Nothing brings Dorcas Wambua more joy than providing her eight children with fresh, healthy food to eat. There have been times, however, when her family has gone hungry. Dorcas and her husband are life-long farmers in rural Kenya, but they haven’t been able to invest in the long-term health of their land or plan for changes in weather. Their harvest would be small, leaving them with little to eat and nothing to sell.

Dorcas, a customer of Acumen investment Tulaa, is one of the 2 billion people who live and work on smallholder farms across the globe. These men and women produce roughly 70 percent of the world’s food, but they often live on less than $2 a day and struggle to make ends meet. With the global population on the rise, there is an increasing pressure on smallholder farmers to meet the demand for food. If that weren’t enough, their farms — and their livelihoods — are expected to bear the brunt of the negative effects of climate change, from severe droughts to intense rain.

As temperatures rise, these farmers face an uphill battle against poverty and the uncertainties of climate change. What if we could support farmers the way they have supported society — and arm them with the tools, knowledge and opportunities they need to build a secure, sustainable future for themselves and their families?

PLANTING OUR FIRST SEEDS

When Acumen first started investing in agriculture in 2008, we believed that smallholder farmers lived in poverty because of low productivity. With most farmers cultivating only a few hectares of land, we thought more robust yields would create a pathway out of poverty. We started looking at companies providing inputs, like drought-resistant seeds and better irrigation technology, which would lead to greater yields — and incomes.

Over the next four years, we invested in four input companies. One of our first investments was MicroDrip, which sold smart irrigation solutions to smallholder farmers in rural areas of Pakistan. Over a five-year period, the company only reached a few hundred farmers. Our other investments too struggled with securing farmers as customers.

What became clear was that better inputs were only one part of the solution. We quickly learned that smallholder farmers are very reluctant to take risks. Farmers don’t earn very much, and their income is seasonal and often affected by volatile commodity prices. They stand to lose significantly if a new adoption fails. Farmers can certainly develop the willingness to experiment, but companies need to commit time and money into developing awareness, knowledge and trust, which is not always an investment that small enterprises can manage, especially in their early days.

DIGGING DEEPER

Learning from our failures, we started to examine the agriculture value chain, looking at which aspects might impact the livelihoods of smallholder farmers, and explore how we could bundle different offerings together to provide them with a more appealing value proposition. While they need better inputs, we came to learn that they required much more if they were to actually see the fruits of their labor.

First off, farmers needed affordable credit to invest in these inputs without risk of putting themselves or their families in debt. In addition, they are often born into farming or learn how to farm from community members passing down outdated practices. Before they can make use of inputs, they need better access to information, including the benefits of new, modern practices or innovations. Farmers may also need training to continue to increase their yields and ensure sustainability of their farms.

Even with the right inputs and modern practices, however, poor access to markets can be a real challenge for farmers. When their harvests come in, they don’t always have the means to arrange transport and connect directly with buyers, or the access to post-harvest facilities to store produce and keep it fresh. Consequently, farmers often end up selling to middlemen at below-market prices, which not only keeps them in poverty but also makes them less likely to make long-term investments in their farms.

In 2011, we started investing in companies that helped farmers afford inputs, train them on better agricultural practices, keep them informed of market prices, and provide fair access to markets. In 2011, for example, we invested in Juhudi Kilimo, a microfinance company that provides loans to Kenya’s smallholder farms. Juhudi believes that capital is one of the most important inputs we can provide to farmers, so it lends for productive assets, like cows, which allow farmers to generate an additional income by selling their milk. Financing for productive assets also means that, even in the event of default, the asset could be returned to repay the loan, helping safeguard farmers against over-indebtedness. Today, Juhudi is lending to more than 35,000 farmers, and 85 percent of new borrowers say that the impact on income has been significant.

THE FUTURE OF FARMING

Over the last decade, Acumen has invested $34 million in 24 agriculture businesses across three continents, impacting 13 million lives. We’ve leveraged patient capital to experiment with business models, support innovations, and catalyze enterprises. We’ve learned from both our successes and failures, but there is more work to do.

With the global population expected to reach more than 9 billion by 2050, we need to support smallholder farmers to ensure they not only carry on the important work of feeding the world but have the opportunity to live the lives they want. The problems of poverty, food insecurity, and climate change are interconnected, and agriculture — from the farmers who tend the land to the crops they grow — needs to become more climate-resilient.

As we look to the future, we will continue to support the next wave of early-stage companies that empower smallholder farmers in India, Latin America, and East and West Africa with philanthropic, pioneer capital.

We are also building a major investment initiative in sub-Saharan Africa that focuses on three critical areas that not only help farmers improve their livelihoods but also protect against climate change.

Aggregator Platforms are one of the most powerful ways to improve the livelihoods of smallholder farmers.They are a one-stop shop, seeking to address multiple farmer needs like inputs, credit, training, and access to markets. Aggregators procure produce directly from farmers then pool it to sell to markets, ensuring a consistent and large supply for buyers. As a result, they have greater negotiating power when it comes to prices than smallholder farmers alone.

Digital Platforms use mobile technology to provide farmers with training, weather updates, and market prices. They also connect them to markets for selling crops as well as buying inputs and financial services.

Innovative Financial Services provide farmers with access to formal financial services like affordable credit, savings accounts and insurance solutions, which lets them purchase inputs or productive assets to diversify their incomes.

What’s exciting is that governments in Africa, India, Latin America and beyond are recognizing the threat climate change poses to agricultural production and food security and, as a result, are developing policy and private-sector initiatives to protect and support farming communities. In addition, advances in mobile technology are also making it easier to create virtual marketplaces and bring farmers real-time information about the weather, farming practices, market prices, and more.

There are a growing number of social enterprises taking a climate lens to the challenges of smallholder farmers, but they need the capital to bring their innovations to scale. Right now, agriculture only accounts for six percent of total assets under management for impact investors. By putting more money into this underinvested sector, we believe we can bridge the gaps in the agriculture chain and provide farmers with the tools, knowledge and financing they need for a secure, sustainable future.

By continuing to evolve our investment strategy, our hope is to deepen our knowledge to help our companies fill in gaps to better understand and serve the needs of smallholder farmers. We want to break the cycle of poverty for smallholder farmers and prepare them for the impacts of climate change because their future is our future.