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Islamic fund to lift food supply without land grab

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Islamic investors, some of which have attracted controversy for snapping up swathes of farmland abroad, are turning to the likes of logistical and silo efficiency to ease food shortages through a $600m fund.

The Saudi Arabia-based Islamic Corporation for the Development of the Private Sector (ICD) on Tuesday launched a food and agribusiness fund in which it said it was already "receiving strong interest from several target investors".

While many Middle Eastern nations have sought, like other food-short nations, to bolster supplies by snapping up farmland abroad, this process has attracted controversy, and sparked agricultural powerhouses such as Argentina and Brazil to tighten limits on farmland purchases by foreigners.

The ICD fund, which will be advised by Rabobank's Robeco asset management arm, will aim instead to boost supplies mainly through equity investments in companies aimed at boosting yields in the Islamic world, and in minimising food losses.

'Inefficiencies and wastage'

Khalid Al-Aboodi, the ICD chief executive, said the fund represented "the first public-private partnership of this nature and size to address the inefficiencies and wastage facing the food and agricultural sector throughout our member countries".

An ICD spokesman told Agrimoney.com: "Farmland will not represent much of our fund – something like 5-10%.

"What we are interested in is projects which result in increases in yield or reductions of wastage."

Investments might include companies aimed at helping Kazakhstan improve its wheat yields, which are one-eighth those in the Netherlands, or reduce the 10-15% of grains which may be lost in storage.

'Strong minority stakes'

This will be achieved through buying "strong minority stakes", of perhaps 20-49%, in agribusinesses, with a focus in particular on 15 countries – a range of exporters and importers including Kazakhstan, Turkey, Pakistan, Bangladesh, Malaysia and parts of North Africa.

The ICD, which is affiliated to the Islamic Development Bank and claims capital of $2.0bn, will inject $25m into a first investment raise of $350m, aimed to close by the end of the year, with a target of a stake of 10% in the final fund.

Cash is being sought from a "primary list" of strategic investors, such as sovereign wealth funds.

But the fund is also aimed to appeal to investors with a "commercial interest" in the sector.

By Agrimoney.com

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