country strategies

• Increase the number of loan projects and grants that include the private sector as a partner or recipient

• Increasingly engage in policy dialogue to improve the rural business environment related to its projects,

programmes and country strategies

• Increasingly play the role of interlocutor or intermediary between foreign and local investors and the public sector,

to facilitate pro-poor policy dialogue and catalyse additional investments in the agricultural sector

Building the capacity of IFAD and its staff• Partner with at least 10 other development institutions, United Nations organizations and NGOs to deepen

its work with the private sector – for policy dialogue, knowledge management or cofinancing purposes

• Organize and participate in various workshops, forums and networks related to private-sector development

and PPPs

• Train its relevant staff (mostly country programme managers and country programme officers) in value chain

analysis, PPPs and best practices in private-sector development

Exploring how rural SMEs can be better supported• Conduct a full assessment in 2012/2013 to analyse alternative options for IFAD to support rural SMEs in developing

countries (direct financing of SMEs would be excluded). These findings to be shared with the Board

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IFAD’s new strategic outlook:

Private sector strategy 2019-2025

Objective: Help achieve IFAD's strategic objectives and have more impact

Broadens IFAD’s instruments to invest in the agriculture sector, targeting the

private sector (SME, cooperatives)

• IFAD-financed projects as starting point

• Maintain traditional instruments

• Crowd in finance from private investors with focus on footprint and social benefits, such

as impact investors and blend financiers

Exploring how private sector can be better supported to advance SDGs

• Leveraging private sector solutions/orientations: Inclusive value chains and innovative

approaches and solutions

• Private sector has more responsible actors, responsive to climate change, focus on

sustainability, transparency, seeking win-win approaches

• Private sector brings new money, leading to new opportunities for partnerships, scaling up

and innovation (e.g. GAFSP, EAT, Seeds & Chips, EXCO 2019)

• Private sector leverages development finance innovation (e.g. new mechanisms, blended

finance, PPPs, impact investors)

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ABC Fund Initiative

The Agri-Business Capital (ABC) Fund will comprise public/private blended capital that will drive inclusive smallholder and rural SME finance

• Pillar 1 – Pipeline Development. IFAD portfolios (US$17 billion including cofinancing) and reach on the ground (40 offices) and AGRA portfolios (US$500 million in 11 African countries reaching out to 30 million smallholders) will be leveraged as a key source of pipeline development opportunities

• Pillar 2 – The ABC Fund’s target SMEs will be farmer organizations and SMEs that are part of the "missing-middle” (investments <US$1 million)

• Pillar 3 – Technical Assistance Facility (TAF) will provide advisory services to farmer organizations, financial intermediaries and SMEs, allowing them to access business development and incubating prospective creditworthy clients

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The ABC Fund Structure

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Thank you

IFAD and Foundation Partners

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Open Society Foundation

Learning partnership for modelling graduation approach with refugees:

• Jordan: $1 million grant from OSF to IFAD under FARMS initiative in 2018 to apply

graduation model for Syrian refugees and Jordanian host communities in IFAD’s new

SIGHT investment

• M&E & Impact Investment: exploring opportunities to collaboration on impact

measurement, and potentially with the foundation’s investment arm

IFAD and Foundation Partners

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Bill and Melinda Gates Foundation

Following letter of intent signed in 2012, focused on country level collaboration:

• India: $500K grant from BMGF to IFAD in 2015 to develop model for 4P goal value chain

in India. Based on results, State of Bihar seeking $160 million in loan from IFAD to take to

scale

• Ethiopia: $1 million grant from BMGF via AGRA in 2018 to support advanced TA for

market links within IFAD’s $100 million PASIDP II irrigation project

• Africa: exploring collaboration with AGRA and BMGF to identify COSOP and pipeline

investments for co-financing

• Pending: $7.5 million grant for ABC Fund Technical Assistance Facility; $60k for SAFIN;

50x2030 Data Initiative

IFAD and Foundation Partners - pipeline

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• Rockefeller Foundation: partnering on post-harvest loss, including through new potential

grant to build IFAD’s capacity linked to Rabo initiative

• MasterCard Foundation: Focus on linking IFAD country teams with new country strategy

teams at MCF for youth job creation initiatives

• Visa Foundation: newly created foundation focus on financial inclusion; aim to link with

ABC Fund and potentially fin inclusion work though POLG

• Small Foundation: provided $400,000 for SAFIN

• Packard Foundation: provided $100,000 for Indigenous Peoples Assistance Facility

• Chanel and Cartier foundations: strong focus on gender empowerment and international

development linkages

• Early pipeline in development: Co-Impact Foundation, Oak Foundation, Moore

Foundation, Omidiyar, Nea Tero, MacArthur Foundation, Elenor Crook Foundation