TruStory

Rural Paz in Colombia

Blended programming

In the Peace Agreement, signed between the Colombian government and the FARC-EP, it is recognized that the armed conflict has directly and disproportionately affected the country’s rural sector. For this reason, a Comprehensive Rural Reform-RRI was proposed, in order to dignify the living conditions of the rural population, as a fundamental step to achieve a stable and lasting peace.

To contribute to the implementation of the Peace Agreement, various initiatives are needed that focus on the creation of new opportunities for income generation, the participation of communities in territorial planning and the promotion of a culture of peace and reconciliation in the territories. Actions in which the government, international cooperation, the private sector and communities join forces to structurally improve the quality of life of the inhabitants of rural areas of the country.

Rural Paz is a programme implemented by ICCO Cooperation (nowadays known as Conexión), in close cooperation with a consortium of Colombian and Dutch partners, implemented in 16 municipalities which were prioritized by the national government in the departments of Nariño and Putumayo in Colombia. Truvalu was one of the consortium partners.

These two regions were heavily affected by the war. The objective of the programme was to strengthen rural economies of afro-descendant, indigenous and peasant communities in these two post-conflict areas, increasing their food security, access to markets and improving their incomes, reaching around 2.500 people in both territories. The programme was financed by amongst others the European Fund for Peace in Colombia.

Programme activities

Rural Paz distinguished three lines of action, implemented in both departments:

Economic empowerment: strengthening access to markets for small producers, food security, the generation of economic opportunities for young people in the gastronomy, tourism and hospitality sectors, and the strengthening of small and medium-sized companies in the agri-food sector.

Advocacy and participation of Afro and indigenous communities and peasant women in the formulation of the Development Plans with a Territorial Approach, promoting the role of women and youth in these processes.

Creating a culture of peace: with emphasis on training in a culture of peace and peaceful resolution of conflicts, as well as the strengthening of capacities for reconciliation in the communities.

“The innovative approach of blending complementary expertise, networks, different roles to play by a variety of actors was put into practice. Sharing of learnings, ideas and networks took place, synergies were created and alignment with governments policies was given careful attention.” Andres Jimenez – Managing director Truvalu for South America

The impact of blended programming

The Rural Paz project, which completed its 3-year execution at the end of 2021, provided the necessary tools to strengthen productive capacities and access to markets, contributing to the construction of a culture of peace in the territories of Nariño and Putumayo.

Through the stimulation of agri-businesses ecosystem, opportunities have been created for companies from the main cities to be supplied by smallholders of conflict areas and for farmers to cultivate other products than the cocaine of the past. Over 4,000 farmers benefit from the Rural Paz project in Colombia. In addition, more than 200 jobs have been either created or sustained.

Among the results of Rural Paz, the following stands out:

1,472 small producers improved their conditions of production, agro-industrialization and marketing.
200 women producers of agri-food and handicrafts obtained greater access to markets.
464 young people are trained in tourism, gastronomy and hospitality have entered the workforce.
The income of the producers increased, for example:
- Coffee: 33%, due to the increase in productivity and in the price for improving the quality of the grain
- Cocoa: 62%, due to increased productivity
- Chontaduro: 22%, achieved by the quality of the final fruit.
- Panela: 73%, achieved by the efficiency and effectiveness in the collective sugar mills.

With these results, it was possible to optimize production, add value to agricultural products, increase productivity, promote a standardization of production processes, facilitate access to markets, increase attention for environmental sustainability, and provide producers with new opportunities to improve their quality of life.

An Investment Fund for SMEs in the agri-food sector was created, which invests in companies with a social impact in both departments.

The impact the programme creates contributes to the Sustainable Development Goals SDG 2, SDG 5, SDG 8 and SDG 12.

Blended finance

The companies that Truvalu invests in play a crucial role in the development of the local economy, inclusive value chains and in the improvement of living conditions of local farmers. Jobs are created, incomes have increased, and people have access to better opportunities. Of these companies, approximately 40% of employees and suppliers are women. Furthermore, 60% is under 35 years old.By stimulating local economic activity, grassroots participation in territorial management and the dissemination of peace and rights culture, this blended programme has contributed to the construction of peace.

“Being a farmer” regained a positive outlook, which provides a good alternative to the migration to large cities. Farmers again become a role model for the younger generation.” – Andres Jimenez – Managing director Truvalu for South America

A Rural Peace Fund

The resources and management of the investment fund The Rural Peace Fund was established in 2021, as a trust fund, instrumented through a seed capital of EUR. 660,000 with contributions from the EU (as a First Loss Facility) and the AgriBusinessBooster (ABB). This was expected to be complemented by additional contributions from investors until reaching a value that gives the possibility of generating financial sustainability (it is expected to manage approximately EUR. 3MM).

There is a Board of Directors made up of Truvalu, EU and ICCO, in charge of ensuring the application of the fund’s operating regulations, deliberating and making decisions on the fund’s operating and administration policies. The Managing Partner is Truvalu BV, that is in charge of the management, implementation and monitoring of the cases and the investment portfolio.

So far, 50% of the Fund has been invested. The remaining amount will be invested in the following months when the negotiation process with the two companies is completed. Truvalu will make an additional investment of 400K to meet the investment plans of a total of 5 companies mentioned above. Additionally, 800K has already been committed by the European new investments which will enter the Fund between 2022 and 2024.

A partnership creating lasting changes

Synergies in the consortium allowed for implementing this high impact project under the complex circumstances of a post-conflict environment. Difficulties to overcome were a/o low levels of trust, distorted production and supply chains, accessibility and security, etc.

Conexión and its community based partners brought credibility to the program, which benefited Truvalu in shaping up their investment deals. Truvalu brought a profit-driven perspective to the table, which ensured project sustainability beyond the end date of the project. Conexión and partners strengthened supply chains of the investee businesses of Truvalu, whereas these businesses could absorb higher levels of supply and hence have more impact with small producers due to the investments and support of Truvalu.

Co-entrepreneurship

The acceleration programme targeted SMEs that were linked to smallholder farmers associations in the prioritized territories of the programme, aiming to increase their sales, thus the amount of raw material purchased from associations. Truvalu selected twelve promising SMEs, which were supported in various ways:

Once a strategic roadmap was set up, a diagnostic was performed to find out what each company needs to achieve its expected results. Those obstacles were the cornerstone of the business development services plan (tailor-made for each of the participating companies).
Specific mentors, with specific knowledge were called into action to close the capabilities gaps of each company (for example, to define a go-to-market strategy, to work on programming algorithms to optimize distribution costs, a mills expert redesigning a mill to become more compliant).
During the programme, the companies were supported to help them uncover important facts hidden in their internal data, do market research and create and ignite a new growth strategic roadmap, based on the entrepreneurs’ vision.
They received support on strategy, financial management, marketing and sales, and other business activities with the purpose of making them “investment ready”.
In its last phase, the programme helped design an investment plan to determine where the investments opportunities were and what would be their magnitude and returns in terms of amount needed, impact on cost, increase of capacity or value added. Additionally, a company valuation was performed to clarify what would be Truvalu’s position as shareholder in case the investment was accepted for both parts.
Truvalu now invests in three companies and is in a final stage to close the deal in two additional companies from Truvalu’s local investment fund, enabling them to grow and increase the impact on the local community. The selected companies are active in the processing of, for example coconuts, pastries industry, vegetables and fruits, exotic oils and cocoa. These companies can make significant progress in their development, resulting in a stronger business model and growing impact.