Reaching the Missing Middle in Rural Finance
The missing middle are the
businesses that are too large to
access credit from microfinance
institutions but considered too
small to secure financing from
commercial banks. Founded in 1999,
Root Capital, Inc. is a nonprofit
development financier that provides
loans and financial training to farmer
aggregators, cooperatives and
agricultural SMEs in Africa and Latin
America to address the funding
needs of the missing middle.
IFC has provided an investment consisting of a senior loan
package of $10 million to Root Capital. The funding will help
the company achieve greater economies of scale, continue
its progress toward becoming a self-sustaining financial
institution, and enable it to reach more underserved farmers and
businesses.
The G20 established the Global Agriculture and Food Security Program (GAFSP) to fund public and private investment in agriculture in low-income countries. GAFSPs private sector window, managed by IFC, a member of the World Bank Group, offers long- and short-term loans, credit guarantees, equity and advisory services to fund private investments that promote agricultural development and food security in low-income countries.
INVESTMENT IN ROOT CAPITAL
EXPECTED DEVELOPMENT RESULTS
IFCs investment in Root Capital is expected to reach approximately two million
more farmers over the next five years. By significantly expanding Root Capitals
lending, the project will positively impact the gap between microfinance and
commercial banking, especially in rural areas in Africa. The project aims to make
a case for sustainable and climate friendly agriculture in difficult markets and
catalyze private sector funding to support Root Capital as it gradually transitions
itself to become a more financially sustainable institution.
IFCs investment will support an innovative financial intermediation business
model that targets underserved market segments including bottom-of-the-
pyramid clients and small scale rural farmers. This is expected to have strong
demonstration effect and the potential for other institutions serving this market
segment to replicate their business model.
IFCs knowledge and experience in corporate governance and environmental and
social standards will play a key role in helping Root Capital spread its corporate
governance and E&S standards, thereby supporting long-term sustainability.
For more information
about IFC and GAFSP
please visit
www.ifc.org
www.gafsp.org
CONTACTS
Laura Mecagni
Head
[email protected]
Bradford Roberts
Sr. Operations Officer
[email protected]
Niraj Shah
Sr. Investment Officer
[email protected]
