The Common Fund for Commodities implemented the first Development Impact Bond in the commodity sector: an innovative result-based mechanism to finance projects aimed at achieving development impact. The Development Impact Bond was implemented to finance a project dedicated to strenghten and modernize cocoa and coffee production in the Peruvian Amazon Region.
The way development projects in emerging market economies are financed is rapidly changing. In this context of change a new platform for development cooperation has been developed: the Development Impact Bond, which incorporates the main principles of the Social Impact Bond. According to the mechanism of the Development Impact Bond, the partners, which are the Commissioner, the Investor and the Service Provider agree on a shared development goal to be achieved in a project, to be evidenced by a set of indicators defined at project design phase. Usually private investors finance the project and rely on service providers for project management to achieve the agreed result. If the project is successful, confirmed by independently verified evidence, then the funding agency or the Commissioner, usually a public sector agency, repays the Investor.
The Common Fund for Commodities in cooperation with the US-based Schmidt Family Foundation, and Rainforest Foundation UK implemented a Development Impact Bond to finance a project to support the indigenous communities in the Peruvian Amazon region, the Ashaninka, in restoring their growing plots and improve their collection and postharvest techniques of coffee and cocoa.
The Common Fund for Commodities is acting as the Commissioner or funding agency, and will repay the Investor, the Schmidt Family Foundation, upon achievement of contractually defined project indicators. The Service Provider is Rainforest Foundation UK.
The Asháninka people of the Ene River live in remote forest villages in one of the most biologically diverse areas on the planet - the Peruvian Amazon. They rely on the forest for food but are impoverished due to extremely limited infrastructure and poor quality health and education services. Moreover, the leaf rust disease has attacked nearly 70% of the coffee production areas in this region last year. The leaf rust disease has affected more than 50% of national production. Rain Forest Foundation UK provided some technical assistance to the farmers in order to control the disease and started building nurseries for planting resistant varieties of coffee.
At a time when Peruvian cocoa is being recognised globally as one of the finest available, these communities are still struggling to improve the quality of the cocoa to a high enough standard to benefit from this.
CFC's support will enable the Asháninka people of the Ene River to improve the cocoa quality of, in particular, the cocoa that they produce, by providing better infrastructure for the post-harvest process. The project will also help restore approximately 20 hectares of coffee plots, used by around 40 producers, recently lost to the leaf rust disease.
With the support of: