Why Should I Partner with the Private Sector?
Catalyzes Private-Sector Investment
Creates Results at Market Scale
Not only does investing in the private sector have the potential to exponentially increase the number of smallholder customers for individual businesses, it also has the potential to affect the entire market system in subtler ways. By firmly establishing successful new products in the smallholder market, businesses can demonstrate the viability of selling products designed for and targeted to smallholder customers. This approach in turn attracts, or “crowds in” new agribusinesses and service providers, resulting in a wider variety of products and services available to smallholder farmers at competitive prices. For example, Partnering for Innovation invested in Kenyan plastics manufacturing company Bell Industries to produce and distribute PICS bags, hermetically sealing 50 kilogram bags for grain storage that significantly decrease smallholder postharvest losses. Bell Industries got these bags into the market with the program’s support, and the company quickly demonstrated their efficacy to smallholder customers. As Bell Industries grew scaled up their production and sale of PICS bags, other companies took note and brought competing products to the market, including GrainPRO SuperGrain bags and AgroZ bags.
In addition, this crowding-in also catalyzes the development of new complementary products and services to maintain smallholder customer relationships. For example, if investment is used to successfully market improved varieties of millet and smallholders demonstrate their willingness to pay a premium for those improved varieties, other businesses might see an opportunity to market their own improved varieties of sorghum or teff for those same smallholder customers. Finally, as businesses start to develop their smallholder customer base, they will look for new ways to improve or simplify their operations, including improving local manufacturing capacity, investing in relevant infrastructure, developing better distribution networks, and designing market campaigns to educate their customers. These investments will benefit not only the company but also other market players entering the smallholder market, and they will result in a richer and more resilient market ecosystem.
Addresses Key Market Constraints
Generates Sustainable Results
Investing in private-sector businesses sparks a sustainable cycle of profitability for both farmers and agribusinesses. Farmers benefit from commercial access to needed goods and services, because businesses have a profit incentive to build an efficient, sustainable market presence that is aimed at smallholder customers’ needs. As farmers become more productive, they have more money to spend on these businesses’ goods and services; in turn, businesses ultimately reach a volume of sales and increased profits needed to reach more smallholder customers without the need for continuing donor support. With an untapped market of 500 million smallholder farmers, integrating smallholder farmers as customers and suppliers can be profitable for businesses while also enabling farmers to take advantage of agriculture’s potential to improve their livelihoods and food security. For example, Partnering for Innovation invested in EthioChicken, a company that sells day-old chicks through a network of commissioned sales agents who raise the chicks to approximately 40 days old, at which point they have received all necessary vaccinations and are hardy enough to survive the often-difficult conditions in rural Ethiopia. By the end of the company’s partnership in 2016, they had ramped up production from 10,000 chicks to 1.3 million chicks per year and increased sales to almost 350,000 smallholder farmers. However, thanks to the program’s investment in scaling up their business, EthioChicken continued to grow its production and sales even after Partnering for Innovation’s funding ended, reaching 4.2 million chicks sold to 600,000 farmers in 2018.