How investors can help build climate resilience for smallholder farmers

Meet Amina, a 31-year-old farmer managing four acres of leased land in Western Niger state, Nigeria (Amina is a fictitious character that represents the impact results and voices from real smallholder farmers in Nigeria, as reported in the 60 Decibels Resilience Deep Dive Impact study). Amina and her neighbors can clearly recount the devastating floods that ruined their crops and livelihoods last year, sending Amina and her community into a state of desperation. Amina recalls, “[When] flooding occurs in my farm, I don’t know what to do. I will just leave it.“ The hardship meant cutting down on essentials, such as three meals a day for her and her family and education for her eldest child for the remainder of the school term.

Niger State is known to be one of the most vulnerable regions to climate change in the world, having seen increasing variability of rainfall with extreme flooding followed by periods of drought, resulting in near-impossible conditions to cultivate rainfed crops with traditional methods. However, thanks to Cropsafe, Amina now has access to critical inputs, climate-smart farming training, and water pumps to prevent her fields from being destroyed by flooding. Today, Amina has bounced back and feels more prepared than ever to withstand future climate shocks. “I’ve learned to use organic fertilizers to allow my soils to better withstand flooding,” she says, “and I’ve applied chemicals ahead of time to protect my crops from pests.”

Challenging and erratic conditions similar to what Amina experienced are no longer confined to hypothetical climate models. They are part of the day-to-day experience for millions of people and disproportionately impact smallholder farmers like Amina who live below the poverty line. It is estimated that at the current rate, climate change could push over 100 million people below the poverty line by 2030. The impact we’re seeing with companies like Cropsafe proves that we can unlock the necessary resources to create an ecosystem that will enable farmers to adapt and build their resilience. To address the size of the challenge, we need direct, patient, and intentional investment with robust measurement methods in place to understand the most effective business models for building smallholder farmer resilience. This insight will enable us to magnify the impact of every dollar invested.

Defining Climate Resilience

Climate resilience is defined as farmers’ ability to adapt, absorb shocks, and access critical services. For over 20 years, Acumen has invested in more than 50 agribusinesses that are building farmers’ resilience by:

• Improving farmers’ ability to use adaptive climate-smart agricultural practices; 
• Improving access to key enablers, such as market access and credit, and; 
• Supporting the farmers to build up sufficient savings to bounce back from any climate event.

For example, KaFresh provides farmers with an organic coating to spray on their produce to improve its shelf-life 10 times, significantly reducing post-harvest losses and increasing the incomes of the smallholder farmers. Oorja provides solar irrigation as a service, significantly increasing farmer yields and incomes. This is absolutely key as these farmers operate in drought-prone areas with unstable energy supply. Our investments contribute towards a diverse market of innovative products and services that will enable farmers to build resilience and thrive despite the impacts of climate change. 

While our companies continue to iterate their business models, we help them learn about the unique climate change risks farmers face on the ground by bringing the farmer’s voice into the pre-investment and post-investment process. We’ve developed a dedicated resilience tool to assess and track farmer profiles across the three pillars of resilience: their ability to adapt, absorb shocks, and access to critical services. 

To build resilience, there is no silver bullet, but rather a menu of services

We first piloted the resilience tool on Cropsafe, one of Acumen’s recent investments under Trellis, a philanthropically backed venture investing initiative. Cropsafe is a farmer allied intermediary business model that aggregates agricultural produce, provides access to value-adding drying services, and provides market access to over 3,000 smallholder farmers. Beyond their core offering, Cropsafe is a one-stop shop for many farmers with relevant information, technologies, and training, specifically training to build farmer capacity in climate-smart agricultural practices. For example, the company offers training on no-till, which requires farmers to avoid turning (or disturbing) the soil to maintain moisture and soil structure, a core practice in regenerative agriculture.

Through Trellis, Acumen will better understand how resilient farmers are by assessing how many adaptation practices they are actively using, how many enablers they have access to, and whether they have easy access to emergency funds in the face of a climate shock. The tool further helps Acumen better understand how Cropsafe contributed towards the farmer’s resilience, and finally how we can build the resilience of smallholder farmers year-over-year, generation over generation by identifying areas of improvement. The table below provides the indicators assessed across the pillars of resilience.

