Agricultural Investment Funds For Development: Comparative analysis and lessons-learned
On December 14th 2016, the World Bank and FAO hosted a webinar “Agricultural Investment Funds for Development: comparative analysis and lessons-learned”. The speakers Toshiaki Ono, (World Bank Financial Sector Specialist), and Calvin Miller, (independent consultant/ex-FAO Agribusiness and Finance group leader) presented a recent FAO study on Agricultural Investment Funds (AIFs) which analyzed 63 Public and Private Partnership (PPP) funds and 52 fund managers. The study will be published from FAO during 2017. Key lessons-learned from the study and issues discussed during the BBL are summarized below:
- The study categorized 63 funds by investment targets such as agribusiness companies, agri-SMEs, producer organizations, rural Microfinance Investment Vehicles (MIVs) with significant agricultural investments and others. Across the board, agribusinesses are the preferred target of investment, as well as agricultural activities and crops that already have an established track record and whose risk-return patterns are known can more easily attract investors.
- The number of AIFs and investments in Latin America is the highest and but in Africa they are increasing significantly. PPPs has been valuable to facilitate the growth, especially in Africa, and is expected to continue. Involvement of public investors may become even more important in view of expected slow growth in Africa.
- SMEs and producer organizations usually require extensive capacity development support from AIFs. Funds for agri-SMEs and producer organizations are often accompanied by grant for technical assistance. Investments in producer organizations are especially difficult. Careful structuring of how and where to invest in an agricultural value chain is critical to success.
- Many AIFs are small (below US$50M) in size, especially those for agri-SMEs and producer organizations. Smaller funds usually yield lower financial returns and not all are financially sustainable. Public investors play a critical role in these funds.
- Many funds are run by specialized fund managers with experience in agriculture. AIFs require a thorough understanding of the agriculture sector in developing countries.
- Investors in agricultural and agribusiness investment funds pursue development impact in addition to financial return. While improving, greater standardization in impact assessment is indispensable for the growth of the industry and demonstrating their development impact.
- The enabling environment is an important pre-requisite, not only to attract agricultural investment funds, but also to achieve the full benefits from investment opportunities.