Building private sector resilience to support smallholders

Efforts to build smallholder farmers’ resiliency are now crucial, as many face unprecedented shocks caused by climate change and widespread pests and diseases. As development practitioners, how can we most cost effectively and sustainably promote smallholder resilience to reduce global hunger, malnutrition, and poverty?

Strengthening the private sector to meet smallholder farmers’ needs is a sustainable option that reduces the cost of long-term aid in at-risk regions. Feed the Future Partnering for Innovation learned that building the capacity of agribusinesses to reduce, mitigate, adapt, manage, and recover from shocks not only strengthens the private sector and market systems, but also trickles down to smallholders who need goods and services to build their own resilience.

Much like smallholder farmers, the private sector is susceptible to stressors and development practitioners need to boost local businesses’ capacity to respond to these shocks. After all, having resilient and financially secure companies operating in rural markets means smallholders can continue to access the agricultural technologies they need to increase their incomes and household food security. With increased smallholder resiliency, the private sector gets new buyers for their goods and services, strengthening market systems and creating demand for infrastructure, incentives, and proven market traction.

Having invested in more than 50 agricultural technology companies in 17 countries, we have seen how this works on the ground and concluded that the private sector is well positioned to reduce farmer risk because they can leverage existing relationships with smallholder clients and distributors to introduce new tools and technologies. Additionally, the commercial focus of private businesses allows for rapid roll-out of new products and services, successfully and sustainably benefitting the businesses’ bottom line.

Below are three key features of Partnering for Innovation’s investment approach to build the capacity of agribusinesses to generate individual farmer and systems resiliency:

1. Supporting adaptive management: Knowing that businesses may need to adjust their approach to achieve the desired outcomes, we use adaptive management to help business leaders maintain flexibility in their decision-making process. Our pay-for performance mechanisms incentivize agribusinesses to respond to market opportunities, adapt their approach to reflect technical realities on the ground, and respond to stressors proactively and strategically.
2. Providing acceleration services: Addressing agribusinesses’ management, finance, organization, and technical gaps is critical to developing their capacity and becoming more resilient to shocks that could undermine their commercial sustainability. We increase their ability to overcome these challenges by providing guidance on investor readiness and business planning.
3. Facilitating catalytic financing: Agribusinesses need cash to implement adaptive management plans and ensure resiliency while entering new markets, introducing new services, or altering supply and distribution approaches. Through a competitive process, we invest catalytic financing through grants, giving businesses the capital to sustainably supply technologies and services to farmers. This not only secures a company’s expansion in the short-term, but building companies core capacity can also de-risks investment for commercial investors who can provide capital in the future.

This is the beginning of a series on how development practitioners can play an active role building resilient commercial agribusinesses that can address smallholder farmers’ food and income insecurity.