The United States International Development Finance Corporation (DFC) is working with governmental agencies like the U.S. Agency for International Development (USAID) to adapt to the global food security crisis exacerbated by Russia’s invasion of Ukraine.
Farmers hold maize that was harvested in a conventional storage bag and protected with pesticides (left) and maize stored in pesticide-free bags designed to reduce post-harvest loss (right). Photo Credit: Feed the Future
As Russia’s invasion of Ukraine continues to have rippling effects throughout the world, particularly on global food security, the U.S. International Development Finance Corporation (DFC) is collaborating with partners like the U.S. Agency for International Development (USAID) to provide assistance and investment to communities in need.
As the U.S. government’s development finance institution, DFC partners with the private sector to finance solutions to the most critical challenges facing the developing world, including food insecurity.
A Feed the Future partner, DFC invests in many innovative projects to help the world’s farmers access affordable insurance, crop inputs, training and access to value chains to help them increase output and earnings. These investments are helping global communities respond to unprecedented challenges including the COVID-19 pandemic and shocks to international food supply systems.
We sat down with Andrew M. Herscowitz, DFC’s first-ever Chief Development Officer, to speak more about this innovative work.
This conversation has been edited and condensed.
Question: Can you explain DFC’s approach to development and why investment (in addition to aid) is so important in addressing food security?
Andrew M. Herscowitz (AH): From a food security standpoint, there is a lot of room for private sector investment. The food space is basically a private sector. It is everything from fertilizer production to all inputs across the value chain, from seeds to cold storage and solar irrigation pumps. Ultimately, food is a commodity that gets sold, that earns a profit and that generates income. The private sector is extremely well-positioned to help address the food crisis because there is so much more private sector capital available than there are public funds.
Question: How is DFC responding to increased needs in regions like Africa and Southeast Asia?
AH: DFC provides loans, equity financing, and other services that help expand businesses and build credit in emerging markets. We’re doing a lot of interesting transactions in food security:
- We provided financing to Root Capital, which provides loans to financial institutions to help smallholder farmers across Latin America, Asia, and Africa build resilience, recover from COVID-19 disruptions, and navigate extreme weather and other shocks. This transaction employs a blended finance approach that combines donor and grant capital along with DFC financing to expand access to capital and other services — including financial management training — for farmers.
- In Africa, we provided financing to One Acre Fund, a social enterprise that provides smallholder farmers with products and services to help improve yields and increase income.
- We also provided financing to AryaDhan, which is promoting growth in India’s agriculture sector by providing commodity-backed post-harvest loans to smallholder farmers who are particularly challenged in accessing financing.
- Milk Mantra is also in India. This is a dairy processing company that sources milk from more than 60,000 smallholder farmers to help improve a very fragmented supply chain. Milk Mantra provides transparent and timely payments to these farmers along with a range of other services such as training, animal feed and veterinary care to help improve the quality of the milk and dairy products produced and improve earnings for dairy farmers, many of whom live below the poverty line. DFC provided financing and technical assistance to help Milk Mantra expand its operations and reach more small rural farmers as well as female farmers.
DFC works with smallholder farmers to increase food security. Photo Credit: Feed the Future
Question: DFC’s work is often focused on the world’s smallholder farmers. What are some of their greatest needs and how is DFC supporting them?
AH: They need fertilizer, seeds, equipment, training and even insurance. Helping them access reasonable financing as opposed to having to borrow at usurious interest rates can make a huge difference. It enables them to increase earnings and expand production.
Question: Food security starts with farmers but ultimately involves many other sectors of the economy. How is DFC working to strengthen food systems from farm to fork?
AH: We are looking at all parts of the supply chain including working capital loans for farmers and businesses. We also provide equity financing, usually for earlier-stage businesses that are not in a position to take on debt.
In 2020, we set a relatively modest goal of mobilizing $500 million of capital for agricultural development within five years. We’ve already surpassed that goal, so last year we increased that goal to $1 billion. And after just over two years, we are on track to surpass the billion-dollar mark as well. What that means is: when the new $5 billion goal for the Global Food Security Strategy was announced, $1 billion of that was DFC financing.
Question: How can people—in government, the private sector or everyday citizens—help communities caught in the crosshairs of Russia’s unjustified and unprovoked invasion of Ukraine?
AH: There is a role for the private sector here to identify where there are opportunities to diversify the global supply chain, including the production of critical resources such as fertilizer.
For more information about DFC, visit dfc.gov.