Public-private partnerships are essential to redirect the $842 billion spent on agriculture globally each year toward cutting emissions, protecting nature, strengthening food security, and improving rural livelihoods.
However, these efforts must be carefully designed and highly transparent about who reaps which benefits, says a new report from the High-level Panel for Just Rural Transition coalition.
Released this week at COP31 in Turkey, the report explicitly urges the public arena to “create more effective roles for the private sector” via incentivizing the latter to invest in agrifood systems.
Agriculture, after all, is largely a private enterprise around the world, whether it’s subsistence farmers or multibillion agribusinesses. Governments with limited funds can’t on their own change the way farmers raise crops or which producers get access to quality markets. But they can lower the risk of new products and technologies, improve farmers’ creditworthiness, and steer the private sector towards goals that markets may not pursue on their own (e.g., emissions reductions and smallholder inclusion).
“It is imperative, not optional, for public support to provide incentives for positive private sector participation,” notes the report.
“Carefully designed public support can attract commercial banks, agribusinesses, impact investors and insurance companies to finance agricultural development. Blended finance approaches increase the scale and sustainability of agricultural investment while reducing dependence on government funds.”
Weighing the risks of blended finance
There are significant risks involved in blended finance, however, not the least of them being that the term often is applied too loosely.
“Blended finance has a very wide, catch-all meaning,” Dr. Sonja Vermeulen, a member of the High-Level Panel for a Just Rural Transition, tells AgFunderNews.
“Much the same as umbrella expressions like ‘regenerative agriculture’ or ‘climate-smart food systems,’ it is the detail of specific models and practices that is far more important and interesting than the overall generic phrase.”
In many so-called blended schemes, private finance “tends to flow towards larger, better-connected and lower-risk producers unless public programs include explicit safeguards and incentives for reaching women, tenants, youth and poorer regions.”
It can also obscure who gets subsidized, and even increase competition over land and water if systems to protect these elements are not in place.
Dr. Vermeulen, who has held senior roles at WWF International, CGIAR’s CCAFS program, IIED, and Chatham House, says transparent contracts between public and private entities are vital to make any blended finance scheme successful.
“The key imperative is around maximizing transparency: on dealings with government and industry, on lending criteria and terms, on market intelligence and risk outlooks.”
Nor should private finance be seen as “a substitute” for private funding.
“There are many examples where governments have hoped that commercial banks and insurance firms will provide sufficient lines of credit or insurance to agricultural producers and to rural infrastructure, but in practice it has not happened because there is too much risk for private finance,” she explains.
When change does not happen, the biggest losers are those with the highest perceived risk: usually smallholders without collateral or credit history, or farmers and landowners at the forefront of things like innovative crops and new energy systems.
What success looks like
The High-level Panel for Just Rural Transition coalition points to several forms that successful public-private partnerships can take, and which are already happening around the world.
Brazil launched its Low-Carbon Agriculture (ABC) Programme in 2010 to move support away from conventional production subsidies. Public and private banks offer concessional credit for no-till farming, pasture restoration, integrated crop-livestock-forestry systems, and manure management.
As a result of this cheaper borrowing and shared risk, more farmers in the country are adopting practices that raise productivity and cut emissions.
In Australia, producers and processors pay compulsory levies on livestock transactions that the government matches. The money goes to sector-specific Rural Research and Development Corporations, such as Grains Research and Development Corporation and Meat & Livestock Australia.
Farmers shape spending through regional panels, advisory committees and voting rights. Universities and CSIRO, the national science agency, carry out the research.
In Malawi, state-run fertilizer distribution was slow, hard to reach and open to political allocation. Malawi’s subsidy program gradually brought in private agro-dealers and voucher systems. According to the report, studies found that this improved timeliness and local access, provided markets were developed enough and the public rules were clear.
India, Nepal, and Bangladesh, meanwhile, are in the midst of de-risking agtech for smallholder farmers. The Inclusive Agritech Facility, managed through the International Finance Corporation, uses concessional public capital to reduce the risk of early-stage equity investments. The agritech firms it backs can deliver extension, market information, credit scoring, logistics and climate advice at a scale governments struggle to reach alone.
Practical lessons for public-private partnerships
These examples share a handful common threads and practical lessons
1. Pay for outcomes, not vendors. Support should be tied to results such as water saved, emissions reduced, and yields improved, not to one company’s products.
2. Make it transparent. Contracts, beneficiaries, subsidy values, and concession levels need to be published.
3. Build competition first. Private delivery works where markets are developed enough. In concentrated markets, subsidies tend to inflate prices.
4. Design for inclusion. Farmer registries, cooperatives, digital records, and warehouse receipts make small producers investable. Dedicated targets for women, youth, tenants and poorer regions make sure they are actually reached.
5. Keep decisions public. Companies should contribute evidence and capital, but governments should set the goals. Smallholders, consumers and environmental groups must have a seat at the table, too.
