Private Sector

Market-led agricultural growth can be accelerated through SSI investments. Research shows that SSI can be profitable for farmers and private sector companies in well-functioning markets. Climate variability, such as longer dry spells are pushing more producers to supplemental irrigation, while demand for vegetables and fruit are pulling farmers into dry season irrigated horticulture. As smallholder farmers focus more on commercializing their activities, opportunities for mutual benefit are emerging. Farmer-led irrigation enables greater stability and quality of produce supply, which can benefit farmers, produce buyers and consumers.

Numerous entry points exist for business as irrigated value chains develop. ILSSI partners throughout the irrigated value chain with equipment suppliers, farmers, value chain cooperatives and SMEs to test and refine business models. Private entities implement market-based activities, while researchers analyze gaps and impacts of market activity. Research shows high potential for business development in irrigated fodder, vegetable and vegetable seed production. Evidence is being used to design interventions that will help to ensure benefits are spread across actors as the markets develop.

Access to suitable financing is a primary barrier preventing smallholder farmers from investing in SSI, but credit dynamics are complex. ILSSI research shows there is a strong demand among farmers for irrigation technologies, motorized or solar pumps, and other agricultural water management tools. Although the potential profitability of irrigation is clear, the costs of SSI may only be viable for smallholder farmers through improved finance tools. Supply-side factors, such as limited access to credit or high costs of borrowing, place constraints on farmers but recent research in Tanzania and Ethiopia shows that demand-side credit constraints, such as risk-aversion, financial illiteracy, and high transaction costs, are equally important.

ILSSI is working with irrigation equipment companies and other private entities to explore the potential of different finance approaches within different business models. Examples already being piloted include asset-based finance, lease-to-own, and seasonal repayment plans. Information technology is at the same time reducing the costs and risks of offering finance to farmers in remote areas. Through these collaborations, ILSSI aims to better match finance products with the needs of different market segments of smallholder farmers, including women and youth. Fostering greater awareness of the limitations of finance in the agriculture sector can also help to shape the design of new, appropriate finance mechanisms to minimize default risks.

Private companies have a stake in the sustainability of water and other natural resources as SSI is scaled. Water availability in the medium to long term will determine the business prospects for irrigation-related enterprises. Increased water scarcity could jeopardize markets for irrigation inputs as well as supply of irrigated produce. Negative externalities of intensified production under irrigation may reduce the quality of water and erode soil health. Yet, private companies in irrigated value chains often lack the expertise and resources to fully analyze how to develop irrigated value chains within planetary boundaries. ILSSI aims to better understand the information needs of private sector decision makers, while also providing research-based evidence to support sustainability of irrigation related investments.

The International Water Management Institute has developed an interactive, online tool that supports users to identify suitable areas for solar based irrigation depending on water sources and pump characteristics. The tool has been refined with the input of private companies. Solar pump supply companies have provided data from pumps in the field toward greater accuracy. Numerous for-profit entities also shared their information needs on water resources. Overall, private sector contributions have helped to ensure the tool is relevant and useful to companies as they explore emerging markets for irrigation.

Fostering information exchange is central to market and food system innovation. ILSSI convenes multi-stakeholder dialogues on farmer-led irrigation in Ethiopia and Ghana and is working to expand these sharing platforms in other countries and across the Africa region. Dialogues create spaces that bring together actors from the private sector, government agencies and Ministries, research organizations and universities, and agricultural value chains, to catalyze change around specific challenges. These platforms provide an umbrella for coordination and adaptive learning across actors and sectors. They provide opportunities to share recommendations, best practices and institutional innovations on agricultural water management. This integrated, multi-faced engagement approach enables those involved to gauge scaling opportunities (and constraints), jointly examine potential solutions, and work together toward the shared benefits of expanding farmer-led irrigation.

Identifying, creating and supporting opportunities for entrepreneurial SSI-related service provision has the potential to improve access to technologies and to generate new income streams in irrigated agriculture. There are many opportunities for the private sector to foster innovation and entrepreneurship. For example, many irrigating farmers across sub-Saharan Africa and Southeast Asia already rent pumps or pay pumping service providers. Business models where entrepreneurs offer irrigation services, such as ‘uber for irrigation’, could enable small scale farmers to get the advantages of irrigation equipment while simultaneously generating income for irrigation service providers. Through research on business models with private companies, ILSSI aims to identify how companies can foster opportunities for rural youth through employment and entrepreneurial enterprise.  

Many smallholder farmers, particularly women, are excluded from effectively accessing SSI technologies, production, and markets. Private sector business models often exclude resource poor farmers, especially women. Yet women play a key role in farming and agriculture-linked value chains in rural communities in many African and South East Asian countries. Women and households could greatly benefit from improved access to irrigation and enhanced yields, by integrating the right tools and approaches. At the same time, product and service businesses are missing out on a significant customer segment. Achieving the potential of irrigation to meet food demands and benefit smallholders through a market system approach will require targeted approaches to reach resource poor farmers.

More inclusive business models, involving partnerships between companies, non-profits and public institutions would enable more smallholder farmers, particularly women, to invest in irrigation technologies. ILSSI is collaborating with private sector actors and cooperatives to promote better understanding of the constraints to inclusivity and equity as SSI expands. Targeted collaboration with the private sector to refine business models in ways that improve inclusivity, can enhance more equitable economic growth and income gains, while also improving household nutrition. Guidance for inclusive irrigation interventions, developed by ILSSI partners, is helping private sector actors, and others, better understand the gendered constraints and opportunities around SSI technologies.