Small sunflower producers in Mexico will obtain up to 2,000 microloans from Agrofinanzas S.A., a local financial institution, with support from a partial credit guarantee of up to US$5 million from the Inter-American Development Bank (IDB).
The operation is part of a supply chain project, which includes the commitment of the food & beverage company PepsiCo Mexico to purchase the production of sunflower oil produced by the network of small farmers.
The project, supported by the IDB’s Opportunities for the Majority initiative, is based on two successful pilot programs, which revealed a need for working capital loans for the participating farmers.
Agrofinanzas will provide loans to the farmers in the program to use toward purchasing seeds and expanding their production of sunflower crops. The IDB’s partial credit guarantee will mitigate Agrofinanzas’ credit risk exposure and allow it to reach out to more clients. Sabritas, a business unit of PepsiCo, will be the sponsor of the project and will provide technical assistance to the participating farmers to access its supply chain.
“This project is a great example of the kind of base-of-the-pyramid business model we are working to support and promote,” said IDB project team leader Elizabeth Boggs Davidsen. “It will enable small producers to have access to otherwise unavailable financing to expand their production. We are pleased to play a role in helping small low-income farmers with their working capital needs and Sabritas to scale up this program.”
The project is expected to serve as a model that can be replicated not only in Mexico but in other countries in the region, added Boggs Davidsen.
When the project reaches full scale, as many as 850 farmers will be part of its new sunflower supply chain. In addition to increasing their income through selling their crops, the farmers will also build up their credit histories and be able to access other financial services, like insurance or loans for purchasing homes or for higher education.
Agrofinanzas S.A. is a leading Mexican microlending institution in the area of supply chain financing, with a unique business model that enables the operation to work with medium-sized and large corporations that need to implement an agricultural supply chain. Agrofinanzas has worked with leading companies throughout Mexico in supply chain finance and was identified as a partner for the program based on its knowledge of supporting small producers and developing lasting value chains.
The Inter-American Development Bank is the main source of multilateral financing and expertise for economic, social and environmentally sustainable development in Latin America and the Caribbean. The IDB’s priorities are reducing poverty and inequality; ensuring sustainable development; addressing sustainable energy and climate change, addressing the special needs of the poorest countries, promoting regional integration, and fostering development through the private sector.