The business advantage: Mobilizing private sector-led climate actions in agriculture
This report (PDF) by IFAD examines how public funds can mobilize private resources for climate change adaptation, how much impact is generated through public-private partnerships, and how such impact is delivered to the farmer households. Scaling up and channeling private capital is crucial in limiting climate change. However, on the adaptation to climate change by smallholder farmers, little in known about private financing flows. The Adaptation for Smallholder Agriculture Programme (ASAP) grant of IFAD operates as a de-risking or insurance instrument to incentivize the private sector to invest in adaptation investments for smallholder farmers. ASAP grants have been successfully used as a tool to lower the level of investment risk and thereby encourage the private actors at all levels to participate in adaptation actions. In addition to contributing financial resources, beneficiaries are empowered, gradually gain independence from public support and build trust with other stakeholders in communities. Existing engagement mechanisms in ASAP have delivered positive economic returns on investment. Evidence of social returns was also documented, including reduced malnutrition and improved skills of farmers. Furthermore, the investment schemes with the private sector have also generated modest positive environmental returns. Benefits generated are distributed in large part to smallholders farmers. In addition to financial gains, their skills have been augmented and they have been empowered in dealing with buyers. There are four different engagement strategies for private actors: development of new enterprises; enhancement of existing micro, small or medium-sized enterprises (MSMEs); leveraging investment of non-MSMEs; and leveraging resources of microfinance institutions and commercial banks. In conclusion, when incentives targeted at the right needs, public funds can be used to harness the resources from private sector and aid national efforts to address multiple Sustainable Development Goals (SDGs).