ETC Group Limited

Direct: ETG purchases agri commodities from farmers at the farm gate indirectly linking them to regional and international markets. ETG sources a large number of agricultural commodities across the African continent; 80% of these are purchased at the farm gate with cash through a network of 450 all-year and seasonal procurement centres. Through these centres, ETG also offers inputs and extension services to the farmers. This enables two things: (1) farmers are able to sell surplus to ETG directly and are generally paid in cash; (2) through quality inputs and extension services yield will increase and (post-harvest) losses decrease.

Pan Africa and Asia (21 countries). A country can have 5 to 150 procurement centres.

ETG purchases from small, medium and large farmers. In the three countries sampled, farmers selling directly to ETG typically have larger landholdings and a lower poverty likelihood. Over 85% of these farmers depend on agriculture as their primary source of income and are entrepreneurial using agricultural inputs and some mechanisation to improve yield. Majority of the farmers have started working with ETG recently and 83% sell nearly half of their produce to ETG with the balance sold to local markets and other middlemen. Farmers selling to the company are mostly male (70%) and young (60%<50 years old).

In 2020, ETG procured from c.579k farmers in our geographies. For our $100 million investment, we estimate attributable reach at c.45k farmers annually.

• Depth: Farmers selling directly to ETG report improved livelihoods. This results from 1) fair market prices (c. 75% mention better price as primary reason to sell to company); 2) improved quality and quantity of crop, as a result of inputs and extension services from the company (c. >60% of farmers also purchased fertilizer and seeds from ETG with 43% of the farmers engaged with agronomists for advice on best practice).

• Duration: The impact will occur over 1 year (or tenor of facility if renewed).

3.24

• Financial: Capital not available in sufficient quantity. BII and other DFIs are plugging a gap in funding left by commercial banks. The combination of increased bank regulations and COVID-19 saw several commercial banks in Africa scaling back operations.

• Value-add: Our ESAP will support ETG’s journey towards alignment with international E&S standards focusing on key areas such as pesticide management, supply chain risk and safeguarding processes, and environmental and social risk assessments.

• Unexpected impact risk: Our markets often have agricultural supply chain risks. ETG has largely good procurement practices related to transparent pricing and timely payment. There are supply chain risks related to farmers supplying to ETG. This risk is being addressed through the execution of the ESAP.

• Evidence risk: Because of the nature of pooled funding, ETG doesn't measure the impact of financing facilities attributable per lender. This evidence risk will need to be tolerated. The key KPI will be number of farmers reached. Our due diligence concluded that the assumptions used by ETG to estimate farmers reached are sound. In addition, we will require additional reporting metrics, such as female farmers as a percentage.