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IDB closes $3.6 million syndicated loan to provide access to finance for smallholder farmers

As many as 10,000 small farmers in nine countries to benefit from IDB loan to FOPEPRO

The Inter-American Development Bank (IDB) has closed a $3.6 million loan to provide access to finance for smallholder producer groups and farmers associations in nine Latin American countries through a loan to the “Fund for Small Rural Producers in Latin America” or “Fondo para los Pequeños Productores Rurales en América Latina (FOPEPRO)."

The loan to FOPEPRO is comprised of $2 million from IDB’s Opportunities for the Majority initiative and $1.6 million from social investors Deutsche Bank Trust Company Americas, Calvert Foundation and Monarch Community Funds. The IDB acted as the lead arranger and book runner for the transaction.

FOPEPRO is the first private, locally managed investment fund of its kind in the smallholder agricultural sector in Latin America. Although the Fund will initially target producer groups in Bolivia, Colombia, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Peru and Paraguay. If FOPEPRO exceeds its funding goals,  there are plans to further scale the Fund’s activities throughout the region, so as to better serve the vast unmet financing needs of small rural producers.

Headquartered in El Salvador, FOPEPRO is seeking to raise a total of $20.5 million to finance onlending credit lines and investment loans to organized farmer cooperatives and associations. This market that has been traditionally underserved in the Latin America since many financial institutions lack the expertise to mitigate the risks in agricultural lending – from seasonality of the production cycle, weather risk, geographic disparity of clients and lack of physical collateral.

“FOPEPRO’s fund management model cracks the hard nut of providing access to finance for small-scale farmers,” comments Susan Olsen, IDB Project Team Leader. “FOPEPRO has hired an excellent team of managers from Latin America with deep and broad experience in the sector, and combined the management expertise with a strong pipeline of clients, and innovative risk management tools.”

The fund is sponsored by Alterfin C.V.B.A from Belgium and Societé D’investissement et de Développment International (SIDI) from France, both privately owned social investors with over 15 years of agricultural investment experience and a strong track record of smallholder agricultural lending in Latin America, Africa and Asia.

The fund has a long-term goal of reaching at least 10,000 beneficiaries over its ten-year life. The average loan sizes are expected to range from $100,000 to $300,000. FOPEPRO will also lend a minority share of its funds to rural microfinance institutions, which will be able to reach individual farmers with smaller working capital and equipment loans.

The IDB’s Multilateral Investment Fund, a major shareholder in FOPEPRO, has contributed an additional $200,000 in non-reimbursable technical assistance resources to a parallel donor fund which FOPEPRO will use to provide technical training and market certification support for its clients. ICCO from The Netherlands has also contributed to this fund with 300,000 euros.

FOPEPRO is managed from El Salvador by Acerola Management SA, a private firm established along with FOPEPRO with the sole purpose of managing investment funds and non-reimbursable technical assistance funds for the agricultural sector in Latin America.