Sourcing from smallholders: complex challenge or commercial opportunity? Perspectives from investors and agribusinesses.

Abstract

(1) This study seeks to add to the body of knowledge on the commercial and development impact potential of smallholder-sourcing agribusiness models by: quantifying the share of investment flowing specifically to agribusinesses sourcing from smallholder farmers within the broader category of agriculture; and capturing investor perspectives on the commercial viability and development impact of companies that source from smallholder farmers. (2) Based on the findings, five specific opportunities are identified for investors, agribusinesses and development partners to support investment in smallholder-sourcing models. (3) It is suggested that unlocking the opportunities of smallholder sourcing requires acknowledging and addressing the constraints in investing in smallholder-sourcing agribusinesses and the challenges in sourcing from smallholders. Investors need a critical mass of clear examples of profitable, inclusive sourcing models to ensure that there exists a path to scale that would provide an exit opportunity. Tools such as pre-investment technical assistance and blended finance can go beyond typical due diligence tools, such as feasibility studies, to actively build the pipeline of investment-ready businesses and to support sustainable growth of investee companies.