The Huruma Fund is the largest social impact fund in Spain (120 M EUR) aimed at financing smallholder farmers in underserved rural areas and the first project led by COFIDES in the framework of the EU blending facilities (through the AgriFi thematic facility). It combines European Union resources (first loss) and Spanish cooperation’s (AECID) funding (through the FONPRODE, Spain’s Development Promotion Fund) with private investor equity capital. Furthermore, it includes a line for Technical Assistance, financed by the European Union, which will help strengthen the host entities and enhance the fund’s potential impact. COFIDES contributes 1 M EUR to this project, with 90 M EUR from private investors, 20 M EUR from FONPRODE and 10 M EUR from the EU.
Huruma Fund is a venture capital fund managed by Gawa Capital, a leading Spanish impact investment company that currently manages three other similar funds. The fund aims to invest in three geographic areas: Latin America (expected 55-60% of the portfolio), Asia (30%) and Africa, were hopefully it will be able to invest between 10% and 15% of the portfolio. At the moment, there are investment opportunities in Ecuador, Bolivia, Colombia, Panama and Peru in Latin America, India and Myanmar in Asia and in East Africa.
First investments have been made last December in two microfinance entities INSOTEC and FACES, both based in Ecuador and with a longstanding experience in financing smallholder farmers. The total amount financed is 4 M EUR in the case of INSOTEC and 3 M EUR for FACES, invested in 3-year instalment promissory notes. This investment will allow these institutions to expand their scope to smallholder farmers. The financial terms of the loans provided by Huruma, longer than the usual ones, are also aligned with the longer terms of agricultural microloans, which improves entities’ liquidity. Additionally, both entities will also benefit from transformation projects implemented with the Technical Assistance funds provided by the European Union.
Different transformation projects are being considered for INSOTEC, including digitalization of the full credit flow, favouring marketing of new products, interconnection among farmers and expansion of the network of rural agents. For FACES, the transformation project being analysed is the design and implementation of an agricultural risk management system, consisting in designing an agricultural credit risk methodology, the acquisition of software and digital tools, developing an internal scoring system for farmers without a credit history, as well as training for customer and risk analysis teams.
In conclusion, Huruma Fund constitutes an important milestone for COFIDES, as it culminates its long pursuit of proving its mettle as an active EU budget manager. It is an emblematic project for COFIDES both for its first-time status and for the very nature of the impact fund, its sectoral focus and its capacity to mobilise private sector funding. This capacity is critical to COFIDES’ strategy of supporting the 2030 Agenda for Sustainable Development and attaining the SDGs. At COFIDES, we firmly believe in the need to engage private investors in this type of structures, to work on promoting such platforms in Spain and, at the same time, establishing an ecosystem of opportunities for both managers and host companies.
José Carlos Villena
Head of Division
Partnerships for Development