Baseline insights for building or enabling business partnerships to better serve smallholders
Last mile business partnerships for smallholder finance remain in early stages across the industry, and the process of forming partnerships is easier said than done. Financial institutions (FIs) are wary of partnership formation because they perceive smallholder farmers as risky, are not comfortable with innovative approaches to farmer finance, and often lack agricultural knowledge. Further, natural risk aversion, institutional rigidity, and multiple layers of approval within FIs make it a difficult and lengthy process to get agreements in place. For last mile firms, limited negotiating power – often due to small size or a scarcity of possible FIs with which to work – and insufficient knowledge on how to develop partnerships impedes their ability to get partnerships in place.
The Learning Lab has commenced an 18-month study of the partnership-building efforts of four of these last mile firms: agribusiness and technology firms that were winners from the first Innovation Competition of The MasterCard Foundation’s Fund for Rural Prosperity. The purpose of the study is to derive insights from their experience about the motivation, process, business dynamics, and outcomes of business partnerships between last mile firms and financial institutions. As these projects and their related partnership efforts are still in early stages, many insights are still forthcoming. However, the baseline findings already shed light on partnership potential, motivation and process. This brief, the second in the Learning Brief series, summarizes these early insights for financial institutions or value chain actors looking to serve smallholders, and their investors and funders.