Impact Measurement for impact validation, leading to Impact Management

Assessing Cropsafe’s smallholder farmers across these three core pillars gave us insight into their resilience and how Cropsafe has contributed to it. Farmers acknowledged the positive impact of the company on their livelihoods, and Cropsafe scored well beyond industry standards. 

1. Adaptation Practices: Cropsafe trains farmers in climate-smart agricultural practices. On average, farmers apply 3.9 out of 7 recommended adaptive practices. This adaptability has led to 87% of farmers reporting increased production and 94% reporting higher earnings. 81% of the farmers reported their improved usage of adaptation practices because of Cropsafe.
   
2. Access to Enablers: Cropsafe ensures farmers can access critical resources such as quality seeds, fertilizers, and finance. Furthermore, 118 out of 202 farmers with reliable water sources were supported by Cropsafe to introduce irrigation into their farming practices. Garba, a farmer near Kano, emphasizes, “Irrigation is to farming what money is to banking. It determines the success of the season.” On average, farmers access 4.5 out of 7 enablers, boosting their resilience and productivity, and 80% of farmers indicated that their increased preparedness for climate shocks is a result of Cropsafe.
   
3. Absorption of Shocks: Resilience is also about absorbing shocks, not solely adaptation. Cropsafe supports farmers in building financial reserves that are key in bouncing back after a shock. 93% of farmers indicate that Cropsafe has improved their ability to access the means necessary to recover from unforeseen events, ensuring their livelihoods remain intact.

Digging even deeper into the results, Osagie Azeta, the founder of Cropsafe, shared that what sets Cropsafe apart is twofold: 1) Cropsafe, through their drying services, is able to pay smallholder farmers highly competitive prices three months earlier than other buyers who do not offer drying services, and;  2) Cropsafe is dedicated to long-term impact by providing training, inputs and pro-bono services in return for farmer produce at a future date. 99% of respondents reported an increase in their quality of life, and the company achieved an impressive Net Promoter Score of 90 out of 100, validating Cropsafe’s impact aspirations and demonstrating that farmers value the services. But the real impact of the study was the action it allowed Osagie to take:

1. Identify which agricultural practices Cropsafe needs to introduce into their offering, or double down on, and; 
2. Recognize that Cropsafe’s extension services and agent network should leverage individuals from the communities that they’re serving. Doing so enables Cropsafe to build trust and establish their commitment to the community for the long run.

Building a resilient future is possible if we have the courage and patience

Cropsafe exemplifies the transformative power of building resilience. For Acumen, investing in businesses like Cropsafe is not a risky investment; rather, it’s risky not to invest. By investing Patient Capital into early-stage companies, we enable the time necessary to build adaptive, accessible, and absorptive practices, and we ensure that smallholder farmers not only survive but thrive in the face of climate change. As Osagie said, “There is no way to do this work without the support of Patient Capital.”

But companies and their solutions need more than just Patient Capital. They need more of the right type of capital and partnerships. The Global Resilience Partnership (GRP) together with 80+ partners collectively advance resilience through identifying and scaling on-the-ground innovation, generating and sharing knowledge, and shaping policy. Jesper Hörnberg, CEO of GRP, articulates the need for blended finance to lower the cost of capital, the very type of finance that enables Cropsafe to have the resources and time to build resilience. Jesper notes, “Blended finance can catalyze and unlock new funding flows, which can promote stability and enable resilience.”

GRP’s work with organizations, including UNDP, the Global Environmental Facility, the Near East Foundation, and Mountain Harvest who provides small-scale farmers in Uganda and Sudan with access to more fairly priced capital. GRP also works with the Shockwave Foundation and the Munich Re Foundation to support organizations and companies in East Africa with mentoring and capital through the Resilient Agriculture Innovations for Nature (RAIN) Challenge. Be it in Uganda, Sudan, or Western Nigeria it is clear that building resilience is possible with the right capital and right partnerships.

Acumen’s investment into Cropsafe’s journey shows that with patient capital and intentional support, a significant impact can be achieved despite operating in challenging environments. From this impact study, it is also clear that we can gather resilience data on smallholder farmers, deepen our analysis, and continue collaborating with partners to scale these impactful solutions. And finally, it is possible to achieve this impact while keeping the farmer at the core.  The millions of farmers just like Amina deserve access to companies like Cropsafe, they deserve to be able to become more resilient, and they deserve to live dignified lives.