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Summary
Small scale producers are face significant challenges on the front-lines of climate change and face significant challenges as weather patterns continue to shift.
They also stewards of land and other ecosystems and can take actions which deliver climate benefits like including carbon sequestration, efficient water usage, biodiversity preservation while also meeting our food security needs.
Farmer While farmer groups can help empower small scale producers aggregate and overcome many of the to overcome their diseconomies of scale that they face. While there is an emerging support ecosystem for these farmer groups, they universally struggle with quick access to low-cost capital which inhibits their growth.
Farmer groups know the investments they need to make in order to enhance their climate resilience and deliver value to their farmer members. We are giving these groups
Digital Green is launching a platform for farmer groups to share their needs and connect with funders who want to support them coupled with training and capacity building for farmer groups members.
Timely grants can be catalytic and give farmer groups a much needed boost which will help them mature and unlock further opportunities including access to government subsidy programs and commercial banks / capital markets.
Key Learning Questions (as of March 6)
What donor persona are we targeting?
Hypothesis is to focus on small foundations / family offices. Other options: Individual social investors/donors; Large Foundations; DFIs; Impact investors; CS; Crypto
Closely related to this is what “theme” do we want to showcase as that influences which funders to target; current take is to prioritize climate adaptation / resilience. Other options are livelihoods / farmer income, gender inclusivity, GHG mitigation, etc.
Schedule brainstorm w Strategy / BD team. Aiming for Apr 8 or Apr 12
What sort of investments do we want to initially showcase (eg, what are the “use of proceeds”)? While this will be driven by farmer group needs and donor personas, want to start with a focus area.
Hypothesis is to focus on assets which support climate resilience which could include sustainable ag mechanization (zero tillage machines, laser land leveling), resource efficiency (eg, drip irrigation), reducing food wastage (cold storage), etc
Other areas to consider:
Funding for adopting sustainable production practices; up-front payment which would enable farmers to achieve certification or tap into ecosystem services markets
Direct cash transfers which FPO members can use to procure service which don't make sense for the FPO to own (eg, warehousing for farmer groups working with cereals, transportation, tractor rental, etc.)
Develop a list of “Top 5” technologies under the “climate resilient assets” theme which are backed by solid evidence for their impact. Speaking with JK on Apr 8 to explore further, reached out to Maria at ADMI who has worked in this space. There are some good reports available here as well.
What sort of impact metrics and stories do farmer groups need to generate for funders?
This will be informed by (1)
Can KDE be adapted as a tool to gather FPO level metrics?
How should we navigate govt subsidies?
Sample potential investment: 15 lakh for a 2MW solar powered cold storage unit
Expect 60% to the covered by govt subsidy (Agri Infra fund), 25% from funding platform donors and remainder from farmer groups (to ensure skin in the game)
Given collecting the govt subsidy funds will take a long time, does it make sense for funding platform to cover the 60% tranche and then recover payment once the govt subsidy finally comes? This might not be practical so maybe the 60% is just a further investment we make early days
Context
If we pursue an "access to capital" path, I think we should give grants to farmer groups (where they put up say 33% of the required proceeds to have skin the game) rather than debt. The pool of grant financing that could be mobilized is pretty large and it feels closer to our DNA.
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