CFC and commodity dependence
According to UNCTAD, a country is commodity-export dependent when more than 60% of its total merchandise exports are commodities. The organisation’s State of Commodity Dependence 2023 report5 , notes that the number of commodity-dependent countries has remained unchanged at 101 in recent years. The vast majority are developing countries; 95 out 142 developing countries were commodity dependent, much of their populations remaining poor and vulnerable.
This dependency is symptomatic of the economic vulnerability of these nations and it highlights the difficulties in diversifying their economies away from primary commodities towards more competitive sectors. The CFC has been actively addressing these challenges by investing in initiatives aimed at alleviating poverty and promoting sustainable development in least developed countries (LDCs) and landlocked developing countries (LLDCs) as special priority vulnerable groups. The CFC's commitment to these efforts is evident in its strategic investments and collaborations within the United Nations system and beyond, focusing on enhancing the agricultural commodity value chain through accessible financing and private enterprise engagement6.
The CFC's approach to reducing the vulnerability of CDDCs, LDCs and LLDCs involves supporting smallholder farmers and small and medium enterprises (SMEs) to add value and increase productivity. By focusing on climate resilience and gender equality, the CFC aims to tackle the root causes of poverty and dependency in these regions. This strategy is aligned with the broader goals of the United Nations, particularly in fostering economic diversification and addressing capacity constraints to shield LDCs from socioeconomic, health and environmental shocks. Through targeted investments and partnerships, the CFC is making significant strides in transforming the commodity sector, thereby contributing to the sustainable development and resilience of the world's most vulnerable economies.
The CFC has been actively contributing to the implementation of both the Doha Programme of Action and the Vienna Programme of Action, which are critical frameworks aimed at supporting LDCs, LLDCs and small island developing states (SIDS). The CFC's mandate to support sustainable development in CDDCs is directly aligned with the objectives of these programmes. Through its investments and project financing, the CFC has been instrumental in promoting structural economic transformation within these vulnerable economies.
Overwhelming demand for CFC financing
The CFC keeps pushing the limits of its internal financing capacity. During 2022-2023, the CFC received 746 project proposals requiring a total of USD 665 million for implementation. While 33 projects have been approved with a funding allocation of USD 30 million, this represents less than five percent of the proposals submitted. Consequently, the CFC is calling for a resumption of voluntary contributions by member states, in alignment with the UNCTAD IV resolution on 93 (IV) Integrated Programme of Commodities, which established the framework for the CFC.
In order to meet our overwhelming demand, the CFC has been working for the formulation of a new fund-the Agricultural Commodity Transformation Fund (ACT Fund) for the past two years. The fund is now ready and CFC is actively pursuing potential funders-both form public and private-to invest for CFC ‘s unique portfolios that go directly into the grassroots of the commodity producing developing countries. For more details about our ACT Fund (see page 14) and be a part of the impact that you could help implemented to alleviate more people from poverty.
With our unique portfolio diversity and size, there are hardly any international financial organisations that can match us in terms of deeper impact at the grassroot. CFC goes in places and in communities that others find difficult or unwilling to get into. With our base in the innovation rich the Netherlands, we have also been working to bridge the gap between the global North and the South through technology and innovation transfer
Recent events have underscored the transformative impact of the CFC's initiatives. A side event at the Governing Council of the CFC showcased several CFCsupported projects, including those in the coffee, macadamia and handicrafts sectors, alongside crucial infrastructural developments. These projects highlight the critical support provided by the CFC to enhance the viability and resilience of commodity producers in developing countries. These efforts are central to the CFC’s mission to generate sustainable development impacts. In upcoming sessions, attendees will have the opportunity to hear from beneficiaries who have directly experienced the positive changes brought about by the CFC’s work.
CFC for food security
As the global population continues to surge, with median projections reaching 10 billion by 2050 and 11.2 billion by 2100, the challenge of ensuring adequate food supplyintensifies. This demographic expansion necessitates a significant increase in global food production, by as much as 70%, to prevent potential shortages and sustain the growing number of inhabitants. The CFC plays a pivotal role in addressing these concerns, focusing on enhancing agricultural productivity and sustainability. By investing in innovative agricultural practices and technologies, the CFC aims to boost food production efficiently and sustainably, ensuring that the Earth's resources are utilised judiciously to support its burgeoning population. This approach not only aims to meet the immediate food needs but also considers the long-term implications of agricultural practices on the planet's health and capacity to provide for future generations.
