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Decision and Policy Analysis Research Area – DAPA

New Business Models for Sustainable Trading Relationships in Agriculture: Series Introduction

Ugandan farmers evaluating bean progress

Photo via Neil Palmer/CIAT

This post is the introduction for series of posts specifically focusing on new business models for sustainable trading relationships.  This series will discuss the emerging solutions in the private sector for small farmer inclusion, the corresponding impact on livelihoods of the rural poor, and the expanding market for sustainable business development for the public sector.

Following the money often leads to some pretty interesting insights.   And if you happen to work in international development, you’ve likely noticed a good deal of money being channeled into the hands of social entrepreneurs.   Backed by social investment firms, social impact banks, and foundations, investment actors are  zeroing in on enterprises committed to both financial returns and impact,  everything from rural water access , eye care services and surgery,  affordable housing and sustainable sourcing, some of the most pressing issues of the world today are being addressed.

With nearly half of the world living below the internationally defined poverty line of less than USD$2, the pooled aggregate demand for businesses and services particularly directed at the needs of the poor (also called the Bottom of the Pyramid) is the emerging arena combining business growth with social development.

The Potential For Social Investment and Rural Enterprise Development

Here within the Linking Farmers to Market program at CIAT, an explosion of new partnerships and learning alliances are occurring  across the public/private aisle.   Learning from the traditional business models we’ve seen in place for the last few decades,  we’ve joined up with a network of organizations (New Business Modes for Sustainable Trading Relationships) committed to capitalizing on a budding framework for new business models of inclusion for  small growers in the developing world.

This international consortium of organizations working towards understanding how small farmer integation occurs at the retail level,  is housed at the International Institute for Economic Development (IIED) and in partnership with Catholic Relief Services, IIED, Rainforest Alliance, CIAT, Sustainable Food Lab, and the Bill and Melinda Gates Foundation.

Principles of New Business Models:

From examining the literature on value chains and following discussions with the private sector, NGO partners, and drawing on our own experience through pilot business model projects, we have identified as set of principles that can serve as a framework for diagnosing and improving trading relationship when moving to a scalable business model.   This framework continues to evolve as global advances are made and smallholders are creatively engaged in dynamic markets.  We have seen consistent patterns in the cases examined that supply chains are most robust for smallholders over time where there is a structure in the value chain for:

1.  Chain-wide collaboration on shared goals and identified champions for these goals;

2.  Fair and transparent chain governance;

3. New market linkages;

4.  Equitable access to services;

5.  Inclusive innovations in the chain; and

6.  Measurement of outcomes throughout the chain, with those measures shared between chain actors and used for continual commercial and social improvement.

This series will focus on our research around these models and we will highlight interesting companies, discuss the tenets of what our consortium has denoted as hallmarks of sustainable trading partnerships, and recognizing that pro-poor development is in the interest of both the public and the private sector.

“Three-quarters of the world’s poorest people get their food and income by farming small plots of land.  So if we can make small-holder farming more productive and more profitable, we can have a massive impact on hunger and nutrition and poverty… helping the poorest small-holder farmers grow more crops and get them to market is the most powerful lever for reducing hunger and poverty.”

-Bill Gates, October 15 World Food Prize Speach

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