How does your proposed innovation leverage public intervention in catalyzing private SME finance?
The program of Rural Risk Capital allows mobilizing resources in the international cooperation arena, as well as in the internal saving of micro and small rural firms, under the criteria of co-financing, eliminating assistential criteria, privileging the principles of efficiency and responsibility from the beginning of the initiative.
Within the programs of productive support (productive municipalities), this initiatives foster the resources of the public sector in a direct manner generating the provision of public services such as electricity, water, infrastructure, grain bins with a high impact in the development of the productive sector.
It allows for high levels of visibility to the productive sector dedicated to organic production as a new and profitable source of public and private investment.
Through these joint initiatives such as PRO-RURAL as a financer and the productive SMES the capacity of negotiating is strengthened with the state and with the financing system.
This generates the association of various SMES by means of the articulation and the presence of PRORURAL in the corporate governments. This action strengthens the negotiating capacities with the different levels of the government.
It allows for the investors in the developed countries to support the rural SMES by means of the injection of temporary capital, turning themselves into partners of the development of the organic production and impacting on the environment due to the characteristics of the certified organic production.
What barriers does your proposed solution address?
Informality, Lack of collateral, Lack of financial capacity, Lack of SME access to skills / knowledge / markets, Unavailability of financial products tailored to SME needs, Underdeveloped local capital markets (term local currency funding, exit options for SME equity), General barriers to SME development related to investment climate.
If you checked any of these barriers, describe how your solution addresses them
Rural Risk Capital is based on an investment relation between two or more partners, where the transparency of information is an indispensable requirement. This situation is achieved only when the SMES has formalized their action, which is, by means of a critical mass of SMES which can achieve accountable and formal systems that are applicable to productive chains taking care of all the aspects inherent to their administration.
Rural Risk Capital eliminates the restriction to mayor investments in relation to the existence of “real” guarantees, given that the relation is based upon a relationship of partners and not debtors-creditors. In this relationship, they are both interested in the accomplishment of the business plans and the constant development.
The founding partner not only injects the financing capital, but also transfers abilities and knowledge for a better understanding of the SME, in order to achieve better technical assistance, higher levels of organic certification and a broader market with higher levels of profitability.
Rural Risk Capital is the best financing instrument to develop agribusiness, given that it adapts itself to the needs and characteristics of the rural business. It aims at the growth and improvement of the SME. Under this concept, PRO-RURAL is not interested in the payment of the interests or in the financial business, but in the integral development of its partners.
Under the concept of risk capital, the strategic alliance that is created does not have a relation of sowing and harvesting. It goes beyond the agricultural campaign. It is by means of the organic certification and the maintaining of the market that a long term relationship is established, hence growth and economic independence.
Within the group of actions being developed, formalization, corporate government, transparency, technical assistance, and access to fair trade markets, one can visualize the important market that exists in terms of organic production in the rural areas and this manner the climate of investment is improved by means of visibility of profitability and the increasing potential of the initiatives.