Smallholder farmers represent a huge and largely untapped market segment for agricultural companies. Despite there being 500 million smallholders in the world, most of these farmers lack commercial access to inputs, storage, loans, and other products and services that would increase their productivity and incomes, and build strong agricultural sectors in countries across the world. But smallholder markets are risky to enter, being poorly understood and producing small margins, so even companies that want to expand into these markets are hesitant. Donor funding, such as United States Agency for International Development (USAID) funding through Feed the Future Partnering for Innovation, can help offset the initial risk of entering or expanding in those markets, providing companies with the ability and confidence to invest their own money in new products, services, and strategies in smallholder markets.
Many of Partnering for Innovation’s partnerships help companies implement new distribution and marketing activities targeted at smallholder farmers, unlocking this massive market segment for these companies. Once companies are established in smallholder markets, they serve as a sustainable, long-term presence (unlike most development projects), providing access to agricultural products and services that are essential for smallholders to produce at a commercial level, increasing the amount and quality of food available as well as incomes for farmers and others working in agriculture like input suppliers and aggregators.
With a program investment of $25.8 million, Partnering for Innovation has generated $42.2 in private sector investment through its partnerships. For example, Partnering for Innovation’s $6.4 million investment in commodities trader Export Marketing Company Limited (EMCL) in Mozambique spurred EMCL to invest $13.6 in building 23 new agricultural hubs in underserved rural areas, providing smallholder farmers with access to inputs, mechanization, and storage, and greatly expanding EMCL’s commodities sourcing. With Partnering for Innovation’s support, EMCL is both expanding its business and providing smallholder farmers with the products and services they need to build productive and profitable farms.
Donor funding can be key in enabling companies to expand in emerging and developing markets. By helping offset the risk of entering these market, donors like USAID are spurring sustainable, private sector-led development that puts US taxpayer dollars to good use building markets and increasing incomes across the world.