Nurturing Resilient Agriculture and Livelihoods through Impact-Linked Finance

Intervention

Social or environmental challenge

The program's Implementation Model addresses critical market failures for individual farmers who struggle with limited access to resources, markets, and affordable credit, leaving them economically vulnerable and unable to integrate into agricultural value chains. In addition, climate change adds to their challenges, with erratic weather patterns and environmental degradation undermining productivity. The program's innovative approach combines renewable technology and sustainable practices to bridge these gaps. By offering training, awareness campaigns, and outcome-based incentives through impact linked loans to Farmer Producer Organizations (FPOs), the approach combines technical assistance with financial assistance. Simultaneously, it recognizes climate impact by promoting climate-resilient practices like drip irrigation and solar power. This holistic strategy not only empowers farmers economically but also enhances their climate resilience, fostering a more sustainable and adaptive agricultural sector.

Description of the intervention

The Outcomes-Based Funding project seeks to address the pressing issues confronting small and marginal farmers in India, constituting 85% of the agricultural holdings. These farmers grapple with limited access to crucial resources, viz., markets, and affordable credit, compounded by the challenges of climate change that undermines their productivity. The project proposes a comprehensive solution that combines renewable technology and sustainable agricultural practices to bridge these gaps. It introduces an innovative financing mechanism, impact-linked loans, as a core component. This mechanism operates by initially providing loans with lower interest rates that effectively function as grants. These loans are tied to the actual outcomes achieved by Farmer Producer Organizations (FPOs) in terms of sustainable agricultural practices. The approach shifts the focus to outcomes-driven support, ensuring that resources are directed where they truly make a difference. It incentivizes performance, encouraging FPOs to optimize sustainable practices and resource utilization. Importantly, it aligns risk, as FPOs are held accountable for repayment only if they achieve the expected impact. The project empowers small farmers economically and ensures FPOs sustain themselves for scalable impact. It's a holistic strategy aimed at fostering a more sustainable and adaptive agricultural sector in India.

Last data update

Data for this pipeline project was last updated in March 2024