KfW, the German Development Bank on behalf of the German Ministry of Economic Cooperation and Development, along with AgDevCo and Root Capital, have launched an investment holding company, the Lending for African Farming Company (LAFCo).

Beginning with a first close of $15m in committed funds, LAFCo aims to become a leading provider of capital for businesses operating in Africa’s local and regional agricultural value chains.

The company will finance agricultural enterprises throughout Sub-Saharan Africa to enhance local food security and stimulate inclusive economic growth in the region.

Jenny Scharrer, Senior Project Manager of KfW, said the barriers to improving food security and alleviating poverty are numerous and complex.

"By investing in LAFCo and supporting the businesses that work with smallholder farmers, KfW is seeking to demonstrate new and innovative approaches to development finance," she said.

"Guided by the shared values and impact philosophies of its sponsors and manager, LAFCo will help fill a critical financing gap and support the equitable and inclusive growth of this sector,” she said.

LAFCo will be managed by Root Capital and will provide lines of credit and other flexible debt products in amounts of up to $4m, denominated in both US dollars and local currencies.

Nate Schaffran, Senior VP of lending at Root Capital, said: "With 15 years of experience in lending to agricultural enterprises, Root Capital is honored to manage LAFCo and help catalyze a broader financial market to benefit Africa’s smallholder farmers.”

“If Africa is to meet the challenge of sustainably feeding a rapidly growing population in ways that also contribute to poverty alleviation, reliable access to finance is essential,” he added.

Lending activities will take place across Sub-Saharan Africa, with a particular focus on Ghana, Kenya, Malawi, Senegal, Tanzania, Uganda and Zambia.

“The potential of Africa’s agricultural sector has attracted significant interest from equity investors, but the day-to-day financing needs of businesses are often overlooked,” explained Chris Isaac, director of investments at AgDevCo.

“We’re delighted to partner with KfW and Root Capital to help African entrepreneurs and farmers access the capital they need to grow profitable businesses. Investment in agriculture means higher incomes, more jobs and increased food security,” he said.

AgDevCo and KfW were advised by global legal practice Norton Rose Fulbright.

Norton Rose Fulbright’s investment funds lawyers in South Africa, Louise Campion and Lance Roderick, advised on the English law aspects of the structuring of LAFCo, while the Mauritius law aspects were dealt with by BLC Chambers.

United States tax and regulatory advice were provided by the practice’s lawyers, Sheldon Elefant (New York) and Rich Fagerer (Munich), respectively.