Climate Resilient Agriculture

(CRAg) Whitepaper
Climate Resilient Agriculture (CRAg) Whitepaper

Summary

Shocks from conflict in Ukraine and the COVID-19 Digital solutions in various forms have emerged
pandemic are today impacting the food security of as potential game-changers in both market
vulnerable populations globally. Climate change functioning and the delivery of productivity
represents an even greater threat in the longer- enhancing solutions. What constrains the
term and adaptation is essential to creating more potential of these innovations? Taking a systems
resilient global agri-food systems. This white perspective on the agri-food sector, three broad
paper examines the prospects for adaptation inter-related aspects need to be considered:
leveraging digital technology focusing on how
solutions can be financed. Finance here is not a. Integration and coordination
regarded as simply another input in agriculture in value chains. This is a central problem
alongside seeds or fertilizer – rather it represents in developing economies, characterised
decision-making about what futures will be by numerous smallholder farmers and
pursued and how uncertainties will be handled. businesses with poor communication,
Nor can finance be considered in isolation weak physical infrastructure, and
from the real-world problems it needs to solve. ineffective formal institutions.
Members of the Climate Resilient Agriculture b. Diffusion of innovation across
(CRAg) Working Group have already been involved value chain participants. Even where
in many initiatives relevant to shaping financial innovations are ostensibly well engineered
markets in developing economies with a strong for the context, frameworks of understanding,
focus on smallholder agriculture. The paper sets values, and risk perceptions play a significant
out a basic framing to help unpack the challenges role in shaping the diffusion of innovation
faced, draw insights from on-going innovation and hence the adoption of productivity and
and identify the key frontier issues which CRAg resilience enhancing technologies.
members and others need to tackle in order to
accelerate change. c. Financing innovation end-to-end. The
transformation of agri-food systems generally
Nearly three-quarters of the world’s estimated requires upfront investment and dealing with
570 million farmers cultivate less than one the problem of the inherent risks posed by
hectare. An enormous emphasis has been placed change. Smallholders and small-scale firms
by government and development agencies on in agrifood systems are frequently especially
supporting smallholder-based food production constrained in their ability to raise the finance
systems but often with disappointing results. This to enable a shift from business-as-usual.
has led to some pessimism regarding the future of
small-scale agriculture. While some small farms To be effective a strong collective effort is needed
will choose to grow rapidly others will adapt to by development actors to determine practically
operate successfully at a relatively modest scale how the promise of digital technology can be
finding new niches where advantage persists for harnessed in a way which addresses the practical
smaller-scale operation. In short, adaptation does problem of change – many of which fall within the
not mean the inexorable extinction of small-scale locus of these three areas. Finding viable routes
production. The digital revolution has directly to financing prospective transformation pathways
and indirectly created a range of agri-food system to resilience will be decisive. The CRAg working
innovations which open up new possibilities for group has the opportunity to play a catalytic role
tackling the challenges of transformation. The in enabling collaboration across a diverse set of
full potential of these technical innovations could actors seeking to exploit the potential of digital
transform smallholder agriculture – introducing to unlock resilient agricultural transformation.
transparency in information flows, creating Its strength at the outset will lie in combining
cost efficiencies, strengthening the connection the diversity of specific problems, solutions and
between value chain actors and ultimately activities in which the group is involved with
improving farmer incomes. pursuing a shared learning agenda drawing
on this diversity.

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Climate Resilient Agriculture (CRAg) Whitepaper

1 Resilience and agri-food systems

Enormous progress has been made in agricultural Female farmers have lower rates of agricultural
productivity in many parts of the world. The US is productivity than male farmers. The productivity
a net food exporter with only 1.3% of its workforce gap gives rise to a huge opportunity for economic,
directly engaged in agriculture.1 Meanwhile, social and climate4 impact: growth generated by
agricultural productivity in the world’s developing the agriculture sector in sub-Saharan Africa is
regions remains low. Smallholder farmers in estimated to be eleven times more effective in
Africa and Asia are often among the poorest reducing poverty than growth in all other sectors.5
individuals in their respective countries facing
poverty, hunger, and malnutrition. Climate change is now impacting already
fragile agri-food systems further undermining
the resilience of smallholder farmers and
those dependent on agriculture. Changes
Nearly three-quarters (72%) in temperature and precipitation patterns,
increased frequency and intensity of extreme
of the world’s estimated 570 weather events, changes in pest and disease
cycles, decreased water availability and loss of
million farmers cultivate soil fertility mean that many current systems of
less than one hectare2 and agricultural production will no longer sustain
even meagre livelihoods. The case for agricultural
comprise a large proportion transformation in many developing economies is
of the world’s poor, who live stronger and more urgent than ever.
The digital revolution creates new possibilities
on less than $2.15 a day.3 for change and an unparalleled opportunity to
achieve this transformation.

Some care is needed in attempting to define just some necessary features of what a resilient global
what is meant by successful transformation. The food system would look like. These provide useful
UN’s sustainable development goals (SDGs) offer pointers, even if incomplete:

1
Source: US Department of Agriculture, Economic Research Service using data from US Department of Commerce, Bureau of Economic Analysis
(SAEMP25N) data as at 30th Sept 2022, available here.
2
Lowder, S.K., Skoet, J. & Raney, T. (2016) “The Number, Size, and Distribution of Farms, Smallholder Farms, and Family Farms Worldwide”, World
Development Vol 877, Nov 2016 pp.16-29, available here.
3
See Fu, H. & Van Nieuwkoop, M. (2023) Mind the gap: enabling data-smart agriculture for all (worldbank.org)
4
Improving agricultural productivity has a direct economic impact, enabling increased value addition, raising the incomes of farmers, and reducing
the prices of food. This has direct social benefits by improving the livelihoods of lower-income households who are disproportionately engaged
in agriculture and in whose budget food generally plays a greater role. Meanwhile, climate impact can be mitigated through better use of existing
farmed land, which reduces pressure on opening open new tracts and deforestation. Greater productivity may also be associated with reduced
waste and improved soil health and biomass.
5
https://agra.org/news/africas-smallholder-farmers-are-the-linchpin-to-economic-success/

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Climate Resilient Agriculture (CRAg) Whitepaper

2 Climate resilient agri-food systems

transformation
Some care is needed in attempting to define just intensity and economies of scale, it remains a
what is meant by successful transformation. The major theme in agricultural development. Major
UN’s sustainable development goals (SDGs) offer agro-industrial corporations are now turning
some necessary features of what a resilient global their attention to the resilience challenge.
food system would look like. These provide useful There are, however, major difficulties with this
pointers, even if incomplete: approach. Measured by the yardstick of the four
i. Tackles hunger – produces the quantity SDG derived pointers above, while agricultural
of food needed to support the world’s industrialisation historically delivered on its
population and distribute it effectively (SDG 2) immediate goal of tackling hunger, it has become
increasingly evident that it scores poorly against
ii. Supports health and nutrition – the quality the other three. These challenges are not new.
of food provides the diversity of nutrients Many solutions have already emerged to known
necessary for humans to flourish and avoids
problems ranging from preserving soil fertility
diets that harm health (SDG 3)
through low-tillage to improving diets and
iii. Reliability – meets global demands for food drastically reducing environmental impact through
over time (SDG 2) reduced consumption of meat and refined sugars.
Other as yet unproven technologies such as
iv. Sustainable – production which aligns with perennial cereals and precision fermentation hold
a path to Net Zero and does not deplete
considerable promise. The slow progress against
the ecological resources on which both
agriculture and every other aspect of life on potential suggests systemic constraints. Growing
earth depends (SDGs 12, 13, 15) scale and concentration in the agri-food industry at
a global level is associated with market power and
Transformation of agri-food systems has been the exertion of disproportionate political influence
a long-standing aspiration for countries in the over policy and regulation especially where it is
global South emerging from the colonial period set to impact adversely on established business
as a driver of food security and wider economic models and interests.6
development. The Green Revolution which started
in the 1960s was focused on farm level productivity,
exploiting new varietals, fertilisers, herbicides
and pesticides alongside mechanised tillage and
irrigation. Results in a limited number of targeted
Farming is the world’s greatest cause
crops in Latin America and Asia were dramatic.
of environmental destruction—and the
Africa, meanwhile, generally failed to make much
headway where the background context was one we are least prepared to talk about.
almost invariably less favourable from a socio- We have ploughed, fenced, and grazed
political and economic perspective. great tracts of the planet, felling forests,
killing wildlife, and poisoning rivers and
The world’s poorest and most food vulnerable oceans to feed ourselves. Yet millions still
regions are characterised by highly disaggregated, go hungry and the price of food is rising
very small-scale production in marked contrast faster than ever. Now the food system
to the world’s most productive regions which
itself is beginning to falter
are closely integrated and based on large-scale
production. The success of the latter leads – from the introduction to
to an increasingly industrialised agricultural Monbiot, G., (2022).
modernisation pathway. Emphasising the
prospective returns from increasing capital

