Rural Displacement Fund (RDF), An Innovative Financial Structure for Post-Conflict Colombia
It has been over a year since the Colombian government signed a peace agreement with the Revolutionary Armed Forces of Colombia (FARC), a guerrilla group, to end the country’s long-standing internal conflict. Implementation of the agreement is underway, but not without major challenges. Colombia must address the over 7 million Internally Displaced People (IDPs), the largest number of IDPs worldwide according to the Internal Displacement Monitoring Centre (IDMC), surpassing countries like Syria (6.3 million) and Sudan (3.3 million). Stressing their situation further, Colombia is also the most unequal Latin American country in terms of land distribution with 81% of fertile land owned by 1% of farms. Dealing with land ownership inequality is particularly relevant in a country where 87% of total displacements happened in the countryside.
To give landless victims of Colombia’s armed conflict an opportunity to be landowners, TerraBlanca Impact Capital, with support from The Rockefeller Foundation & Kellogg School of Management Sustainable Investing Fellowship, has been working on an innovative financial structure to help bridge the credit gap for these families in war-torn regions, most of whom were previously smallholder farmers.
A Rural Displacement Fund (RDF) is a financial instrument that has a private equity real estate fund structure with a buy and lease scheme that aims to empower victims in post-conflict countries. The aim of RDF is to enable smallholder farmers to restart their livelihoods and rebuild ownership of their lands.
The RDF raises capital to acquire large extensions of unused fertile agricultural land, most likely left unused by communities fleeing conflict. The acquired land would be parceled later on into smaller productive units. Additionally, a housing unit with basic amenities would be built on each one of these new small farms. Each productive unit is then leased to a family wanting to return to rural areas as smallholder farmers. Finally, for families to be able to meet the rural lease payments, TerraBlanca helps them procure and access markets to fairly sell their produce.
Currently, TerraBlanca is working on a pilot project in the region of Nariño, in southern Colombia. By growing and exporting quinoa, sacha inchi, and other Andean ancient grains, TerraBlanca aims to build sustainable agricultural business models to secure cash flows for families to meet lease payments, have a decent livelihood, and, at the end of the lease period, formally transfer land ownership from the RDF to the families.
TerraBlanca’s RDF is an offshoot of CampoColombia, the runner-up in the 2015 Kellogg-Morgan Stanley Sustainable Investing Challenge, a competition which recognizes up-and-coming sustainable finance practitioners. The Rockefeller Foundation supports the competition because ideas like TerraBlanca have enormous potential to build a better world by leveraging the tools of finance to unlock human opportunities. The goal is that high potential concepts, like the RDF, eventually can become scaled investable markets, which can assist post-conflict countries in their efforts to rebuild quickly.
In considering the immense challenge ahead for Colombia or any country faced with serving a displaced population, we need to bring all the tools we have to bear. Investment models which promote integration, building livelihoods and land ownership for displaced families is key to moving forward. Investment money must reach this vulnerable population or the challenges they face will only grow.