On February 1, the Chicago Council on Global Affairs launched a new blog series, A Food-Secure Future, to explore the challenges that threaten global food security and the opportunities that exist to overcome hunger and malnutrition once and for all. We will publish one post each week addressing these issues, and our series will culminate with the release of a new Council report at the Global Food Security Symposium 2017. Join the discussion using #GlobalAg, and tune in to the symposium live stream on March 30.
It is clear that we need to see innovation in the global agricultural system if we are to meet the challenges of the 21st century—from a changing climate to the growing youth bulge. In this series, we’ve discussed how the public sector can contribute to this effort, particularly through R&D investment. In this post, though, we’ll focus on the ways in which the private sector is helping to expand global agricultural productivity.
Small-Scale Agriculture Is Ripe for Innovation
World Bank estimates project that food demand will increase by 70 percent by 2050 as a result of population growth (although some studies have suggested different estimates ranging from 25 percent to 70 percent.) To expand the scope of the global food system, small producers, traders, processors, and other business owners throughout food supply chains in low- and middle-income countries require innovative technology, new methods of financing, and preparation to become successful entrepreneurs. Farmers need help to intensify and diversify their production to insulate themselves from the effects of erratic weather and land degradation, and meet increasing demand for different crops. Agricultural work forces and entrepreneurs need training in new techniques, risk aversion, and financial literacy. And, agricultural small- and medium-sized enterprises (SMEs) need help to navigate barriers to financing so that they can access the credit and financial tools they need to grow their businesses.
The private sector, with its capital reserves and technological capacity, is uniquely poised to address these issues. Indeed, most of the $80 billion per year in investments that will be required to meet growing food demand will come from the private sector. There are many ways that the private sector is stepping up: through impact investing, social entrepreneurship, and partnerships with governments and multilateral institutions, to name a few. And, while multinational agribusiness corporations are contributing a great deal, they are not alone: startups and larger private sector entities are also making investments in agriculture from within many low- and middle-income countries themselves.
India’s Thriving Climate for Social Entrepreneurship
India is one landscape where we’re seeing tremendous home-grown private sector investment in entrepreneurial development and agricultural innovation—despite shortcomings in the domestic regulatory environment.
India is home to 2 million social enterprises, 28 percent of which focus on the agricultural sector. Not only do these social enterprises generate employment and skills development among disadvantaged groups, but they are producing innovations that are helping farmers and agricultural SMEs advance their operations. There’s Star Agri, which is providing high-quality warehousing infrastructure to over 100,000 farmers throughout India to reduce postharvest loss. Digital Green is a development organization that uses video platforms to share knowledge on agricultural practices, livelihoods, and nutrition, providing farmers and producers across 9 states in India and five countries in sub-Saharan Africa with cost-effective extension services. And Jain Irrigation Systems, an Indian manufacturer of microirrigation schemes, is now reaching 29 countries with water-saving technologies that increase crop yields.
Efforts like these prove that it’s possible to generate profit while at the same providing services geared towards a social good. India’s thriving impact investment climate is further evidence of this; between 2010 and 2015, Indian impact investments amounted to $4.1 billion and generated returns of an average 10-12 percent. There are over 50 investors and impact funds operating throughout the country, and many specifically target agriculture. Omnivore Partners is one such impact fund—operating in 22 states across India, Omnivore is investing in a variety of startups throughout the country that focus on agricultural technology, innovative food, and rural livelihoods. Others, like Lok Capital, fund entrepreneurs that are providing financial services to underserved populations—an essential offering, as smallholder agriculture universally lacks appropriate financing.
Opening the Door
Agricultural investment is not only a highly efficient way to promote food security and reduce poverty—it is also an enormous business opportunity. As much as we can encourage the private sector to invest in agriculture, the more we will see expansion in agricultural enterprises, to the benefit of small farmers and entrepreneurs, consumers, and private companies alike.
However, we must be cognizant of the barriers that remain to private sector investment in agriculture. Without any potential for productive investment and profit, the private sector will not be able to intervene in the global food system. Governments need to ensure that they’re creating enabling environments that allow business to be done—particularly for financing, where state banks and subsidized credit schemes impede private sector involvement in an area where it is sorely needed. Everyone has a role in assuring global food security in the coming decades—let’s ensure that all actors are able to play to their comparative advantages.