Dutch entrepreneurial development bank FMO intends to provide Vietnamese leading rice exporter Loc Troi Group with US$90 million through two senior secured facilities, with an eye to promoting sustainable agriculture in Vietnam.
This funding aims to finance Loc Troi’s expansionary capital expenditure to upgrade rice mills and warehouses in group subsidiaries and associates, and working capital to support the Vietnamese agribusiness’ integrated model programme.
“The proposed transaction intends to create jobs, strengthen food production and security, improve farmer livelihoods, mobilize private funding, strengthen climate adaptation and resilience of rice farmers and reduce methane-related rice emissions,” the Dutch leading impact investor says.
FMO presented its letter of intent for funding to the Ho Chi Minh City-headquartered company on November 2 in Hanoi, with visiting Dutch Prime Minister Mark Rutte and his Vietnamese counterpart Pham Minh Chinh witnessing.
Loc Troi is not just a major rice exporter, it is Vietnam’s leading integrated agribusiness, active in rice, crop protection chemicals and certified seeds. The company employs over 3,600 employees, including 1,200 agronomists who provide technical advice and crop management services to farmers.
The company plans to roll out an integrated model of pre-financed contract farming for rice farmers, which it calls an integrated model.
FMO says Loc Troi’s environmental and social risk category is B+. The Dutch bank explains the following International Finance Corporation’s performance standards (PS) are applicable.
PS 1 is assessment and management of environmental and social risks and impacts. PS 2 is for labour and working conditions; PS 3 for resource efficiency and pollution prevention; PS 4 for community health safety and security); and PS 6 deals with biodiversity conservation and sustainable management of living natural resources.
FMO is further investigating the potential trigger of PS 5 (land acquisition and involuntary resettlement) and PS 8 (protection of cultural heritage).
Therefore, Loc Troi has to further strengthen corporate management systems and human resource policies and procedures. Additionally, a supplier code of conduct will be established.