April 30, 2020
On April 28, Japan International Cooperation Agency (JICA) signed a loan agreement for a maximum amount of $56 million with Olam International Limited (Olam Ltd.), a Singaporean agricultural products company, to support Indonesia’s cacao industry. This project is co-financed with the International Finance Corporation (IFC), a member of the World Bank Group, and on the same day IFC also signed a loan agreement for a maximum of $120 million.
Indonesia is the world’s third biggest producer of cacao after Côte d'Ivoire and Ghana. Cacao is an important industry with over 1,000,000 households participating. Most Indonesian cacao plantations are owned by small farmers and there are issues of low productivity and quality. This project strengthens production capacity through expanding cacao plants owned by Olam Ltd.’s Indonesian subsidiary. By supporting loans to small farmers, it also strengthens Indonesia’s cacao production value chain and increases the cacao production as well as trading volume of small farmers. This will contribute to raising their income.
In Indonesia there is an issue with regional disparities, and cacao production is concentrated on the Sulawesi region that has a high poverty rate. Through this project, assistance for small farmers contributes to correcting regional disparities and alleviation of poverty. In addition, from the macro perspective, improving the trade balance is a big issue in the Indonesian economy, and this project has an effect in stimulating exports in the agricultural area. It also contributes to SDGs Goals 2 and 8.
Olam Ltd is a leading food and agri-business supplying food, ingredients, feed and fibre with its value chain spanning over 60 countries which includes farming, processing and distribution operations, as well as a direct and indirect sourcing network of an estimated 5 million farmers. It promotes sustainable agriculture as a basic strategy and gives assistance such as management advice to 740,000 small farmers in more than 20 countries. Since 2015, Mitsubishi Corporation has invested in Olam Ltd. with board membership and established a joint venture with the company in Japan to market specific products of Olam that can leverage its strong distribution and retail presence and Olam’s expertise in those products.
This is a co-financing project based on the Memorandum of Understanding (*) made between IFC and JICA in May 2017 relating to business cooperation for efficient co-financing of the private sector in developing countries.
Message from Olam
N Muthukumar, Managing Director and Group CFO of Olam, said: “I am delighted to announce the completion of this facility that provides support, stability and reliable market access to smallholder farmers, particularly in these challenging times.”
“This facility also aligns with Olam’s core purpose of re-imagining global agriculture and food systems as well as IFC’s and JICA’s mandate of enabling inclusive economic growth with environmental stewardship and regional integration. I would like to thank IFC and JICA for their long-standing support and commitment to Olam.”
Message from IFC
"Building upon Olam’s expertise, IFC’s support will help the company expand use of digital technologies to improve market access and incomes of smallholder farmers,” said Tomasz Telma, IFC Senior Director, Manufacturing, Agribusiness & Services. “This is our first joint agribusiness financing with JICA and we look forward to doing more together to promote sustainable and inclusive growth by working with strategic corporate partners like Olam.”
Message from JICA
Junichi Yamada, Senior Vice President of JICA, said: “Olam has been actively working to build a global, sustainable agri-business, and in Indonesia considerable efforts have been made to tackle environmental and social issues. We expect sustainable cacao business in Indonesia will be expanded through this loan facility, which we believe will provide stability to smallholder farmers. I am delighted to announce this is the first co-finance project with IFC in agri-sector. JICA would like to cooperate with IFC to further expand agri-sector support.”