6
An obvious highly relevant illustration of this is in relation to the problem of environmental externalities such as greenhouse gas emissions and
pollution but also growing concerns over nutrition. Regulatory action has frequently been resisted as a result of successful industry lobbying
(Clapp, J.,2023)

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Climate Resilient Agriculture (CRAg) Whitepaper

Moreover, development pathways involving sharp solve. Each step of the pathway to change has to
changes in complex socio-economic systems be viable economically, socially and politically.
have often produced unanticipated adverse
impacts and failed to deliver the outcomes A prospective third way can be conceived which
sought. With large populations directly dependent seeks to steer between the two polar extremes.
on small-scale agriculture for their livelihoods, This could be characterised by eclecticism which
displacement by more concentrated forms of seeks to balance the need for some degree of
production creates intractable distributional and farm expansion, intensification and consolidation
thus political economy challenges. (for the familiar reasons of technical scale
economies and benefits from division of labour/
specialisation) with reducing the concentration
of market power and increased flexibility.
As a result, an enormous Thus, rather than implicitly assuming that all
smallholder farms need to be reached
emphasis has been placed and modernised, this pathway admits the
notion of differentiation.
by government and
development agencies on
supporting smallholder- Some small farms will
based food production choose to grow rapidly
systems but often with and others will adapt to
disappointing results.7 operate successfully at a
smaller scale with some
finding new niches where
With reasons to be sceptical over the viability of there can be advantages to
transformation based on either a dash towards
intensive industrialised farming or only very smaller-scale operation.10
gradual incremental improvements in basic
smallholder production, what would a viable
Adaptation does not mean
pathway look like? Elements of both seem the inexorable extinction of
essential. Smallholder agricultural production
based on traditional farming methods cannot small-scale production.
sustainably feed eight billion people, leave aside
the nearly ten billion projected for 20508 under
significantly less favourable ecological conditions
in many places. But the environmental impact of
Organisationally the vision is one of increased
current intensive industrial farming technology
rather than reduced diversity with a mixture
renders it unviable. Even where the basic science
of micro, small, medium and large players. It
and core technologies necessary to move towards
probably means much less at either extreme –
resilience have already been developed,9 rapid
fewer micro-farms/firms which may be below
practical application remains a central problem to
an efficient scale of operation (often a result

7
See Section 4.1 “Barriers to the transformation of agri-food systems” in the background literature review paper for a discussion of the complex
array of challenges involved, and Studwell, J., (2014) “How Asia Works” for a detailed discussion.
8
United Nations, Dept of Economic and Social Affairs (2022) World Population Prospects 2022: Summary of Results, available here.
9
Irrigation represents a centuries old solution to the vagaries of weather. More recent mature examples include drought resistant varieties, crop
rotation, crop cover and reduced tillage. Precision agriculture represents a more frontier technology but which can nevertheless still be applied
to smaller-scale production (see for example, Loures, L. et al (2020) “Assessing the Effectiveness of Precision Agriculture Management Systems in
Mediterranean Small Farms”
The notion of development pathways in smallholder agriculture is articulated in ISF Advisors & RAF Learning Lab (2019) State of the Sector
10

Report: Pathways to Prosperity.

