Description financing model: Intermediated Financing Facility

Commercial capital is channeled through a facility that extends loans to farmers. These facilities often pool funding from both commercial and catalytic sources, enabling greater scale while balancing risk and return

Applicability: Well-suited for a range of asset owners (e.g., pension funds, institutional investors) who seek to support farmer financing without direct engagement

Considerations: Success is dependent on effective matching of stakeholders with different risk-return expectations

Description of de-risking tool(s):

First Loss Coverage: A form of credit enhancement where a party (often public or philanthropic) agrees to absorb initial losses, protecting other investors (private) and encouraging their participation by limiting risk exposure

Guarantees: Third-party assurances (typically by public or development actors) to cover losses in case of borrower default, reducing perceived investment risk

Offtake agreements: Contractual commitments by value chain actors to purchase sustainably produced outputs at pre-agreed terms, providing revenue certainty and improving bankability

Ecosystem outcome monetization: Positive environmental outcomes (e.g., carbon sequestration) of farmers are quantified and monetized through ecosystem outcome credits (e.g., carbon credits). This creates an additional revenue stream for projects and links sustainability outcomes directly to financial returns

Case study description: 

Growbeyond aims to accelerate climate adaptations and inclusive finance for small holder farmers and agri-SMEs in Southeast Asia

1. Regional fund (ASEAN) comprises catalytic capital and technical assistancefund to support over 10 country-crop local facilities, delivered by local bank
   1. Provide pari-passu guarantees on 50% of portfolio and/or first loss on 10% of portfolio
   2. $15M grants for technical assistance for each facility
2. Local partner bank acts as lending facility, bringing in own capital
3. Unsecured loans are provided to farmers to finance CAPEX & working capital needs via cooperatives/FAIs
4. Closed Looped Partnership includes offtake agreements with value chain players, MRV, ecosystem monetization etc.

Complete deal, crowding in $85M commercial capital, $15M concessional TA with support from guarantee providers for each local facility