Former fellow Willy Foote’s (Mexico, 1995-1997) sustainable agriculture finance group Root Capital is partnering with the Swiss Agency for Development and Cooperation and the Inter-American Development Bank launch an what it calls a “pay-for-impact” funding mechanism to help early-stage agricultural enterprises in Latin America. Root Capital is eligible for up to $1 million in incentive payments on loans to high-impact agribusinesses in Colombia, Costa Rica, Guatemala, Honduras, Mexico, Nicaragua and Peru.
“The SIINC [social impact incentives] model is a game-changer,” Willy said. “It will enable Root Capital—and ultimately many other financial institutions—to lend to the enterprises that need it most.”
Many social lenders focused on agricultural finance have been hesitant to provide loans to early-stage agribusinesses because of high risk and unattractive returns, according to Root Capital. The new SIINC model encourages lending to early-stage agricultural enterprises and “creates a market-correcting incentive that compensates for short-term unprofitability of this segment, thereby improving its long-term sustainability.”