Better Cotton, the world’s largest cotton sustainability initiative, and impact investment firm, FS Impact Finance, have signed a Memorandum of Understanding (MoU) to jointly develop and launch a fund directed at smallholder farmers in the cotton sector.
Initially piloted in India, the fund will help incentivize cotton farming communities to invest in field-level work related to women’s empowerment and climate resilience by eliminating traditional financing barriers.
Smallholders, who make up more than 90% of the world’s cotton farmers, often struggle to access adequate financial support due to their Farmer Producer Organisation’s (FPO) lack of credit history.
In India, with 16,000 FPOs representing over 5.8 million farmers, only a few large and well-established FPOs have access to formal financial markets. However, the vast majority lack the turnover and credit history to qualify for finance, a prerequisite for growth.
Under this new fund, FPOs will be supported in the implementation of gender and climate resilience activities with the goal of fast-tracking field-level results and improving their bankability. This will enable less developed FPOs to improve their credit history and benefit from services that will help them to create strategic and sustainable growth plans for the future.
Better Cotton CEO, Alan McClay, commented, “This collaboration with FS Impact Finance has the potential to accelerate important work already underway in India, and it will do so in an inclusive way. Access to finance for smallholders is always a challenge and we are excited at the prospect of helping to change that.”
FS Impact Finance Managing Director, Martin Cremer, commented, “We look forward to jointly developing this innovative financing solution in the cotton sector that complements Better Cotton’s great work in this area. Our goal is to improve the situation of smallholder farmers and contribute to the development and professionalization of players along the local value chains”.
Farmer Producer Organisations will be vetted via both financial- and governance-related due diligence processes.
Better Cotton’s 2030 Strategy includes Impact Targets relating to women’s empowerment and climate change mitigation.
The organization has committed to reaching one million women in cotton with programs and resources that promote equal farm decision-making, build climate resilience, or support improved livelihoods. This also ensures that 25% of field staff are women with the power to influence sustainable cotton production.
On climate change mitigation, Better Cotton has committed to reducing greenhouse gas emissions by 50% per tonne of Better Cotton lint produced by the end of the decade.
