Finance Alliance for Sustainable Trade

Montreal, Canada

An Overview Of Our Solution

In 2016, Finance Alliance for Sustainable Trade (FAST) launched AXiiS (Access and eXchange for impact and investment and Sustainability), an online financial matchmaking platform that changes the way small and medium enterprises (SMEs) access finance. Typically, most farmers are constrained by the financial products available to them through their local banks, which may not be tailored to meet farmers’ needs. FAST brings to the platform financial service providers (FSPs) from around the world that have financial products designed to meet the needs of agricultural producers. SMEs and FSPs can create online profiles that showcase their business/financial products. Users from both sides of the financing equation can browse potential matches. When a match is created, FAST facilitates a business meeting and monitors the process of credit application and disbursement.

Who is this solution impacting?

Community Type

Urban

Suburban

Rural

Organization type

À but non lucratif

Ecosystem (select all that apply)

Forests

Freshwater

Grasslands

Oceans/Coasts

Urban/Built Environment

Population impacted

N/A

Size of agricultural area

N/A

Production quantity

N/A

People employed

N/A

Describe your solution

FAST promotes an increase in professionalization among farmers, an increase in the perception of agriculture as an economically viable activity, and an increase in the perception of sustainability as an important criterion for investment by bankers. In December 2016, FAST launched AXiiS, an online financial matchmaking platform where these two sides come together. FAST provides financial literacy training and investment planning for agricultural enterprises and cooperatives. We often work hand-in-hand with partner organizations providing agronomic assistance in better agricultural practices and certification readiness; enabling farmers to become better business people and access financial services is the last mile of this important work to ensure the overall sustainability of the project. On the other side of the equation, FAST provides information to banks on how to invest in sustainable commodities and how to measure the impact of their investments. Investors are increasingly seeking investments that promise additional value beyond a high rate of return, such as strengthening ecosystems and communities. FAST connects these investors with thousands of small farmers and foresters in the developing world who are themselves looking to protect their land and the ecosystems connected to them.

Describe your implementation

FAST’s vision of success is being able to creatively adapt to the evolving needs of the social finance sector and of agricultural enterprises. AXiiS is an innovative tool that connects FSPs to the enterprises where their capital can have a measurable positive impact. The focus is on enterprises that are most commonly excluded from the mainstream financial sector. We did this in order to: - Better leverage tools developed in prior years to serve the needs of the social financing sector, and more effectively bridge the gap between credit-ready SMEs and FSPs - Expand our geographic reach and capacity to serve a higher volume of clients, thereby maximizing its international social and economic impact There are a large number of SMEs that are well plugged-in to the digital world and will be able to benefit from AXIIS with little to no additional technical support. However, we are aware that there are segments of SMEs that are less well plugged in or who may need more targeted support that addresses the specific access to finance barriers of their demographic (e.g. women may face increased barriers to access finance than men). FAST has a strong drive for greater inclusivity in access to finance, and this is the primary drive behind this proposal. One of the main obstacles SMEs face is the low level of readiness of financial information. FAST has built an International Network of Local Financial Advisors (INFLA), which we deploy to identify high potential enterprises and coach them to increase credit-readiness. Through INFLA, FAST enables greater professionalization of farmers and supports their digital and financial literacy. Our ongoing mission is to work with the right partners to build enabling environments for greater investment, then help to channel this capital to where it can have the greatest impact.

External connections

FAST is a progressive, member-driven alliance of over 150 members from 36 countries, as well as other major international partners who are committed to working collectively in an effort to facilitate the access to quality trade finance for SME producer organizations. Our members include socially-oriented financial institutions, non-traditional lenders, local, regional and international financial institutions, development banks, non-governmental development-focused organizations, certification bodies, export agencies, and producers and their cooperatives. FAST has a number of strategic partners and key members, including: - The MasterCard Foundation - The Forest Stewardship Council (FSC) - The Inter-American Institute for Cooperation on Agriculture (IICA) - Local, regional, and international FSPs in Latin America, East Africa, and the Caribbean Together, we provide integrated services to agriculture and forestry operations, ranging from training and technical assistance, to policy and business development, to analytics, matchmaking and access to finance. For example, FAST joined a consortium of organizations to reboot the cacao sector in El Salvador. FAST is responsible for the access to finance component of the project, with other actors that provide technical assistance, blended financing, and policy options. This project aims to set national benchmarks for good agricultural practices for cacao and national policies to support agricultural growth and diversification.

What is the environmental or ecological challenge you are targeting with your solution?

Food production will need to nearly double by 2050 in developing countries. It is estimated that smallholder farmers need an estimated $450 billion in finance, not only for working capital that sustains everyday business operations, but also for long term investment that is crucial for producers to transition towards better agricultural practices and environmental stewardship, boost the climate resilience of their crops, and achieve higher yields and quality that result in higher incomes. For FAST, access to finance by credit-ready SMEs is a key enabler for meeting the environmental and ecological challenge of producing enough nutritious food to feed growing populations while protecting our environment for the future.

