The Rural Prosperity Bond will allow small and medium enterprises (SMEs) to work in sustainable agriculture to sell their products to smallholder farmers on financially reliable credit. This bond will help tens of thousands of farmers adopt regenerative practices that are currently beyond their reach. Examples of services and products that could be supported by the Rural Prosperity Bond include drip irrigation, organic land amendments, agroforestry planning, tree planting services, and sapling purchases, among additional technologies.
Capital is scarce for most entrepreneurs in Africa, but even more so for sustainable agriculture and forestry SMEs based in rural areas, far from the cities where investors concentrate. Most of these SMEs struggle to gain traction with smallholders, who are the backbone of Africa’s agricultural economy because they struggle to access funding to produce sustainably. The combined lack of SME capital and smallholder credit keeps rural communities stuck in poverty and exacerbates land degradation.
The proponent, World Resources Institute, launched The Land Accelerator in 2018 to train and support entrepreneurs whose companies restore degraded land. The Bond, capitalized by debt investors, would make graduates of the program eligible to sell their products to smallholders on credit. A special purpose vehicle (SPV) would manage the fund and also provide training and support to the SMEs on sales, collections and mobile payments. The SPV would charge a small fee to cover operating costs while remaining proceeds would be passed on to debt investors.
The proponent estimates that, once fully operational, the Bond could furnish over US $35M in new lending toward restoring degraded landscapes and sustainable agriculture, while supporting hundreds of SMEs. Because the bond will lend at more favorable rates and terms than what is currently available, this amount of credit could help tens of thousands of additional farmers transition to climate-smart practices in a financially sustainable way.
Featured photo by Will Anderson/WRI.
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