How Rabo Foundation adds value
The partnership between Rabo Foundation and USAID began in October 2018. Since then, Rabo Foundation has partnered with two lenders willing to participate: SAMFIN (Samunnati Financial Intermediation and Services Private Limited) and ANANYA (Ananya Finance for Inclusive Growth). With the guarantee provided by Rabo Foundation and USAID, they have granted loans to two Sustainable Landscapes projects, including one for the production of sugar with less water. While the term of the facility is for ten years, we expect to see complete utilization within the first three years. The longer tenure under this facility (until  2028) is kept to provide guarantee cover for loans which are otherwise not deemed to be bankable.  USAID and Rabo Foundation aim to facilitate between 30 to 40 new loans. “But”, Sood adds, “there’s no reason why it can’t be 50 or more!”

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USAID

INDIA

Innovative finance encourages sustainable landscapes

Innovative products encourage financing 

India /working together with USAID

people. “We work together with USAID to encourage climate- and forest-friendly agriculture for the next ten-year period”, says Rishabh Sood, Senior Manager of Rural and Development Banking at Rabo Foundation India. “This will happen through investments into enterprises promoting Sustainable Forestry, Agroforestry and Low Emission Agriculture. The ultimate aim is to support farm enterprises that either reverse, or at least restrict, greenhouse gas emissions. That way, smallholder farmers who also produce sustainable forestry products can improve their livelihood possibilities while transitioning towards climate-resilient agriculture.”

How inaccessible credit can be in India
The investments in climate- and forest-friendly agriculture are different from standard agricultural investments, as loans for that type of agriculture require longer tenure and involve greater risk. USAID and Rabo Foundation cannot provide loans directly, so they need to jointly identify specialized financial institutions which are aligned to their mission and have the capability to assume greater risk. USAID and Rabo Foundation collaborate with these financial institutions by providing them with structured portfolio guarantees to enable them to give loans in the Sustainable Landscapes sector. “We complement one another”, Sood explains. “USAID has a great body of work in the Sustainable Landscapes sector. They know how Sustainable Forestry can complement agriculture. Rabo Foundation has a better understanding of the needs and challenges of smallholder farmers, which are often entrepreneurs without any credit history. We also

bring in a network of farmer organizations and financial institutions that would be willing to participate in investments in Sustainable Landscapes.” Why don’t USAID and Rabo Foundation loan money to the farmers themselves? “Indian regulation allows lending by offshore entities only in a few sectors and with certain restrictions”, says Sood. “In this case, it’s not allowed.”

How smallholder farmers get loans anyway
It is important to work with local Financial Institutions, according to Sood. “Those organizations have their feet on the ground and can originate loans more efficiently through their local branch presence. Rabo Foundation and USAID enable these financial institutions to offer impactful loans which they otherwise would not have made on stand-alone basis because of high perceived risk and lack of knowledge.” In order to help smallholder farmers’ organizations obtain loans (both working capital for regular business and term loans for infrastructure), Rabo Foundation has been providing loan guarantees since 2014. “This means Rabo Foundation covers a large proportion of the risk that a Financial Institution would incur lending money to a smallholder farmers’ organization”, Sood explains. “That risk coverage helps persuade some of those institutions to grant loans to the farmers.” Rabo Foundation partnered with USAID to innovate in order to provide funding for the Sustainable Landscapes sector. “It helps quite a bit that Rabobank has such a reliable reputation internationally”, Sood emphasizes. “At the moment, only limited lenders are taking interest in the sector. I hope that eventually larger commercial banks, which provide cheaper loans, will also join them. Maybe once they see the success of our partnership with USAID!”