In its mission to combat food insecurity, the CFC aligns its efforts with several of the United Nations’ Sustainable Development Goals (SDGs), particularly targeting SDG 1 (No Poverty), SDG 5 (Gender Equality), SDG 8 (Decent Work and Economic Growth), SDG 10 (Reduced Inequalities), SDG 12 (Responsible Consumption and Production), and SDG 13 (Climate Action). By focusing on these areas, the CFC not only contributes to increasing the global food supply but also ensures that its initiatives promote social equity, economic development, and environmental sustainability. Investments are carefully selected to empower communities, particularly in developing countries, by providing them with the tools, knowledge and resources needed to improve agricultural productivity, adapt to climate change, and achieve food security. Through these targeted investments, the CFC is making significant strides towards a future where food is accessible and abundant for all, irrespective of the challenges posed by a growing global population and the limitations of our planet's resources.
CFC makes contributing to Climate Action a priority
The CFC is acutely aware of the intricate link between the production and trade of commodities and the global challenge of climate change. As the world grapples with the urgent need to transition away from fossil fuels, the CFC is intensifying its efforts to support renewable energy initiatives in developing countries. This commitment is in direct alignment with the United Nations' Sustainable Development Goal 13, which calls for urgent action to combat climate change and its impacts. By increasing investments in businesses that are innovating in the field of renewable energy and sustainable practices, the CFC is playing a crucial role in facilitating a greener, more sustainable future.
Commodities, while being a primary source of income for many nations, can also lead to environmental degradation and social inequality if not managed sustainably. The CFCrecognises that the drive to produce more can often lead to a surplus that depresses market prices and strains natural resources. This unsustainable approach can hinder longterm development and exacerbate the 'resource curse', where countries with abundant natural resources experience stagnant economic growth and social challenges. The CFC's mission is to transform this dynamic by ensuring that the entire commodity value chain, from production and processing to trade, is equitable and beneficial for all stakeholders, particularly smallholder farmers and local communities.
The CFC's investments are tailored to the unique strategies and developmental needs of each country and region in which it operates. Sustainable development, a multifaceted concept, requires a nuanced approach, and the CFC's strategies reflect this complexity. The cornerstone of the CFC's investment philosophy is to enhance food security, financial stability, and market access for smallholder farmers, who are responsible for a significant portion of food production in Africa and Asia. These farmers often live on the margins, with their livelihoods hanging in the balance.
To mitigate the challenges faced by these critical players in the agricultural sector, the CFC provides financial backing to innovative projects that promise to deliver positive change. These projects aim to increase production, improve market connectivity, and boost incomes for smallholder farmers andSMEs involved in the commodity sector. Through impact financing at the grassroots level, the CFC empowers these stakeholders to adopt sustainable practices that not only raise their standard of living but also contribute to the global fight against climate change. In doing so, the CFC is not only investing in the present but is also sowing the seeds for a more resilient and environmentally conscious future for commodity-dependent economies.
Our core activities
Acting as an impact investor, we support communities that rely on the commodities sector and are most exposed to its risks. We are based in the Netherlands, where we can harness innovation to help agri-SMEs and smallholder farmers in CDDCs, LDCs and LLDCs thrive.
We offer financing up to USD 2 million7 , which SMEs submit proposals for. This bottom-up strategy ensures our investments are targeted to their needs and those of their local communities, while preserving the environment and creating stronger value chains.
We also manage technical assistance facilities for other impact investors operating in areas connected to our mission. This collaborative and knowledge sharing approach enables us to extend our support to more SMEs and smallholder farmers in more countries.
Investing to make a difference
The CFC works with various partners across the public and private sectors, development institutions, and civil society, to support and invest in commodity value chains. Our aim is to use the commodity production, processing, manufacturing and trading sectors to improve the lives of the economically disadvantaged.
We fund organisations and initiatives that:
- Promote innovation: We look for innovative projects that tap into new commodity market opportunities. These should drive economic growth, create jobs, boost household incomes, reduce poverty and improve food security.
- Offer scalability and sustainability: We invest in projects that can be scaled up and replicated, and are financially sustainable.
- Deliver measurable benefits: We support activities that have a clear, positive impact on both the social-economic and environmental aspects of the communities and regions involved in commodity value chains.
- Strengthen market connections: We aim to enhance existing market links or develop new ones within the value chain.
- Improve financial services: We increase access to financial and other support services for commodity producers and businesses.
- Enhance knowledge and information sharing: We promote the sharing of knowledge and information across the industry.
- Foster effective collaboration: We help build efficient and cost-effective partnerships among producers, industry, governments, civil society and other stakeholders working to enhance development through commodities.
- Connect producers with consumers: Using technology, we bridge the gap between modern consumers and smallholder farmers. This approach, which we call ‘walking back along the value chain’, directly benefits the smallholders who are essential to our food supply.