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Climate Resilient Agriculture (CRAg) Whitepaper

of land fragmentation) and very large-scale Global experience suggests that there are multiple
conglomerates which may exert excessive market possible futures for agricultural development.
power. This heterogeneity produces more Rapid progress has almost invariably reflected the
adaptive market systems supporting increased articulation and successful execution of policies
innovation and greater resilience to factors that which enable viable development pathways.
cannot be predicted with precision (the known Furthermore, markets alone cannot tackle
unknowns) or foreseen at all (the unknown the urgent need to shift towards ecologically
unknowns). Such systems are more likely to sustainable production.11 What future emerges
produce solutions to successful transformation will depend on the wider system of supporting
measured against the multi-dimensional markets and institutions. Policy driven
yardstick of the UN sustainable development intervention can shape markets enabling choices
goals outlined above. to be made which optimise the outcomes for
sustainable human development.

3 Innovation and new opportunities for

transformation
sell their produce to distant markets illustrates
this type of technology driven innovation.
The digital revolution has In simple terms, the former shapes what is
productively possible within a given area
directly and indirectly driving yield and efficiency, setting to one side
created an even greater the problem of organising those production
processes. Meanwhile, the latter focuses on
range of agri-food system what is organisationally possible and – crucially –
determines the change path through which new
innovations which open productive technologies can be adopted.
up new possibilities for
Among the most significant production related
tackling the challenges of innovations are precision agriculture, which uses
sensors and drones to collect data on crops and
transformation.
soil conditions to optimize resource use, climate-
smart agriculture, which blends traditional
practices with new technologies to help farmers
adapt to climate change, climate-resilient crop
On the basis that the economic organisation of
varieties, early warning systems and more
agri-food systems is central to what changes
accurate weather forecasts. Meanwhile, at an
can occur practically and what will prove
organisational level, key developments include
resilient, it is useful to consider how innovations
impact on these systems. On one hand there farm resource planning systems, digital input
are technologies which primarily impact on and marketing platforms, pay as you go asset
production itself. New seed varietals represent platforms, enhanced logistics, digital payments
one obvious such agricultural technology which and other novel digitally delivered credit and
can directly impact on plant productivity. On risk solutions. These have direct impacts on
the other those whose impact relates to how productivity and resilience at the individual firm
economic activity is organised whether within and farm level but also at a value-chain or system
firms and farms or between them in markets. level. In relation to the latter, technology enabled
Digital platforms which allow farmers to readily co-ordination across value chains can reduce

Emission of greenhouse gases represents just one of a number of negative externalities which undermine critical ecological systems on which
11

human survival depends.

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Climate Resilient Agriculture (CRAg) Whitepaper

costs end-to-end and reduce waste. However, it

is important to highlight the potential fragility of
systems which are optimised solely for efficiency
but have little or no tolerance for unforeseen
adverse events or developments.12

The full potential of these

technical innovations can
transform smallholder
agriculture by improving
farmer income,
introducing transparency
in information flows,
creating cost efficiencies,
and strengthening the
connection between
value chain actors.

Although the impact remains uncertain, they

hold great promise. Crucially, the innovations
addressing the efficiencies and effectiveness of
markets and firms/farms combined with new
production technologies expand the prospective
range of transformation pathways towards more
resilient agri-food systems. However, many of
these technologies have already been in the
market for some time but with limited impact,
highlighting the imperative of focusing on how
they can be effectively deployed.

12
See Monbiot, G., (2022) ch.2

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Climate Resilient Agriculture (CRAg) Whitepaper

