Sustainable Agriculture

Impact investing fuels the development of agribusiness

Impact investing refers to making investments into companies with the intention to achieve financial returns alongside generating a measurable positive contribution to society and/or the environment.

The vast majority of people who have to make ends meet on a very low income have one thing in common: they are farmers. Most of these farmers have around half a football pitch at their disposal to generate their income. They have no mechanical means, have limited access to chemical fertiliser and pesticides, and are often located in remote areas . This is why having access to microfinance facilities will make a huge difference for these small farmers.

How and where is ACTIAM operating?

ACTIAM is currently active with two impact funds, in 50 countries. These funds are the ACTIAM Financial Inclusion Fund (previously known as ACTIAM Institutional Microfinance Fund III - AIMF III) and the ACTIAM-FMO SME Finance Fund (SMEFF). The ACTIAM Financial Inclusion Fund was launched as AIFM III in December 2014 and provides debt capital to microfinance institutions in emerging and developing countries. The SMEFF provides capital to financial institutions with the objective to give the 70% of the SMEs in emerging markets, which are currently underserved, access to capital and development opportunities. Entrepreneurs can use these funds to support their business, for growth, or for professionalization purposes.

ACTIAM Financial Inclusion Fund provides loans to financial institutions in developing and emerging countries. These specialized institutions then provide financial products and services to entrepreneurs, individuals and SMEs in their market. The focus here is on microfinance, but there is also room (max. 20% of the fund) for providing loans to SMEs, for health care projects or for financing social housing.

Loan to Khan Bank, Mongolia

An example of such an investment done by ACTIAM Financial Inclusion fund is a senior loan to Khan Bank in Mongolia. With a market share of around 25%, Khan Bank is one of the largest commercial banks in Mongolia. It is estimated that the bank provides services to 70% of the country's households. Thanks to its extensive network of more than 500 branches and offices, the bank is able to offer banking services in the most remote parts of Mongolia. This means that it serves the poor rural communities as well as the SME sector. All the borrowers are screened on their policy and risk profile with respect to the impact they have on people and the environment. Khan Bank is, therefore, the ideal partner for ACTIAM to make a substantial contribution to the development of Mongolia.

This is because the bank does not limit itself to the provision of funding facilities to the agricultural industry, it can provide loans to all kinds of other sectors as well, thereby enabling the development of an autonomous and local economy.

Growth through impact investing

Khan Bank provides, amongst other things, loans to clients such as Bayjuulagch Odod, a dairy and meat producing company. After a tentative launch in 2009, this producer set up a small milk processing company in 2011. Thanks to a company loan of USD 83,000, the company was able to invest in new machines in 2012, thus enabling a growth in capacity.

Achieved results

The company grew and a new factory was built with more space for cattle and an increased level of efficiency. In 2017, the company received a second company loan of USD 83,000 for the second phase of the project. This allowed the company to start up a project in milk powder technology. Today, the company has 340 animals, including 80 dairy cows, modern stables, and 410 hectares of land. The farm received the 'Best Cattle Farm' award from the government and it aims to further expand its services with Khan Bank.

Source: ACTIAM, as per end of March 2021