Description financing model: Intermediated Financing Facility
Commercial capital is channeled through a facility that extends loans to farmers or agri SMEs. 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):
Guarantees: Third-party assurances (typically by public or development actors) to cover losses in case of borrower default, reducing perceived investment risk
Case study description:
Private sector lending to agri SMEs in Burundi facilitated through The Multilateral Investment Guarantee Agency (MIGA)'s provision of non-commercial risk insurance to the investors. This insurance type covers currency inconvertibility, expropriation, war/civil disturbance, breach of contract, and non-honoring of sovereign obligations.
- MIGA issues guarantees of $5.6 million to a consortium of foreign investors, to cover the equity, shareholder loans and retained earnings of their investments for a period of up to 10 years
- A consortium of foreign investors make equity investments and provide shareholder loans to 3 local SMEs in the coffee sector
- In the case of the materialization of political risks, including transfer restrictions, expropriation, war and civil disturbance, MIGA covers the losses of the investor consortium up to the guarantee amount
The project supports existing operations of the country’s main coffee exporter. 55,000 indirect jobs are impacted, including farmers and others throughout the value chain.