4 Unpacking transformation pathways

Effective exploitation of the new opportunities

created by digital and other innovations in which
the economic organization of the agri-food
Successful East Asian states have shown system – and specifically the role of smallholder
that the way to [maximise output from production - is a central concern requires greater
agriculture] is to restructure agriculture focus on the prospectively viable transformation
as a highly labour-intensive household pathways. It demands greater focus on three
farming - a slightly larger scale form elements: (i) how market systems of farms and
of gardening. This makes use of all firms can be successfully improved, integrated
available labour in a poor economy and coordinated (the ‘meso-level’ perspective),
and pushes up yields and output to the (ii) the process by which innovations are adopted
highest possible levels … by market participants over time, and (iii) how
this transformation process can be financed.
(Studwell, J., 2014)
These three elements are clearly strongly inter-
related. This perspective doesn’t seek to suggest
that the many proximate constraints that have
A wide range of factors have been advanced been identified are not material – rather it is
to explain the limited success in transforming simply looking to place them within the context of
agriculture across many regions and value change dynamics with a view to finding pathways
chains in the global South. These include: lack which are possible.
of investment, limited agricultural research
None of these three aspects of system change
and development, fragmented markets, lack of
dynamics is new to the agricultural development
financial services for smallholder farmers, weak
field. Growing concerns over food system
institutional and policy environments, political
resilience and environmental sustainability
and economic instability, lack of government have produced an increased emphasis on a
support, local heterogeneity, and - more recently more holistic systems approach.13 The major
- climate change. Many interventions have challenge remains largely around praxis: how to
been designed to address these constraints but manage complex multi-dimensional interventions
with generally patchy levels of success. What over time which stimulate rather than displace
remains somewhat unsatisfactory in the various market solutions. While successful agricultural
explanations of failure is unpacking why in some transformation programmes in earlier periods
places and times it has been possible to make shows that digital technology is not necessary
progress (see boxes highlighting successful agtech to solving this problem, it nevertheless provides
companies) – sometimes very rapidly – despite promising new tools which could make the task
apparently similar conditions at the outset to easier – especially pertinent where starting
contexts which have made limited headway. Or conditions may be less advantageous (notably in
put another way, it seems easier to explain failure relation to state capacity, political economy and
than predict success. financial system development).

13
See for example OECD

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Climate Resilient Agriculture (CRAg) Whitepaper

A particular emphasis is placed on the Lack of access to reliable and affordable

financing issue. communication technologies and information,
weak physical infrastructure, and ineffective
formal institutions can lead to inefficiencies
and barriers to market access, impacting on the
Finance cannot be regarded viability of smallholder-based agriculture. These
barriers to effective market functioning, so critical
as simply another input to disaggregated productions, provide a strong
impetus to larger-scale farms and processors and
alongside seeds or fertilizer vertical integration but lead to the problems already
– rather it represents highlighted. The inherent greater challenges of
integration and co-ordination have successfully
decision-making about what been tackled in many contexts, historically through
futures will be pursued various forms of government intervention or
co-operative development. In part reflecting a
and how uncertainties mixed track record of success, there has been
greater emphasis on private sector led solutions
will be handled. in recent years. Digital platforms offer significant
promise here potentially dramatically improving
market functioning through enhanced information
flows and supporting lower cost mechanisms to
enable trading between distant market participants.
Appropriately structured it can provide the
This potential however depends on both the
‘glue’ to coordinate multiple interdependent
adequacy of digital infrastructure and effective
developments. It also of course encompasses the
human-digital interfaces – often significant
payments infrastructure function – often a crucial
constraints in remote communities.
enabler of market functioning.

4.1 Integration and coordination DeHaat is an online marketplace for farmers in

India that provides a wide range of agricultural
services along the length of the value
chain, including access to seeds, fertilizers,
Integration and equipment, crop advisory, and market linkages.
It provides AI-enabled crop advisory to farmers
coordination among for more than 30 crops in regional languages.
participants in agricultural DeHaat is building AI-enabled technologies
to revolutionize supply chain and production
value chains is a central efficiency in the farming sector. Currently,
problem in developing DeHaat operates in 12 Indian agrarian states
with an extensive network of 11,000+ DeHaat
economies, characterised Centers and over 500 Farmer Producer
Organizations, serving 1.8 million+ farmers. It
by numerous smallholder has raised over $600 million in funding from
farmers and businesses with investors such as SoftBank, Sofina Ventures,
and Temasek.
poor communication, weak
physical infrastructure,
4.2 Diffusion of innovations
and ineffective formal
The material incentives for the adoption of
institutions.
innovations necessarily depend on the specific
technologies and the stage of the value chain in
which it is being implemented. For farmers, digital

