Theory of Change

The Initiative for Smallholder Finance (ISF), with input from the Council on Smallholder Agricultural Finance (CSAF) members and many other stakeholders in smallholder agriculture, has developed a theory of change for the sector.

ISF has articulated the theory of change more fully in its recent brief titled “Smallholder Risk and Impact Metrics: A Labyrinth of Opportunity” and on their website, but a high-level summary is provided here.

This theory of change represents an emerging understanding of how improvements in access to finance, technical assistance, markets for products and country-level infrastructure can unlock a virtuous cycle of productivity, improved resilience and reduced risk that in turn leads to positive impact on rural families, communities and ecosystems. With many actors in the smallholder support community working at different levels of the agricultural value chain, this theory of change helps to create a shared vision for how these efforts combine to promote smallholders’ prosperity and environmental stewardship, and recognizes that trust and shared value among value chain actors is paramount to ecosystem development.

Smallholder Theory of Change

The purposes of the theory of change are to facilitate rigorous testing of its hypotheses, to coordinate impact-measurement efforts across the industry and, ultimately, to inform how private- and public-sector actors engage in smallholder agriculture. The Initiative on Smallholder Finance has articulated the hypotheses outlined below, and conducted a literature review for each one, which is available online.

Hypotheses
1 Providing tailored financial products to farmers helps them build larger and more productive farms.
2 Providing capital to producer organizations and agribusinesses allows them to build stronger agricultural markets and serve farmers better.
3 Providing capital to financial institutions allows them to on-lend to farmers.
4 Technical assistance to farmers, both productivity- and business-related, builds more resilient, productive and sustainable farms.
5 Technical assistance to agribusinesses builds more capable agribusinesses better able to serve farmers.
6 Technical assistance to financial institutions allows them to on-lend to farmers.
7 Certification for farmers builds more resilient, productive and sustainable farms.
8 Providing transport and storage infrastructure to agribusinesses allows them to build stronger agricultural markets and serve farmers better.
9 Providing market linkages to farmers improves their yields and incomes.
10 Providing inputs to farmers helps them build larger  and more productive farms.
11 Producer organizations and agribusinesses build more resilient, productive and sustainable farms.
12 More resilient and productive farms lead to enhanced access to finance.
13 More resilient and productive farms lead to improved outcomes for farmers.
14 More resilient and productive farms and agribusinesses lead to rural job creation and poverty alleviation.
15 More resilient and productive farms lead to enhanced ecosystem resilience.
Source: ISF (2014)