CDC, the UK government-owned development finance institution, is taking the first step to revamp its business model, following a bruising government review of its strategy, with a $32.5m direct investment in smallholder farmers in the poorest countries of sub-Saharan Africa.

Under the new strategy, CDC aims to invest half of its assets directly into businesses over the next 8-10 years. It currently invests solely via private equity funds.

The first such investment, a mix of equity and debt, is in Export Trading Group, an African agribusiness involved in crop buying, warehousing, distribution and merchandising.

“ETG combines strong development impact with a compelling commercial investment case. Private equity does not have this sort of flexibility,” said Mark Pay, managing director of direct investments at CDC.

Mr Pay expected the direct investment approach to be more cost-effective than private equity, although he said this was not the main reason for the change of strategy.

CDC, which has net assets of £2.1bn has also narrowed its geographic focus to developing countries in Africa and south Asia, at the expense of Latin America and China.

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