Investments in this strategy aim to improve farm profitability by enabling farmers to adopt high-yield crops and technologies, mitigating exposure to risk, increasing smallholder investment in production factors, reducing food waste, and improving access to strong, stable pricing. The sections below include an overview of the strategy for achieving desired goals, supporting evidence, core metrics that help measure performance toward goals, and a curated list of resources to support collecting, reporting on, and using data for decision-making.

What

Dimensions of Impact: WHAT

Investors interested in deploying this strategy should consider the scale of the addressable problem, what positive outcomes might be, and how important the change would be to the people (or planet) experiencing it.

Key questions in this dimension include:

What is the problem the investment is trying to address? For the people experiencing the problem, how important is this change?

In many countries, smallholder farmers produce between 60% and 80% of food, often with productivity twice or even higher than that of other farmers thanks primarily to labor-intensive farming practices (6). However, this productivity advantage frequently diminishes over time, as smallholder farms tend to adopt technology – like tractors and farming equipment, improved seed varieties, and fertilizers – more slowly and may also struggle to meet quality conditions to sell to supermarkets (5). Investments in this theme can:

  • increase productivity by encouraging smallholders to adopt higher-risk, higher-yield crops, practices, and technologies (7, 8, 9);
  • increase smallholder investments in farming inputs, amount of cultivated land, and other production factors by reducing farmers’ exposure to risk (7, 10, 11);
  • reduce food waste by improving storage of harvested crops (12); and
  • improve access to better and more stable pricing, including premium pricing based on certification status (13).

What is the scale of the problem?

Smallholder farms, of which there are roughly 450 million worldwide, supply the vast majority of food consumed in sub-Saharan Africa and Asia (2, 6). Though some smallholder farms may already be relatively productive, with developing technologies and advancing agronomic practice, they may see yields increase at a slower rate than would be possible with continued access to inputs, financing, and other support.

Who

Dimensions of Impact: WHO

Investors interested in deploying this strategy should consider whom they want to target, as almost every strategy has a host of potential beneficiaries. While some investors may target women of color living in a particular rural area, others may set targets more broadly, e.g., women. Investors interested in targeting particular populations should focus on strategies that have been shown to benefit those populations.

Key questions in this dimension include:

Who/What is helped through this strategy?

Very Low-Income, Farm-Dependent Households: Over two billion of the world’s poorest individuals live in households that depend on agriculture for income and nutrition (1). Low-income smallholder farmers often lack credit, savings, or risk mitigation products to help them weather unfavorable growing conditions, livestock disease, household emergencies, or other negative events. Increasing farm profitability can increase the resources available to cushion negative shocks, as well as increasing household investments in farm production, education, vocational training, and health.

Rural Communities: Rural communities are often less able to access stable or premium pricing for their agricultural yields. Improving farm profitability—whether by increasing yields, increasing access to pricing information and markets, or decreasing food waste—can allow farmers in these more remote communities to better predict their incomes and grow their agribusinesses.

Women: Women comprise 43% of smallholder farmers globally but produce 25–30% less than their male counterparts, in part because of limited land tenure, less access to quality inputs and training, and more limited financial means to adopt improved inputs (2, 3). Investments in targeted inputs and services can therefore particularly help women, with some estimates suggesting that giving female farmers the same access as men to farming resources would reduce the global number of food insecure individuals by 100 to 150 million (2, 4).

What are the geographic attributes of those who benefit?

Most of the world’s 450 million smallholder farmers live in Asia, with smaller numbers in Africa, Latin America, and the Middle East and North Africa; most are in rural locations, though some are also peri-urban or urban (1). There are also regional differences; Asia’s Green Revolution has bypassed African production, which has persistent low agricultural labor productivity and declining farm sizes (5).

Contribution

Dimensions of Impact: CONTRIBUTION

Investors considering investing in a company or portfolio aligned with this strategy should consider whether the effect they want to have compares to what is likely to happen anyway. Is the investment's contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How much and Who?

Key questions in this dimension include:

Is the investment’s contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How Much and Who?

For this strategy, investments that allow farmers to increase the production of crops that may be sold at strong market prices will likely create better outcomes than would otherwise occur. While some of these improved outcomes could happen over time on their own, investments can help expedite progress. Of course, the extent to which this strategy can increase farm profitability depends on the investee business and the product they are bringing to market.

How Much

Dimensions of Impact: HOW MUCH

Investors deploying capital into investments aligned with this strategy should think about how significant the investment's effect might be. What is likely to be the change's breadth, depth, and duration?

Key questions in this dimension include:

How many can receive the outcome through this strategy?

Of roughly 450 million smallholder farms worldwide, almost all could benefit from increased profitability, though outcomes will vary widely by type and intensity of approach. Models that address multiple smallholder constraints or are accompanied by additional services (such as financing and access to high-quality inputs, insurance, or market linkages) will likely reach more farmers than approaches offered independently.

How much change can beneficiaries experience through this strategy?

Though the amount of change beneficiaries experience greatly depends on the specific approach taken and product or services offered, evaluations of projects in this strategy include the following:

  • Farmers in South Africa who began using a pest-resistant varietal of cotton achieved 89–129% higher yields per kilogram of seed planted compared to conventional cotton, correlating to a USD 35–65 increase in income per hectare (14).
  • Analysis of a weather insurance policy in rural China associated insurance coverage with an increase in farmers’ allocation of land to cash crops by as much as 22% compared to uninsured households (15). – A 2009 study of group-liability loans to Kenyan smallholder farmers found that participation increased household incomes by USD 200–260 over a single production period, or USD 478–641 per year (16).
  • A randomized study in Kenya found that access to interest-offering savings products increased not only long-term assets (by USD 75 three and a half years after the experiment) but also productivity and business capital (by USD 33 per month) (17).

