Root Capital is Providing Sustainable Financing to the People Who Grow Your Food

Meghan French Dunbar March 5, 2016

Coffee farmer in Indonesia who benefits from Root Capital’s work.


Location: Cambridge, MA, with associated locations in Costa Rica, Guatemala, Kenya, Mexico, Nicaragua, Peru, Senegal, and Uganda

Founded: 1999

Team Members: 135

Structure: Nonprofit


• Disbursed nearly $1 billion in loans

• Lent to more than 600 small and growing agricultural businesses

• Improved incomes for more than 1.2 million smallholder farm families

Of the 2.7 billion people living on the equivalent of less than $2 per day, nearly 75 percent live in rural areas, and the majority depend on agriculture as their primary source of income.

Fortunately, many of these farmers are connected to farmer-owned cooperatives or private businesses that purchase the farmers’ goods to sell on the local or global markets. Unfortunately, many of the cooperatives and businesses that link the rural poor with market opportunities lack the ability to scale due to the financial constraints imposed upon them by their being part of the “missing middle” — enterprises that are too large for microfinance but are considered too small, too risky, or too remote for commercial banks to serve.

This is where Root Capital steps in, to work at what founder and CEO Willy Foote calls “the intersection of two of the world’s oldest industries: farming and finance.”

The nonprofit organization based in Cambridge, Massachusetts provides capital and customized financial training to agricultural businesses trapped in the missing middle of finance. The organization’s clients are farmers’ associations and private businesses that help build sustainable livelihoods by aggregating hundreds, sometimes thousands, of farmers in some of the poorest places on earth.

By providing capital and training to these enterprises, Root Capital expands distribution channels, increases the quality of products, and facilitates growth opportunities, all of which directly benefit both the linking business or cooperative in the missing middle and the rural agricultural producers who are then paid more and have more market opportunities for their products.

We spoke with Foote about this innovative model for addressing rural poverty on a global scale.

Founder and CEO, Willy Foote

What inspired you to start this organization?

Willy Foote: In the late ’90s, I spent two years in Mexico on a business journalism fellowship, where I witnessed large-scale poverty and found that there was an enormous “missing middle” in rural financial markets. The farmers and small-business owners I spoke with were too big to apply for microfinance loans and too small or remote to be banked by commercial players. They were unable to access loans or purchase equipment needed to expand; they were stuck in the middle.

There are 450 million smallholder farmers in the world. Multiply that by four or five for each of those farmers’ family members, and we’re talking about roughly one-third of the people on this planet. From agriculture, I believe we can unpack some of the greatest challenges of our time, from hunger to climate change to youth unemployment. And the businesses that aggregate these farmers are the way in.

We’re proud of our impact, and yet we’re acutely aware that Root Capital will never be able to serve all of the 450 million smallholder farmers across the world. There is substantial need for additional capital, both from other lenders currently operating in the market and from new players. As one of the few impact-focused agricultural lenders, the burden of proof on us to demonstrate the potential for this kind of financing is, rightfully, high. Over the last 15 years, we’ve honed our business in a way that works, and every dollar lent is another proof point — and we have accumulated nearly 1 billion proof points since our founding.

CEO Willy Foote with Lubinda Julcajuanga Morre. Lubinda owns a 2.5-acre cocoa farm, earning $1,700 in net revenue, far more than she would make selling rice into local markets. L

What have been the critical elements to the organization’s success?

WF: For us, there have been two critical ingredients. First, we would not be here without a pioneering group of donors, investors, and partners. These individuals, companies, and institutions were patient and offered our organization the room we needed to take calculated risks, adapt to changing contexts, and refine our approach over the past 15 years. When deploying capital within uncertain and unproven markets, it is difficult to decode everything up front. This is especially true for those of us working in agriculture, which is subject to increasingly erratic rainfall and temperature patterns. In a way, it’s about overcoming the “short-termism” that unsustainably pressures financial markets.

The second ingredient is a team of over 100 individuals — from Managua to Kampala — who share a passion for achieving social, environmental, and economic impact. From agronomists and credit analysts to financial trainers and mobile technologists, our team is represented by more than 15 nationalities working in over 10 different languages.

How does Root Capital find the companies that you lend to? What are the key characteristics, or is there a “common denominator” that you’re looking for in these companies?

WF: We serve clients that are located at the end of back roads deep in the countryside, so finding them isn’t always easy. However, these businesses and the producers with whom they work are the foundation of our global food system. We work with hundreds of buyers, from global giants like Starbucks and General Mills to creative disruptors like Equal Exchange and Taza Chocolate, to identify capital-starved businesses in their supply chains. Nongovernmental organizations and certification bodies (like the Rainforest Alliance and Fair Trade) are also invaluable partners. More recently, we’ve developed our own team of business development experts to help us continue to expand our client base in 2016 and beyond.

As for common denominators, the businesses with which we work are all economic engines in their communities. They source from smallholder farmers and are often the first, last, and only providers of critical services like agronomic training, farm inputs, and microcredit. Each of these businesses meets stringent thresholds for social and environmental performance.

