A business case for engaging the private sector in climate-smart solutions for smallholer farmers
This discussion paper (PDF) by CTA presents compelling evidence of win-win outcomes from private-sector investments that unlock access to technology, finance, markets, information, insurance and other risk-management tools which build the resilience of smallholder farming systems. Large and growing numbers of poor rural households depend on climate-sensitive agriculture, which has prompted the need to look beyond the public sector. As private sector, by helping smallholder farmers increase productivity, stabilise yields, improve quality of product, reduce production costs and transfer risk, such investments are helping businesses, e.g. by stabilising supply, increasing trade volumes, and accessing better quality products. Yet resilience-building partnerships between smallholders and private sector cannot be sustained without significant productivity improvements. Smallholders reaching productivity and quality thresholds is central to success. Providing the required extension support present particular challenges. The costs of providing extension support are very high, which usually only large corporation can afford to finance. Innovative, performance-based funding models for farmer support are key to unlocking shared value between smallholders and the private sector. More holistic ‘ecosystem’ approaches that address a number of risk factors, often in multi-stakeholder partnerships, have a better chance of success as they maximise complementarities. Engagement of private sector in climate-smart solutions is still in its formative stages. There is huge scope to shape how this will evolve over the next few years. Innovative deployment will have a significant impact on whether these approaches will become the preferred way of doing business. Knowledge institutions have a key role by providing evidence and refining business models. Further, they need to support a better understanding of climate risk by the private sector. Investing funding mechanisms to promote engagement of the private sector in delivering sustainable climate-smart solutions needs to be an area of focus. Affordable, tailored and long-term finance through a blend of commercial and quasi-commercial instruments could be the single most powerful instrument for shaping such investments at scale.