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Climate Resilient Agriculture (CRAg) Whitepaper

technologies such as precision agriculture can Core economic conditions in terms of various
increase productivity and efficiency, and platforms forms of capital endowment (land, finance,
connecting farmers with buyers can improve skills etc) determine the base potential for
access to markets and pricing. For processors and adopting innovation.
manufacturers, digital technologies can provide
benefits such as improved supply chain efficiency
and better inventory management. For retailers However, even where
and consumers, digital technologies can provide innovations are engineered
access to product information and improved
convenience through online ordering and home for this socio-cultural
delivery. However, the extent to which these context, frameworks of
incentives give rise to adoption can rarely be
understanding, values,
understood in terms of a raw ‘business case’.
and risk perceptions play a
Farmerline is a social enterprise that aims significant role in shaping
to improve the lives of smallholder farmers the diffusion of innovation
in Africa by providing them with access to
and hence the adoption
information and technology. The company has
developed a mobile platform that provides of productivity enhancing
farmers with information on crop cultivation, technologies.14
pest and disease control, and weather
forecasting. The platform also allows farmers
to connect with other farmers and experts.
Farmerline has reached over 1 million farmers Some cultures may be more resistant to
in Ghana, Kenya, and Uganda. The company change while others are open to new ideas
has been recognized for its innovative use of and technologies. Individuals and groups with
technology to improve the lives of smallholder a more analytical and scientific approach to
farmers. understanding new ideas may be more likely to
adopt them quickly. On the other hand, individuals
Stellapps uses artificial intelligence to help 2.8 with a more collectivistic orientation or a lower
million dairy farmers in India improve their tolerance for risk may be more hesitant to adopt
new ideas. Women are often marginalised in
productivity and eff iciency. The company’s app
the adoption and use of digital technology in
provides farmers with real-time data on their agriculture due to factors such as lack of access
cows’ health, fertility, and milk production. to resources, decision-making power, and digital
This data allows farmers to make better literacy and skills. However, when women are
decisions about their herd management, provided with the necessary resources and
such as when to breed their cows and how support, they can be effective adopters and
to feed them. Farmers who use the app have users of digital technology in agriculture. Youth
can play a crucial role in the diffusion of digital
reported increased milk production, improved
technology innovations in agri-food systems. They
herd health, and reduced costs. Stellapps are often the early adopters of new technologies
has also helped to improve the lives of rural and can serve as intermediaries in connecting
communities by providing farmers with a more farmers and other stakeholders with information
reliable source of income. and resources. In Africa and Asia, despite the
strong attractions of urbanisation, youth are still
heavily involved in smallholder farming and may

14
See Rogers, E.M. (2003)

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Climate Resilient Agriculture (CRAg) Whitepaper

be important drivers of change, adopting digital

technologies such as precision agriculture and and reduced financial risk. Acre Africa has
mobile-based extension services.15 The use of also helped to improve the lives of rural
social media for "social agriculture" is popular communities by providing farmers with a more
among young, educated farmers and can facilitate reliable source of income.
the diffusion of innovation. Meanwhile many
smallholder farmers, especially with limited Apollo Agriculture, based in Kenya, is a
or no literacy and numeracy, remain reliant on technology-driven company that aims to help
oral communication. Digitally enabled agents or small-scale farmers maximize their profits
interactive voice response (IVR) provide channels by providing them with customized farming
that can reach these segments. advice, financing, and access to high-quality
farm inputs. By leveraging advanced data
4.3 Financing transformation analytics, satellite imaging, and machine
learning, Apollo Agriculture offers tailored
The transformation of agri-food systems generally recommendations to individual farmers to
requires upfront investment and dealing with improve their agricultural practices, reduce
the problem of the inherent risks posed by risk, and increase productivity. Apollo started
change. Smallholders and small-scale firms are operations in 2017 in Kenya, where it has
frequently heavily constrained in their ability to been expanding rapidly, empowering more
finance transformation. Many already struggle than 170,000 farmers to date, nearly half of
with meeting basic working capital needs, them female. Apollo’s solution builds financial
and the longer-term investment requirements and climate resilience and improves food
for significant change often present an security by providing access to financing and
insurmountable barrier. Managing risk presents all the tools farmers need to farm profitably,
a core challenge here. Agriculture already faces increasing their crop yield by approximately
greater production and market risks than many 2.0-2.5x times.
activities. These are often amplified by climate
change, especially given the covariance of various
adverse impacts. Change itself necessarily The financial sector is frequently conflated with
introduces new risks. Low-income households the wider financial system of which it forms only
frequently adopt a portfolio approach in investing one - albeit highly significant - element.
whatever scarce capital can be raised with the
aim of mitigating exposure to a single activity in a
frequently unstable and unpredictable operating A systems perspective
environment. This incremental approach directly
limits the prospects for both rapid change and points to four major
increasing capital intensity.
elements found in most
economies, albeit that
Acre Africa is a company that links smallholder
farmers to index-based insurance providers. Its the emphasis varies
services are designed to help farmers protect significantly: (i) the
their crops from weather-related shocks,
such as droughts and floods. The uptake of formal financial sector,
Acre Africa’s products has been strong. The (ii) embedded finance,
company has over one million active users
in Kenya, Malawi, and Tanzania. Acre Africa (iii) informal/community-
is also expanding to other countries, such as based finance and
Mozambique and Zambia. Farmers who use
Acre Africa’s services have reported increased (iv) state finance.
crop yields, improved food security,

