Helping businesses help the world’s farmers
Many of the world’s farmers are unable to produce enough food to support their own families because they lack the proper training, seeds and fertilizers or equipment. OPIC has a growing portfolio of “agribusiness” projects that help these farmers increase their yields, extend their growing seasons and earn more income by reaching regional export markets.
Here OPIC President and CEO Elizabeth L. Littlefield talks about the challenges that many of the world’s smallest farmers still face and the ways that OPIC’s support for private investors and businesses is helping.
Can you start by explaining why so many of the world’s farmers struggle to produce enough food?
In many remote regions of Africa, Asia or Latin America, farmers lack many of the tools, such as equipment, fertilizer and electricity, that we in developed countries take for granted. These challenges make it difficult for them to use their land efficiently and since many of these farmers have only very small plots of land, they are really restricted in how much food they can produce.
For example, when farmers in Africa don’t have irrigation equipment, they are limited to growing during the rainy season. When OPIC facilitates the means to purchase this sort of equipment it typically proves to be a good investment. If farmers can grow through the dry season they not only produce more food, but are often able to sell it at a higher price since there is less produce on the market at these times.
How does OPIC support these farmers?
We support them through our private sector partners. As the U.S. Government’s development finance institution, OPIC supports American businesses operating in emerging market countries. Many of these businesses are providing critical equipment such as irrigation systems or solar lighting – often along with training or financing -- to small farmers. For example, one of OPIC’s partners is working with farmers in Senegal to help them lease tractors, combine harvesters, cold storage facilities and advanced systems like satellite surveillance. Partners that invest in electricity and infrastructure also make it easier to store and transport food.
How does OPIC support private businesses?
In addition to the three basic tools we offer -- financing, for businesses that cannot obtain loans from traditional lenders; political risk insurance, to help mitigate certain risks, such as political violence or expropriation; and support for emerging market private equity funds that invest in local businesses – we are always talking to existing and potential clients to better understand the challenges they face. OPIC has developed multiple programs and initiatives to help address their needs. Each year, more than half the new projects that we support involve a small or medium U.S. enterprise.
When we noticed that some of the investment funds and non-bank financial institutions that were applying for OPIC financing were pursuing unconventional structures in an effort to prioritize or maximize development impact, we launched the Innovative Financial Intermediary Program (IFIP) as a pilot program to support these projects. We also have another pilot program called Portfolio for Impact (PI), which is designed to support projects that show strong promise to generate both financial and social or environmental returns but might struggle to raise capital because they are small or early stage. The PI program has supported multiple agriculture projects, including one that is helping small farmers in Africa purchase micro-irrigation equipment.
What should American businesses know about investing in these emerging markets?
The opportunity is significant. The vast majority of the world’s consumers live outside of the U.S. and many of the world’s poorest countries are seeing strong growth in the consumer class. Doing business in these markets can be difficult, but OPIC can help businesses navigate these challenges.