Interview with Nicolaus Cromme, Chief Operations Officer ad interim of the CFC
In October 2021, long-standing CFC employee Nicolaus Cromme was appointed CFC’s ad interim COO. We sat down with Nicolaus to learn more about his experience, what has changed at the CFC over the years, and what motivated him to dedicate his career to commodity sector development.
You have been working at the CFC since 2004. What attracted you to join the organization?
After finishing high school, I started working as a farm apprentice and then went to university where I earned a degree in Tropical Agriculture. After a year at MBA school, I began my career in development finance at KFW, the German Development Bank, in 1999. There I had the opportunity to explore a lot of different sectors – from privatizing seaports, to supporting the construction of rural schools and establishing microfinance institutions in Africa. It was very interesting, but I always wanted to go back to my roots – agriculture and rural development. So, when I saw the opportunity to join the CFC, I did not have to think twice.
For me, agriculture remains a fascinating field with great potential for development. I personally come from a rural area in north-western Germany, which was traditionally very poor. However, about 70 years ago, advances in animal husbandry and increasing demand for high protein food enabled local farmers to create highly integrated value chains and become world-class technology providers. This transformed the area into one of the most prosperous regions in Germany. So that’s why I am a firm believer in what the CFC does – because I know it can work.
How has the organization evolved over the years?
When I arrived in 2004, we were just starting to include the private sector in our then grant-based technical assistance projects. One of the first – and most impactful – projects where we engaged with the private sector was with Heineken and Diageo. As a consortium, we co-financed the establishment of a brand-new sorghum supply chain in Ghana and Sierra Leone with the goal of supplying the local Heineken and Diageo subsidiaries.
After a very rocky start, this project became a huge success. Because we proved that it is indeed possible to set up a reliable supply chain like this, the concept of integrating locally available raw materials has now been incorporated by all of Africa’s major breweries.
From that point on, we have permanently integrated the private sector into our projects. This has radically changed our approach – moving away from grant-based technical assistance projects to tailored loan finance solutions for private agribusiness SMEs who create impact. Our experience vindicates our belief that the private sector is the ultimate driver of innovation and sustainability.
What are the biggest challenges you have faced during your long tenure at the CFC?
Changing from an organization that was focused on grant-based technical assistance projects into a loan finance provider was a huge task. When I look back, I still cannot believe that we managed to do it in just a few years’ time. Our sector knowledge and willingness to step out our comfort zone allowed us to quickly get acquainted with the nuts and bolts of SME finance in agricultural value chains. This was only possible thanks to the great personal engagement of all our staff at the CFC.
What are the most important upcoming challenges and opportunities for the organization?
We are a revolving fund and need to recycle our funds, meaning that we have to make sure our loans are repaid to an extent that can preserve our capital base. At the same time, our exclusive focus on agriculture and specialization in smaller loans that are suitable for SMEs exposes us to rather high risks. We nevertheless specifically chose to focus on this target group, no matter how risky they might be, as they are the key drivers of growth in many emerging economies. They provide jobs, produce food and add value to raw materials. In the words of our Managing Director, at the CFC we encourage businesses to walk back along the commodities value chain so that we can reach the grassroots where poverty is stubbornly trapped.
What are the advantages of being a COO with extensive experience in the Technical Assistance Facility?
The demand for our Technical Assistance (TA) Facility Management, a service we provide to other impact-driven agri-funds, has grown over the years due to our extensive expertise in identifying, developing and managing grant-based TA projects in agriculture. I was responsible for establishing and growing this division. My background in tropical agriculture certainly helped when interacting with local agricultural companies and identifying challenges and opportunities that we could address with technical assistance. Overall, I think our seamless fusion of knowledge and finance is what makes the CFC so unique: people with a wide range of experience in different fields are working together under the same roof for a sustainable tomorrow.
The CFC has been working on establishing the Commodity Impact Investment Facility (CIIF) for over a year. Now that it has been approved, what does it mean for the future of the CFC?
It is our chance to grow as an organization and to scale up the practices we excel at. While this will not happen overnight, I am certain that we can convince potential investors to provide additional funding to deliver impact at scale. Not least because we have proven that we can do it – the demand is high and growing and far outstrips our resources.
Finally, with about eight years left to achieve the Sustainable Development Goals, how do you think that impact investing, and the CFC in particular, can accelerate the progress towards sustainable development?
I believe we have already made a contribution. In 2012, when our member states helped us reform our future strategy, we ended up at what is now called impact investing. I remember that we had to do a lot of explaining at the time when we said our “return” was social and environmental impact, but that we would also try to get our money back from borrowers to recycle it. Ultimately, we believe that our actions can show the often-reluctant financial sector in many of our member countries that it is indeed possible to provide loans to agricultural SMEs in ways that create substantial social and environmental impact.
This pandemic, ongoing conflict and persisting inequalities are proof that quick action is necessary. I believe that the donor community should pay greater attention to commodities and their related value chains, where a huge financing gap is inhibiting the growth of SMEs and smallholders. With the CFC’s strategic approach, we will continue our journey of building sustainable impact at scale.