WASHINGTON, D.C. - As East Africa struggles with skyrocketing food prices and the region's worst drought in 60 years, the U.S. Agency for International Development, together with six partners, today announced a first-of-its-kind effort to invest $25 million in small and medium sized enterprises. The African Agricultural Capital Fund (AACF) will deliver much needed growth capital to boost the productivity and profitability of Africa's undercapitalized agriculture sector.

Over the next five years, Pearl Capital Partners (PCP), a specialized African agricultural investment fund manager based in Kampala, Uganda, will invest the AACF's $25 million in at least 20 agriculture-related businesses in East Africa. The investment infuses equity and expertise into a sector that has suffered from under-investment, and paves the way for raising the productivity and incomes of at least a quarter of a million households.

"Achieving food security in Africa requires public and private players working and investing together. This transaction is a testament to that kind of collaboration," said USAID Administrator Dr. Rajiv Shah. "Investors increasingly see the promise of Africa's agriculture sector, but the transaction risks are often perceived to be too high. That's why we're leveraging our development dollars and using innovative tools like the Development Credit Authority to lower the investment hurdles for private partners that want to invest with us."

In order to attract investors to East Africa's fledgling but increasingly profitable agribusinesses, USAID's Development Credit Authority is guaranteeing 50% of an $8 million commercial loan from J.P. Morgan's Social Finance Unit to AACF. The fund is also supported by $17 million in equity investment from the Bill & Melinda Gates Foundation, the Gatsby Charitable Foundation, and the Rockefeller Foundation. The fund will also have access to $1.5 million in USAID-funded business development services, primarily funded under President Obama's flagship Feed the Future initiative, to improve investee companies' operations, competitiveness, and access to markets.

PCP's model focuses on building the skills of local management teams rather than infusing management expertise from abroad, making it a sustainable approach to investing on the continent. Agribusinesses are vital sources of employment, secure markets and improved products for millions of smallholder farmers across East Africa.

The fund's co-investors are all members of the Global Impact Investing Network (GIIN) Investors' Council. USAID, J.P. Morgan, and the Rockefeller Foundation are anchor funders of the GIIN, which is a nonprofit organization dedicated to increasing the scale and effectiveness of impact investments.