Describe the context in which you are operating

Finance has the potential to play a key role for producers wanting to develop more sustainable operations, access necessary inputs and new markets, capture higher value for their product, build resilience to devastating pests and the effects of climate change, and increase productivity, quality, and certification. Finance can also enable producers of one commodity to diversify into another, which can serve as a strategy to enhance local food security and safeguard income.

There is no shortage of investors interested in the agricultural sector and capital is widely available in many Latin American, African and Caribbean countries. The problem in the agriculture and forestry sectors however, is that many potential investees cannot meet the requirements of traditional lenders in their own countries, are unable to prepare financial statements and projections that inspire confidence, or are unable to provide viable guarantees. Typical banks and Financial Institutions (FIs) seldom understand the idiosyncrasies of small farmers. Many farmers are forced to turn to less formal lenders, which provide loans at extremely high interest rates to those unable to meet the terms presented by more formal lenders.

Since 2008, FAST has facilitated over US$45M in private financing to SMEs in these regions, and today operates an online platform called AXiiS where financial institutions with US$5B in capital for investment in agriculture have their financial products and services listed.

How did you impact natural resource use and greenhouse gas emissions?

SMEs profiled in AXiiS have combined financial requests of over $35M USD. FSPs profiled in AXiiS have combined total assets under management of over $5.6B USD. This represents an enormous opportunity for sustainable SMEs around the world to grow their operations. FAST designed a monitoring and assessment framework and a set of indicators to assist investors in assessing the impacts of agricultural finance. These indicators include total revenue earned, assets held, employment, and availability of sustainable certification. These metrics are embedded in AXIIS, and help investors make decisions that are financially, environmentally, and socially intelligent. FAST is in advanced stages of two financing deals between actors in different countries without transport costs. This eliminates financial and carbon costs associated with face to face business meetings typically required to finalize a deal. Furthermore, these deals represent an increase in foreign direct investment to these countries.

Language(s)

English, French, Spanish

Water

44% are improving their waste management

Food Security/Nutrition

53% are going to increase land certifications. 38% increasing their use of sustainable cultivation techniques Note: Though AXiiS does not currently have a metric for food security or nutrition impacts for the SMEs using the platform, FAST addresses these important issues in other ways, such as promoting investment in key commodities recognized for their high value for food security and nutrition such as the sweet potato in the Caribbean.

Economic/Sustainable Development

88% of SMEs registered in AXiiS plan to increase their number of permanent employees. 38% are generating new employment in associated sectors

Climate

31% are reducing their energy usage. 40% are increasing reforestation. 25% are reducing greenhouse gases emissions.

Sustainability

FAST provides services to our clients. We enable beneficiaries to link to mainstream financial services. FAST has traditionally worked with, and will continue to work with, governments and international development NGOs across the globe, on regional projects for SME development whereby FAST is contracted for specific services relating to financial literacy and financial access for smallholders. In addition to large, multi-stakeholder development projects, FAST will also serve individual SMEs as clients as part of our own strategy for financial self-sustainability, as well as our experience that the most professional farmer enterprises and cooperatives will seek out and pay for the right financial services to unlock their growth.

Return on investment

It cost approximately $75,000 CAD to build the AXiiS platform in collaboration with a web development company, with associated staffing costs of perhaps $150,000 for FAST staff over the project period. Two months after launch, there are 40 SMEs and 20 FSPs profiled on the platform. Of these, there have been 12 matches made, and two of these matches are in advance stages of negotiation around credit application and disbursement. As FAST continues to be a not-for-profit organization, any fees that larger farmer enterprises and cooperatives will pay for our highly tailored Finance Connect service will be used to subsidize the cost of providing extra support to smaller farmer enterprises and cooperatives using AXiiS.

Entrant Image

How could we successfully replicate this solution elsewhere?

FAST is as an association of Financial Service Providers and other key stakeholders including buyers and SMEs themselves. Of course, FAST is not the only financial matchmaking platform. However, FAST is uniquely positioned to serve medium-sized enterprises in order to subsidize smaller ones. FAST is one of the only institutions working in financing the Agri-forestry sectors. One of our biggest competitive advantages is to know the demand (SMEs in need of finance, what they need, conditions, interest rates that they can pay, terms) and supply (what the FPSs lend, terms, conditions, interest rates, etc.). FAST is very well positioned to link the demand to the supply and has done this successfully in the past 5 years, facilitating $45 million USD in finance to smallholders. This model is scalable, and is limited only by the availability of credit-ready enterprises. As businesses across the world continue to develop their operations, FAST can be ready to support them to access finance.

YouTube URL

AXiiS: 5 Steps to Accessing Finance

Overview