German Development Minister Gerd Müller announces the launch of ALF, the new initiative of the ministry with Incofin IM and German bank KfW.

The Agri-Finance Liquidity Facility (“ALF”) is a debt facility investing in sustainable agri-enterprises in mainly Africa and Latin-America, funded by KfW/BMZ and managed by Incofin IM as the Alternative Investment Fund Manager.

With a size of EUR 40 million, the facility will support actors in the sustainable agri-food value chain in developing and emerging countries to maintain their operations during and after the Covid-19 crisis. The capacity for investments has been extended to other agri-finance lenders and their investees in order to be as broad and inclusive in its impact as possible.

To offset the pandemic’s negative impacts on the sustainable agricultural production sector, KfW approached Incofin IM to develop a proposal for an emergency liquidity facility initially targeted for investees of the Fairtrade Access Fund (FAF). After reviewing the proposal, it was jointly decided to expand the focus of the facility to other agri-finance lenders, principally members of the CSAF (Council of Smallholder Agricultural Finance), and their investees to be as broad and inclusive in its impact as possible. This will allow the facility to be as much inclusive as possible and to generate further impact.

 

Covid-19 caused a drop of more than USD 500 of the annual income

Covid-19 disrupted global food systems, testing the resilience of farmers who already receive the least value for their contributions to agri-food value chains. Many farmers, forced to harvest with significantly reduced personnel, lost quality and volumes of their crops.

As household budgets shrank, the sustainability of a product lost its strength as a purchasing argument. Fairtrade sales suffered a blow. On average, this meant a drop of more than USD 500 in smallholder farmers’ annual incomes, representing a substantial impact on their household economies.

 

Launching video ALF

Switzerland and Luxembourg are mobilizing an overall budget of EUR 55 million to support smallholder farmers. The new ten years program, called SSNUP (Smallholder Safety Net Upscaling Program) draws on the knowledge and expertise of the technical assistance facilities of leading impact investment managers like Incofin IM.

The vast majority of low-income populations live in rural areas and essentially consist of vulnerable smallholder households who practice subsistence farming. In order to improve practices and bolster the agricultural markets in Africa, Southeast Asia and Latin America, the Luxembourgish and Swiss development organizations chose for a close cooperation with partners like Incofin Investment Management. Incofin is considered a reference in the field of financial inclusion and the agri-food value chain and has successfully set up several technical assistance facilities. Through this partnership, the public and private sector will co-fund technical assistance projects for the agricultural value chain.

SSNUP will be coordinated by ADA, the Luxembourgish NGO specialized in inclusive finance. It is a ten-year project of which the first phase (2020-2023) has now been officially launched. The global goal of this phase is to strengthen sustainably the safety nets of around three million smallholder households, contributing to several SDGs like for example “No Hunger” and “Gender Equality”. It starts with an estimated budget of EUR 18 million, EUR 12 million of which will be co-funded by Switzerland and Luxembourg. The remaining EUR 6 million will be pooled from the private sector and other donors.