In India, agriculture is responsible for a major proportion of the country’s greenhouse gas emissions. It is also a driver of the loss of forests, which sequester carbon and are a source of livestock feed, fuel, and income for many

Increasing the incomes of smallholder farmers in India while protecting the ecosystem and forest biodiversity requires a comprehensive strategy. Rabo Foundation and USAID (the United States Agency for International Development) have joined forces to follow such a strategy and develop a first-of-its-kind product for in India. "

“Financial innovation is
an absolute must”

Innovative finance encourages sustainable landscapes

Enabling loans for
smallholder farmers

USAID

INDIA
“Financial
innovation is an
absolute must”

India /working together with USAID

Increasing the incomes of smallholder farmers in India while protecting the ecosystem and forest biodiversity requires a comprehensive strategy. Rabo Foundation and USAID (the United States Agency for International Development) have joined forces to follow such a strategy and develop a first-of-its-kind product for in India. "

In India agriculture is responsible for a major proportion of the country’s Green House Gas emissions. It is also a driver of the loss of forests, which sequester carbonand are a source of livestock feed, fuel, and income for many people.

We also bring in a network of farmer organizations and financial institutions that would be willing to participate in investments in Sustainable Landscapes.” Why don’t USAID and Rabo Foundation loan money to the farmers themselves? “Indian regulation allows lending by offshore entities only in a few sectors and with certain restrictions”, says Sood. “In this case, it’s not allowed.”

How smallholder farmers get loans anyway
It is important to work with local Financial Institutions, according to Sood. “Those organizations have their feet on the ground and can originate loans more efficiently through their local branch presence. Rabo Foundation and USAID enable these financial institutions to offer impactful loans which they otherwise would not have made on stand-alone basis because of high perceived risk and lack of knowledge.” In order to help smallholder farmers’ organizations obtain loans (both working capital for regular business and term loans for infrastructure), Rabo Foundation has been providing loan guarantees since 2014. “This means Rabo Foundation covers a large proportion of the risk that a Financial Institution would incur lending money to a smallholder farmers’ organization”, Sood explains. “That risk coverage helps persuade some of those institutions to grant loans to the farmers.” Rabo Foundation partnered with USAID to innovate in order to provide funding for the Sustainable Landscapes sector. “It helps quite a bit that Rabobank has such a reliable reputation internationally”, Sood emphasizes. “At the moment, only limited lenders are taking interest in the sector. I hope that eventually larger commercial banks, which provide cheaper loans, will also join them. Maybe once they see the success of our partnership with USAID!”

 “We work together with USAID to encourage climate- and forest-friendly agriculture for the next ten years. This is supposed to happen through investments going into enterprises promoting Sustainable Forestry, Agroforestry and Low Emission Agriculture. The ultimate aim is to support farm enterprises who lead to either reverse or at least restrict Green House Gas emissions.”, explains Rishabh Sood, Senior Manager of Rural and Development Banking at Rabo Foundation India. “That way, smallholder farmers who also practice forestry and agroforestry can dramatically improve their livelihood possibilities along with transitioning towards climate resilient agriculture.”

How inaccessible credit can be in India
The investments in climate- and forest-friendly agriculture are different from standard agricultural investments, as loans for that type of agriculture require longer tenure and involve greater risk. USAID and Rabo Foundation cannot provide loans directly, so they need to jointly identify specialized financial institutions which are aligned to their mission and have the capability to assume greater risk. USAID and Rabo Foundation collaborate with these financial institutions by providing them with structured portfolio guarantees to enable them to give loans in the Sustainable Landscapes sector. “We complement one another”, Sood explains. “USAID has a great body of work in the Sustainable Landscapes sector. They know how Sustainable Forestry can complement agriculture. Rabo Foundation has a better understanding of the needs and challenges of smallholder farmers, which are often entrepreneurs without any credit history. 

How Rabo Foundation adds value
The partnership between Rabo Foundation and USAID began in October 2018. Since then, Rabo Foundation has partnered with two lenders willing to participate: SAMFIN (Samunnati Financial Intermediation and Services Private Limited) and ANANYA (Ananya Finance for Inclusive Growth). With the guarantee provided by Rabo Foundation and USAID, they have granted loans to two Sustainable Landscapes projects, including one for the production of sugar with less water. While the term of the facility is for ten years, we expect to see complete utilization within the first three years. The longer tenure under this facility (until  2028) is kept to provide guarantee cover for loans which are otherwise not deemed to be bankable.  USAID and Rabo Foundation aim to facilitate between 30 to 40 new loans. “But”, Sood adds, “there’s no reason why it can’t be 50 or more!”