About the fund
The Africa Food & Agri Fund was set up to provide suitable financing to African companies operating in the primary sector. It is difficult for these companies to obtain financing from local banks and when financing is obtained, it is on unfavorable terms. This can create continuity problems and limits growth opportunities. The initiators of the fund have years of experience in financing the target group in Africa, which enables them to properly assess and advise these companies.
Structure
Stichting Juridisch Eigenaar Africa Food & Agri Fund, a Dutch foundation, acquires and holds all assets on behalf of the fund for the account of the Participants and has granted power of attorney to Africa Food & Agri Fund Management B.V. to manage the fund. The directors of this B.V., the fund’s initiators, are responsible for implementing the fund's investment policy, day-to-day operations and portfolio management. The fund managers have outsourced administration of Participants, calculation of the value of the fund and regulatory reporting to a specialized administrator.
Target group
The Fund focuses on medium and large-scale companies in the agricultural sector because they are important for African food security and employment. By producing on a larger scale, these farms help meet the increased demand for food resulting from population growth. A larger scale also enables the innovation and diversification needed for sustainable growth in food production. In order to make the most of its contacts and market potential, the fund will initially focus on farms in Zambia. In the next phase, this will be extended to farms in other English-speaking African countries.
Products
The fund provides loans to finance business operations and to finance investments that contribute to the Sustainable Development Goals.
The loans are secured by mortgage and have an initial size ranging from one to five million US-Dollars. The tenor of the loans may vary from one to ten years, depending on the credit need and payment capacity of the company. The interest rate depends on the credit risk and is below the market rate.
Portfolio Management
To be eligible for a loan, companies must meet a number of minimum criteria. The most important of these are fitting into the target group, having sufficient payment capacity to meet the obligations towards the fund, and being able to offer collateral of sufficient value to guarantee the loan. When these criteria are met an extensive credit procedure is followed. The fund management visits the companies at least once when they apply for a new loan and then at least once a year to monitor whether they are still meeting the criteria and fulfilling the agreements on sustainability.
In addition, the fund management steers on key indicators at portfolio level, to ensure that the risk of the portfolio as a whole is and remains acceptable. Key indicators are the average credit score of the borrowers and the average loan amount in relation to the value of the collateral. In addition, indicators that limit the concentration risk in the loan portfolio are applicable.
Credit Procedure
