By Hamid Hamirani, Senior Advisor FSF and Managing Principal EHA Advisory
Innovative Collaborative Funding Model: De-Risking Investing in the Good Food Transformation
The Innovative Collaborative Funding Model (ICFM) is designed to address food security, improve nutritional outcomes, support adoption of climate smart agricultural practices, and enhance sovereign fiscal resilience. A new paper outlines the model, along with benefits to key stakeholders and institutions.
By facilitating public-private partnerships through a unique investment deal structure, the ICFM significantly lowers the risks of investing in the food and agriculture sectors while reducing the need for food subsidies. This approach is particularly beneficial for lower- and middle-income countries, offering governments the ability to take equity in projects through public assets rather than cash or local currency.
Key Benefits of the ICFM
- Public Asset Equity: The ICFM leverages Sovereign Wealth Funds, enabling governments to monetize state-owned assets as equity contributions within an investment structure. This approach allows governments to retain full or partial ownership of assets, attract additional investors, and preserve capital for other priorities.
- De-risking Investments: By leveraging sovereign assets and concessional capital, the ICFM reduces investment risks, thus attracting private sector investments in food and agriculture.
- Optimizing Returns: The model promotes long-term socio-economic returns, improving not only financial outcomes but also health, nutrition, and climate resilience.
ICFM in Action
The ICFM aligns with global initiatives like the World Bank’s Food Finance Architecture strategy. For example, in Rwanda, the Agaciro Development Fund has partnered with Hinga Wunguke to reduce post-harvest losses through a $4 million co-investment fund aimed at improving agricultural efficiency.
Key Players in the ICFM Structure:
- Government Contribution: Governments provide assets like land or warehouses, which helps to significantly lower project costs and investment risks.
- Donors – Concessional and Catalytic Finance: Institutions like the World Bank and USAID provide low-cost loans, grants, and technical assistance to ensure financial viability.
- Smallholder Farmers: Cooperatives of smallholder farmers benefit from better access to low-cost finance, technology, and practices, boosting productivity and inclusivity.
- Private Investors: De-risked projects attract private capital, generating long-term financial, social, and environmental returns.
Conclusion
The ICFM is, at its core, an attractive investment model, for it spreads the costs and risks associated with investing in agriculture among public, private, and institutional stakeholders.
At the same time, it also addresses key issues, such as food insecurity, public health, and food waste. Critically, the ICFM can also be used to improve climate resilience, trade balances, and inflation.
Thus, the ICFM can be leveraged to establish more competitive economies, a healthier population, and more efficient public spending.
Good Food Finance Network 