15
See for example https://www.cgap.org/blog/youth-in-agriculture-new-generation-leverages-technology; and https://www.platformlivelihoods.
com/social-agriculture-%20key-takeaways-report/

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Climate Resilient Agriculture (CRAg) Whitepaper

Much financing activity is heavily embedded Moreover, various forms of climate finance
within real sectors: for example, large firms often prospectively push far beyond the frontiers
finance growth through retained earnings and of commercial provision reflecting the task at
large agri-processing companies. Various informal hand – correcting the greatest market failure
or semi-formal community-based financing still in human history.16 It is essential to recognise
frequently play a far greater role in the day-to-day the interconnectedness of these four elements
financial lives of low-income people than formal
of the financial system. Embedded financing,
institutions despite enormous improvements
for example, may depend heavily on large-scale
in financial inclusion. Finally, governments
agri-processing firms being able to access lines
necessarily play a major role in the financial
of credit from the formal banking sector. Digital
system. Domestic and international development
technology is already playing a significant role
finance institutions and specialist agricultural
programmes have long sought to address the in enhancing the individual functioning of each
shortcomings of the financial sector element of the financial system and how they
in relation to agriculture and especially interrelate more effectively.
agricultural transformation.

16
See Stern, N. (2006) The Economics of Climate Change, Cambridge: Cambridge University Press

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5 Harnessing digital technology for climate-

resilient agricultural transformation
Digital technology has proven potential to improve UPI in India) to effectively build bottom-up on-
agri-food systems in Africa and Asia by increasing line marketplaces. Digital platforms specifically
productivity and market functioning. Crucially targeting agricultural market functioning are
these technologies open up new pathways for starting to demonstrate scale and the potential
transformation which can enable the adoption to support transformation in India (for example
of solutions to the challenges of climate change De Haat, described in a box earlier) and to a more
throughout the value chain. Much is already being
limited extent in Africa (exemplified by Safaricom’s
accomplished through market-based approaches.
DigiFarm in Kenya). However digital is also being
applied successfully to transform more familiar
pipeline business forms, improving the functioning
Digital solutions in various of value chains. Large-scale agri-food buyers
are increasingly digitalizing their supply chains.
forms have emerged as a This can significantly improve the transactional
potential game-changer environment for smallholder farmers embedded
within value chains.
in relation to both market
functioning and delivering The impact on the productivity aspect of
transformation derives from a combination of
productivity enhancing improved market functioning – enabling farmers
solutions. to simply gain better access to conventional
products and services necessary to improving
yields – and enhancements in the supporting
services through digitalisation. The latter include
include software solutions to support enhanced
The application of digital to market functioning farm management, tailored weather/climate
in agri-food systems has received considerable information, agricultural advisory and financial
attention. Digital platforms standout here given solutions. Farmerline, Stellapps, Acre Africa and
the high profile disruptive impact of platforms on Apollo Agriculture (see boxes above) illustrate a
many other sectors globally. Platform businesses range of digital solutions currently in the market.
can be defined as those ‘whose core function is
creating value by enabling interaction among How the various digital models will play out
platform users’ and contrasted with more familiar remains unclear at this stage. Digital platforms
pipeline business models which ‘create value looking to provide new ‘horizontals’ suggest
through a relatively linear process of producing, major opportunities for improving access by
distributing and, ultimately selling goods and smallholders to input and output markets. The
services to consumers’.17 Social media platforms inherent openness of platforms promises to
and digital payments platforms exemplify enhance competition and innovation. However,
solutions that reach across multiple markets, the danger is that insufficient attention is given
providing a form of new infrastructure – enabling to the transformation process and the three
solutions to be developed for all sorts of problems. elements highlighted in this paper. Simply
WhatsApp and Facebook have been combined improving efficiencies across value chains through
with mobile money platforms (such as M-Pesa digitalisation will not necessarily translate into
and bKash) and digital payment systems (such as sufficient resilience.

