Sector: Agriculture (coffee)
We invest in the growth of agricultural enterprises so they can transform rural communities. We build long-term relationships and provide enterprises with the resources they need to grow, such as reliable access to financing and tailored advisory services.
Root Capital was founded in 1999 by Willy Foote, a journalist-turned-social-entrepreneur. The firm has provided over $1.4 billion in loans to more than seven hundred businesses across Africa, southeast Asia and Latin America. It is backed by global private equity investors, including impact investors, NGOs and philanthropic organizations. Root Capital’s focus is on providing rural agricultural businesses with loans of up to $1.5 million and advisory services to scale operations and solidify global value chains.
In 2010, Root Capital began working with businesses in East Africa. “All our clients have a farmer base,” says James Nyambok, head of lending and general manager, East Africa. In Rwanda, the organization focuses on supporting SMEs whose end product is exported to buyers in Europe and the US, including coffee cooperatives. Root Capital works with these businesses to strengthen value chains because 70 percent of Rwandan farmers are subsistence farmers who must plan their yields in advance.
If cooperatives have good relationships with buyers who agree to a quantity and price ahead of time, they can then organize their network of small and medium-scale farmers and everyone prospers. “Without that consistent way of going to the market, the farmer won’t know what to grow for the next season,” says James. The approach has proven successful. “With one client who has worked with Root Capital since 2014, we have seen a hundred-fold increase in their business growth,” James says.
The Root Capital team attends coffee conferences across East Africa to meet with cooperatives and producers. Before lending, it evaluates the social impact of a loan, including the number of farmers and producers in the business chain. Even if an applicant doesn’t meet the loan requirements, they can apply for advisory services and receive support to improve their financial and stakeholder management.
Be able to explain how your business makes money.
By the end of your pitch, it should be clear what you are selling and who’s going to pay for it.
Have the potential to scale.
There’s a difference between something that will grow to be an owner-operated business, like a hair salon, versus something that is genuinely scalable, like a fintech company.
Make a return on investment.
There’s a real challenge in Rwanda because an entire generation has grown up only experiencing donor money. You’ve got to be able to give us the money back in three years and then some.
Don’t reinvent the wheel.
It’s ok to “copy with pride” and create a business model that has been successful in other countries, but creating a copy of something as sophisticated as YouTube for the Rwandan market is unlikely to succeed.
Main Photo by Patricia Alvarado - Grazioso Pictures Inc.