Root Capital is a non-profit social investment fund that grows rural prosperity in poor, environmentally vulnerable places in Africa and Latin America by lending capital, delivering financial training, and strengthening market connections for small and growing agricultural businesses.
Across the developing world, the rural poor are excluded from the formal economy. Most of these people depend on agriculture as their primary source of income. Without access to capital and viable markets for their crops, millions of small-scale farmers are trapped in a cycle of poverty.
Root Capital clients are associations and private businesses that help create sustainable livelihoods by aggregating the products of hundreds or, in many cases, thousands of farmers. As of June 2015, Root had deployed more than $850M in credit via 1,800+ loans to 1.2M producers in Latin America, sub-Saharan Africa and Asia, sustainably managing 1.5M hectares of land.
Root Capital’s lending is directed towards businesses that are too big for microfinance, but generally unable to secure credit from conventional commercial banks – “the missing middle” of developing-world finance.
Access to capital and markets for sustainable products is the key to combat slash-and-burn farming, converting forests to pasture, and overharvesting wildlife.
Root Capital identifies producers ready to build environmentally sustainable enterprises improving the lives of smallholder farmers.
Root Capital opened the door to investments by large commercial and public actors in smallholder enterprises producing sustainable products.
More than 400,000 farmers have benefited, and a movement to invest in smallholder farmers worldwide is growing.
Tens of millions of smallholder farmers gain access to markets that pay fair prices for sustainably produced goods, improving their economic livelihood, food security, gender equity, and environmental stewardship.
Demonstration and attraction of other investors to the sector
Demonstration and attraction of other investors to the sector to increase the number of farmers served, either through direct lending or through off balance sheet partnerships. Document outcomes including impact and repayment rates in order to encourage other capital investors to replicate the model globally.
William Foote was an investment banker during the Latin American growth years of the early 1990s. During the financial crisis that followed Mexico’s peso devaluation of 1994, he spent two years documenting what was happening to people and the environment, realizing that there was a whole sector of the farm economy – producers too big to be helped by microcredit, but too small to be commercially bankable – that could adopt more sustainable practices or launch sustainable enterprises if they could get training, credit, and support to access markets. He developed the program that became Root Capital to identify locations and producers with potential for conversion to environmentally sustainable enterprises, and to unleash the aggregate power of groups of smallholder farmers. The lending model combines loans with investments in the groups’ capacities, including financial training, strengthening of market connections, and mitigation of economic and environmental risks. By demonstrating that this segment of the agricultural economy can be bankable, Root Capital opened the door to investments by large commercial and public actors. By linking investments to markets for sustainably produced goods and services, the model achieves impact not only in improved livelihood, but in stewardship of natural resources upon which the producers ultimately depend.