What has been the biggest challenge that the organization has faced, and how have you addressed it?

WF: This work is as challenging as it is important! In many ways, our day-in and day-out challenges — running the gamut from risk management to fundraising — all roll up into a larger, overarching challenge: how do we scale and replicate our model?

Oftentimes, addressing this challenge requires a focus on the “back office” — looking at things like systems, processes, and talent. It’s not exactly sexy, but it’s all part of laying the foundation for our continued growth and success. And that foundation has to be rock solid if we’re ever going to grow into an industry that reaches all of the world’s 450 million smallholder farmers.

Root Capital has a 100% repayment rate on your loans and has proven the success of this model over the last 15 years. What are the primary barriers to this solution scaling faster? Why do you think we still have such disparity in getting capital to underserved populations?

WF: We track two different kinds of repayment rates: the repayment rate on the loans that we make to agricultural businesses (97 percent), and our repayment rate to our investors (100 percent). The latter, the 100 percent repayment rate to our investors, sends a critical signal to the impact investing market, increasing confidence and capital flows to our entire sector.

Root Capital on-lends the capital we receive from investors to our clients. Market failures in agriculture and the communities we serve are so deep that reaching the highest-impact businesses often requires pairing debt capital side by side with a smart, targeted subsidy, which creates an opportunity for incredibly highly leveraged philanthropy.

On the other side of our business, lending to clients, factors like climate change, political instability, commodity prices, and currency volatility are all barriers to scaling. To maintain our 97 percent repayment rate, we find innovative ways to mitigate these shocks, including new products, tools, and partnerships that better serve our clients. Despite the barriers, there’s evidence that the sector is growing: in 2014, the seven social lenders comprising the Council on Smallholder Agricultural Finance (of which Root Capital is a founding member) disbursed $564 million, up 56 percent year over year.

What larger trends are you seeing in the investing world?

WF: Today, two big trends are collectively creating a unique window of opportunity for impact for suppliers of capital.

First, as you and your readers know, global food and agricultural companies increasingly see investing in the sustainability and resilience of the farmers at the base of their supply chains as an essential part of their business and critical to future success. There is an unprecedented groundswell of attention being given to sustainable agriculture worldwide. And it’s about time!

Second, the move toward impact investing over the past decade has been nothing short of remarkable. Back when I founded Root Capital in 1999, the term “impact investing” didn’t yet exist. Now, Bain Capital and BlackRock are the latest entrants to this ever-growing and increasingly diverse community. With this diversity comes different expectations around return. Some believe you can achieve social and environmental impact and realize market-rate returns. It’s a big topic of debate among investors and investees. And as more capital enters the impact investing market, the debate seems to intensify.

Of course, the more institutions and individuals that align their money with meaning, the better. But we all need to be using the same definitions and measures of impact. In general, I’ve seen that finance, when driven by values, can be a force that promotes inclusion and equality, instead of eroding them.

What is giving you hope for the future?

WF: Among the many challenges to the future of agriculture, I believe none are more significant than making a career in the countryside truly compelling for young, talented people. Agricultural businesses can create a kind of peace and prosperity in their communities that makes farming a more attractive career option, and I’m hopeful that the next generation can better view farming as what it is: a business opportunity.

At the end of the day, that is work that really matters. We’re happy to play a small part.

1. Don’t start by designing fancy solutions; identify underserved needs. This field is filled with talk of new innovations and disruptive business models. It seems like people are always looking for the next big thing. But solutions are often pretty straightforward, and not always super sexy.

 2. Find your true north and always maintain that direction. There are many roadblocks, naysayers, and setbacks along this journey. For entrepreneurs, it is essential to find your own true north and build the team, systems, and tools necessary to maintain that direction. Without that, you’ll slowly drift off course and away from the mission that you care about most deeply. Always calibrate your compass — both personal and professional — to your true north (and make sure your donors, investors, and partners are on board).

 3. Proximity to those you serve is paramount to building the relationships that are so fundamental to achieving your mission. It was impossible to scale a global agricultural-lending organization working only from our headquarters in Cambridge. We’ve continually decentralized our operations, moving decision-making as close to our clients as possible.





Many of the 500 million smallholder farmers worldwide depend on small businesses, like coffee cooperatives, to get their products to market.

With limited access to capital and credit, these small businesses often struggle to purchase products in large quantities and reach every potential farmer who would like to sell their products on the market. Their distribution reach is also often limited to local and domestic markets.



Root Capital provides the intermediary small businesses with capital and credit, along with management and financial training.

With access to capital, combined with their enhanced business acumen, the small businesses are able to purchase from more farmers, make larger purchases, and reach international markets, where sustainably produced products fetch premium prices.


A Bangladesh-based development organization that helps people graduate from extreme poverty by operating several social enterprises that provide high-quality inputs and services, ranging from social empowerment and health to enterprise development and disaster preparedness.


A nonprofit organization that provides financing, distribution, and market facilitation to help East African farmers increase their yields and therefore their overall livelihoods.

Stakeholder Capitalism
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