17
ISF Advisers & RAF Learning Lab (2021) Agricultural ‘Platforms’ in Digital Era: Defining the landscape

13
Climate Resilient Agriculture (CRAg) Whitepaper

The extent to which a ‘pure’ digital platform

simply bringing multiple participants together
can address the integration and coordination To be effective a strong
problem, enable the diffusion of innovation and collective effort is needed
unlock financing of change is questionable. Two
obvious problems arise – the limitations of the to determine practically
digital channel itself in reaching smallholder
farmers, and the extent to which coordination
how the promise of
will happen across multiple participants on a digital technology
digital platform in the absence of a lead player
orchestrating activity. Digital solutions that focus can be harnessed.
on adding value across specific agri-food system Finding viable routes to
verticals provide this orchestration and may be
more tailored to the specific needs of smallholder financing prospective
farmers. On the other hand, these may offer
less immediate prospects for scalability and can
transformation
produce a market structure in which farmers pathways to resilience
remain largely or entirely dependent on a single
provider of supporting services. It is possible that will be decisive.
hybrid forms may emerge in which at least some
degree of competition may be enabled say for
inputs or off-take over a platform,
while the operator plays a stronger role in
leading transformation. Financial markets have generally not ‘solved’
for the problem of smallholder agriculture
The few market-driven successes thus far have transformation in the absence of market-shaping
generally drawn heavily on the very early-stage measures and initiatives. With the need to now
research, experimentation and pre-commercial confront the market failures of climate change,
investments by various development partners the application of smart climate and development
and governments. While progress has been made finance is likely to be crucial.
in utilizing digital technology in agriculture, the
agriculture sector lags behind highly digitized The CRAg working group has the opportunity
and medium-digitized industries and the future to play a catalytic role in enabling collaboration
trajectory is far from certain. Furthermore – across a diverse set of actors seeking to exploit
crucially – the application to building a path to Net the potential of digital and finance to accelerate
Zero and long-term climate resilience remains at resilient agricultural transformation. Its strength
a very early stage. The understanding of what is at the outset will lie in combining the diversity
meant by resilience in this context is prospectively of specific problems, solutions and activities
complex but can be addressed by reference in which the group is involved with pursuing a
to the relevant UN SDGs highlighted earlier shared learning agenda drawing on this diversity.
which represent a global consensus. However This may lead to greater coordination of specific
quantifying targets against these goals is more market building initiatives, first, where immediate
challenging and will require further work. synergies are revealed through mutual learning
exercises and second, as the insights start to shape
Development partners will continue to have collective strategic approaches and the need for
a strong role in both priming and shaping the specific new initiatives. The CRAg WG welcomes
development of solutions. Given the market other participants sharing its vision and seeking to
failures confronted, solutions will necessarily build scalable, systemic solutions driven by rapid
involve engagements beyond the core market innovation grounded in market application.
participants even if that is where much of the
action necessarily lies. The scale of the challenge
is daunting and systemic impact is beyond the
reach of any individual agency or programme.

14
Climate Resilient Agriculture (CRAg) Whitepaper

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17
The CIFAR Alliance Climate Resilient Agriculture (CRAg) Working Group, co-chaired by GSMA, and MSC,
comprises: BII, CGAP, FSD-Africa, GSMA, MSC, UNFoundation, and WRI