Wh at RD and RF
are doing in a sense is
helping to create a
sustainable Food and
Agribusiness sector for
the future
Hans Bogaard:
WORKING TOGETHER
Adding value
OPENING UP THE ENTIRE VALUE CHAIN
Rabo Development, which incorporates Rabo International
Advisory Services (RIAS), was set up a few years ago to reach
out to rural areas and improve ready access to financing
for farmers. That sounds quite simple, says RD's Head of
Agribusiness Hans Bogaard, but the ultimate aim is improve
the quality and quantity of their products. Not only does this
benefit the farmers themselves, it can add enormous value
for RI's clients who take up these products. "Also," he says,
Rabobank Agri Fund, a Guarantee Fund set up by Rl and RF and man-
aged by Rl Trade Commodities Finance, is another instrument within
Rabobank which can strengthen the relationships with Rl clients by im-
proving the access to pre-finance to their suppliers at sustainable terms.
Especially in these times of fïnancial crisis, where local banks in emerging
markets are more restrictive to rural lending and traders are less willing
to pre-finance their suppliers, the Agri Fund can provide added value.
The principal objective of the Agri Fund is to change the approach of
the local banks towards rural lending and exporting companies
cooperatives buying from small producers through offering them
adequate fïnancial risk-mitigating instruments.
The Rabo Agri Fund, says Ellen Bogers, Fund Manager, issues partial
credit-guarantees in favour of local banks, allowing them to offer com
mercial finance for the purchasing, processing and trading the commodi
ties in the international market at better pricing and less higher collateral
restrictions. Fundamental in this process is that we decrease, on a step-
by-step basis, our risk while the local bank will increase its risk and so
enabling the local bank to build up a credit history with their clients.
The Agri Fund focuses on creditworthy companies and cooperatives,
buying from small buyers, which are too big for RF and too small for Rl.
By helping to eliminate that one stumbling block - local financing for the
companies and linking local farmers to the big commodities traders - the
Agri Fund helps to open up the entire value chain and to facilitate sus
tainable and commercial business in these emerging markets. Ultimately,
our challenge is that in our 3 to 4 years relationship with a local bank and
the cliënt, the banks' attitude towards lending to companies in the Agri
sector will change, as they learn to see it as good commercial business.
"big commodities traders like Cargiil, ECOM and Dunavant
often have to pre-finance their forward purchase of raw
materials, such as cotton, cocoa or coffee. But they don't see
this as their core business and are more than happy to move
this pre-finance exposure to our local banks. Besides, these
banks are in a much better position to monitor and control
these projects and limit the risk of defaults."
A good example of how Rl, RD and RF are working
together to add value for an Rl dient is the Maragra
project in Mozambique for sugar giant lllovo, part of
British Sugar. RF has been closely involved in thefunding
of the rehabilitation of a former sugar plantation and
establishment of farmers associations, which involved the
installation of new irrigation and drainage systems. RD's
RIAS also offered advice on the structuring of an effective
cooperative and streamlining the supply of raw materials
to lllovo. While RF provided the initial grants for the project
and mitigated startup risks for financing the farmers, the
financing for the growers will eventually be taken over by
RD's local partner bank Banco Terra. In effect, RF is bridging
the gap between the pioneering stage and the stable stage,
when the farmers or cooperatives move on to be banking
clients. This model is working so well that some clients,
like lllovo and ECOM, are working with RF and RD partner
banks in several countries, sometimes covering the entire
value chain, from producer to retailer (see box). "Projects like
this are a perfect example of just how much value we can
add for RI's clients if we work together proactively," Albert
Boogaard says. "We can improve the quality and quantity
of the raw materials our clients need, while also improving
the working conditions and income of the farmers that
produce those commodities. Not to mention the fact that
we are helping clients to increase the sustainability of their
business."
issue 20 jul THE WORD
