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Root Capital
Root Capital is a nonprofit social investment fund that provides capital, financial education, and market connections to small and growing businesses in Latin America and Africa. Headquartered in Cambridge, Massachusetts the organization also has regional offices in Costa Rica, Guatemala, Kenya, Mexico, Nicaragua, and Peru.

Root Capital's mission is to pioneer finance for grassroots businesses that build sustainable livelihoods and transform rural communities in poor, environmentally vulnerable places.

Background
Root Capital was founded in 1999 by William Foote, who had previously worked at Lehman Brothers, and as a business journalism fellow with the Institute of Current World Affairs in Mexico. These experiences gave him insight into the challenges small-scale producers faced in obtaining affordable financing to grow their businesses.

Across the developing world, the absence of capital and the isolation from viable markets exclude the rural poor—approximately 75% of the 2.6 billion people living on less than $2 a day —from the formal economy. As a result, they make a subsistence living that exposes them to drought and disease, strains the natural environment, and limits opportunities for long-term economic development. Trapped in the “missing middle,” or the gap between microfinance and corporate banking, businesses such as farmer and artisan cooperatives in Latin America and Africa lack access to capital to expand their operations and generate economic opportunities for marginalized populations.

Organizational Strategy
Root Capital's three-prong strategy—Finance, Advise, and Catalyze—is designed to respond to the market failures and inefficiencies that exclude rural grassroots businesses from affordable credit.

Strategy 1: Finance

Root Capital provides loans ranging from $25,000 to $1,000,000 to private enterprises and to businesses comprised of small-scale producers organized into associations. Annual interest rates, which typically range from 10% to 12% in U.S. dollars, are designed to be competitive with local bank rates. That is, Root Capital aims to extend finance to businesses not currently reached by commercial lenders without distorting the market through interest subsidies.

The majority of loans employ a form of value chain finance, whereby the main security is future sales contracts from buyers, primarily in North America and Europe. Root Capital uses factoring agreements, or lending against signed purchase orders between grassroots businesses and their buyers, for short-term and long-term loans. The purchase agreement, in effect, replaces or decreases the need for traditional collateral as it represents a discrete, future revenue stream pledged to repay our loan.

Strategy 2: Advise

Root Capital offers comprehensive financial education and training services and pre-investment technical assistance to executives and managers of rural businesses throughout Latin America and Africa. Through workshops and one-on-one training, the program’s goal is to equip these leaders with the financial knowledge, skills, and systems to build their businesses and successfully manage their finances for sustainable growth.

Strategy 3: Catalyze

Root Capital also seeks to elevate the field of SGB finance by sharing knowledge and best practices, engaging in networks and alliances, forming partnerships and pilots, and building talent.

Impact
Since its launch, Root Capital has provided more than $120 million in credit to 235 grassroots enterprises in 30 countries, maintaining a 99% repayment rate from its borrowers and a 100% repayment rate to its investors.

Recognition
Root Capital has been recognized in the following sources: Stanford Social Innovation Review, Ode Magazine, MarketWatch, Financial Times, LA Times, Miami Herald, Microfinance Insights, NuWire Investor, Boston Business Journal, Fast Company, New York Times, and The Wall Street Journal.

Root Capital has also been the recipient of awards, including: Social Venture Network Innovation Award, Clinton Global Initiative, Young Global Leader, Charity Navigator, Fast Company Magazine, Social Capitalist Award, Ashoka Fellowship, and Skoll Foundation Award for Social Entrepreneurship.

Partnerships
Root Capital partners with leading global buyers of ethically-sourced products, including its largest investor, Starbucks Coffee Company. Additional industry partners and investors include Ashoka, Calvert Social Investment Foundation, Citi Foundation, The David and Lucile Packard Foundation, Deutsche Bank Americas Foundation, Foley Hoag LLP, Green Mountain Coffee Roasters, Inter-American Development Bank, JPMorgan Chase Foundation, Kendeda Sustainability Fund, Peru Opportunity Fund, The Rockefeller Foundation, Skoll Foundation, and Trillium Asset Management Corporation.