Description financing model: Direct Farmer Financing (Corporate Supply Chain)

Direct Farmer Financing (Corporate Supply Chain) is offered to suppliers of food & agri corporates on preferential terms, subsidized by food & agri corporates

Applicability: Best suited to well-structured supply chains with formal offtake agreements

Considerations: Scalability depends on the willingness of food & agri corporates to absorb part of the cost

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

Case study description: 

Syngenta, Itaú, and The Nature Conservancy partner together to provide Cerrado soy farmers with long-term loans to restore degraded pastureland for agricultural production, implementing a DCF1 model that can alleviate the pressure of agricultural expansion over native vegetation

1.Itaú offers farmers loan tenure of up to 10 years with up to 3-year grace period, at discounted rates

2.Syngenta takes on part of lending risk through first-loss coverage

3.Syngenta provides inputs, infrastructure & machinery to farmers

4.Farmers use loans and Syngenta inputs to implement a DCF model for agricultural practices

5.Syngenta provides continuous technical support to farmers with its Cropwise2 platform, consultants, and a best practices toolkit co-developed with The Nature Conservancy (TNC)

6.TNC and Syngenta jointly develop eligibility/ monitoring criteria for the Cerrado region, as well as incentives for conservation (e.g., surplus legal reserve and restoration)

7.Syngenta can also provide a market for their products through Syngenta Group's Nutrade trading platform

Disbursed $200.9M

Note: 1) Deforestation-free and conversion-free; 2) Digital farming platform using satellite imagery, AI, and remote sensing to help farmers monitor fields, predict crop health, and manage resources efficiently | Source: IFACC 2023 Market Report; Lit search