Illustrative Investment

One Acre Fund provides bundled services, including asset-based loans, targeted training, storage services, and market information, that aim to increase the incomes of smallholder farmers (18). Their services have reached over 500,000 farmers across six countries in sub-Saharan Africa, providing thousands of farmers with new access to risk-resistant and higher-yield inputs. One Acre Fund’s services have enabled significantly increased yields and profits, with average profit increases of 55%, and increases reaching 111% in some locations.

Draw on Evidence

This mapped evidence shows what outcomes and impacts this strategy can have, based on academic and field research.

NESTA: 3
Comprehensive Impact Report

One Acre Fund. “Comprehensive Impact Report.” September 2016.

NESTA: 2
Alliances KK synthesis report of the first phase

Alliances KK. Synthesis Report of the First Phase: September 2011-September 2013.

NESTA: 1
Agricultural Productivity and Poverty Reduction: Linkages and Pathways

Schneider. K and M. K. Gugerty (2011). Agricultural Productivity and Poverty Reduction: Linkages and Pathways. The Evans school Review, Vol. 1(1): 56-74.

NESTA: 1
An integrated evaluation of strategies for enhancing productivity and profitability of resource-constrained smallholder farms in Zimbabwe

Zingore, S., E. González-Estrada, R. J. Delve, Mario Herrero, John P. Dimes, and Ken E. Giller. “An integrated evaluation of strategies for enhancing productivity and profitability of resource-constrained smallholder farms in Zimbabwe.” Agricultural systems 101, no. 1 (2009): 57-68.

NESTA: 1
Evidence on the Impact of Rural and Agricultural Finance on Clients in Sub-Saharan Africa: a Literature Review

Clark, Chris, Katie Panhorst Harris, Pierre Biscaye, Mary Kay Gugerty, & C. Leigh Anderson.“Evidence on the Impact of Rural and Agricultural Finance on Clients in Sub-Saharan Africa: a Literature Review.” EPAR Brief No. 307 / Learning Lab Technical Report No. 2 (November 2015).

NESTA: 2
Drought and Retribution: Evidence from a large scale Rainfall-Indexed Insurance Program in Mexico

Fuchs, Alan, and Hendrik Wolff. “Drought and retribution: evidence from a large-scale rainfall-indexed insurance program in Mexico.” (2016).

NESTA: 3
Impact of Weather Insurance on Small Scale Farmers: A Natural Experiment

Ibanez, Marcela, and Stephan Dietrich. “Impact of Weather Insurance on Small Scale Farmers: A Natural Experiment.” (2015).

NESTA: 1
The Impact of Weather Insurance on Consumption, Investment, and Welfare

De Nicola, Francesca. 2012. “The Impact of Weather Insurance on Consumption, Investment, and Welfare”. SSRN Scholarly Paper ID 2172422. Rochester, NY: Social Science Research Network.

NESTA: 1
Investing in smallholder agriculture for food security

Bosc, P. M., J. Berdegué, M. Goïta, J. D. van der Ploeg, K. Sekine, and L. Zhang. Investing in smallholder agriculture for food security. No. 6. HLPE, 2013.

NESTA: 1
Catalyzing Smallholder Agricultural Finance

Carroll, T., A. Stern, D. Zook, R. Funes, A. Rastegar, and Y. Lien. “Catalyzing Smallholder Agricultural Finance (Sept. 2012). Dalberg Global Development Advisors.” (2012).

NESTA: 2
Comparison of three modes of increasing benefits to farmers within agroforestry tree products market chains in Cameroon

Charly, Facheux, Amos Gyau, Diane Russell, Divine Foundjem-Tita, Charlie Mbosso, Steven Franzel, and Zac Tchoundjeu. “Comparison of three modes of improving benefits to farmers within agroforestry product market chains in Cameroon.” African Journal of Agricultural Research 7, no. 15 (2012): 2336-2343.

NESTA: 1
Input Subsidies to Improve Smallholder Maize Productivity in Malawi: Toward an African Green Revolution

Denning, Glenn, Patrick Kabambe, Pedro Sanchez, Alia Malik, Rafael Flor, Rebbie Harawa, Phelire Nkhoma et al. “Input subsidies to improve smallholder maize productivity in Malawi: Toward an African Green Revolution.” PLoS biology 7, no. 1 (2009): e1000023.

NESTA: 2
PROFIT Zambia Impact Assessment

DAI. “PROFIT Zambia Impact Assessment.” 2010.

NESTA: 1
Productivity and Profitability of Organic Farming Systems in East Africa

Ton, Peter. “Productivity and profitability of organic farming systems in East Africa.” (2013).

NESTA: 2
Food Security: A Collaboration Worth Its Weight in Grain

Samberg, Leah H. “Food security: A collaboration worth its weight in grain.” Nature 537, no. 7622 (2016): 624-625.

NESTA: 1
Primary Farming (Agriculture)

International Finance Corporation. (2012a). Primary Farming (Agriculture). Poverty Literature Review Brief.

Each resource is assigned a rating of rigor according to the NESTA Standards of Evidence.

Define Metrics

Core Metrics

This starter set of core metrics — chosen from the IRIS catalog with the input of impact investors who work in this area — indicate performance toward objectives within this strategy. They can help with setting targets, tracking performance, and managing toward success.

Additional Metrics

While the above core metrics provide a starter set of measurements that can show outcomes of a portfolio targeted toward this goal, the additional metrics below — or others from the IRIS catalog — can provide more nuance and depth to understanding your impact.