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):
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:
Brazilian farmers receive funding for regen ag practices from a lender syndicate of 4 banks, backed by a full loan guarantee
- JPM DFI and Export and Agency Finance assessed the project’s sustainable development intentions and how it would support UN SDGs
- MIGA issued a $1.2B guarantee for 10 years to the 4 banks for their loan to Banco do Brasil
- A lender syndicate of 4 banks provides a $800M loan to Banco do Brasil
- Banco do Brasil provides revolving working capital loans up to $2M for agri MSMEs to adopt conservation agriculture methods (e.g., no-till farming practices)
- After loans are repaid, farmers can apply for new loans in subsequent years to sustain their farming operations
- In case of failure by Banco do Brasil to re-pay principal and interests in full, the guarantee provider pays out the principal and interest to the lender syndicate
$800M loan facility can finance cultivation of 1M ha & avoid almost 12M tonnes of GHG emissions over 10 years
