• The fund will help cotton farming communities accelerate field-level sustainability work in the face of climate change, starting with India
• Vetted Farmer Producer Organisations¹ (FPOs) across the country will be eligible to gain funding to expand their services and simultaneously build a positive credit history
• Smallholders represent more than 90% of the world’s cotton farmers

FS Impact Finance and Better Cotton² have signed a Memorandum of Understanding (MoU) to jointly develop and launch a fund directed at smallholder farmers in the cotton sector.

The fund, initially piloted in India, will help incentivise cotton farming communities to invest in field-level work related to women’s empowerment and climate resilience³ 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 (FPO⁴) 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, which is 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.

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 professionalisation of players along the local value chains.

Martin Cremer, Managing Director FS Impact Finance

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.

Alan McClay, CEO at Better Cotton

Footnotes

1 Farmer Producer Organisations will be vetted via both financial- and governance-related due diligence processes.

2 Better Cotton is the world’s largest cotton sustainability initiative. Our mission: to help cotton communities survive and thrive, while protecting and restoring the environment. In challenging times, we are meeting the challenge head on. In the 2021-22 cotton season, through our network of field-level partners, 22% of global cotton production was Better Cotton, grown in 22 countries around the world. Our programmes reached 2.8 million farmers, which included more than 2.2 million Better Cotton licensed farmers. Over one fifth of the world’s cotton is now grown under the Better Cotton Standard.

3 Better Cotton’s 2030 Strategy includes Impact Targets relating to women’s empowerment and climate change mitigation. The organisation has committed to reaching one million women in cotton with programmes and resources that promote equal farm decision-making, build climate resilience, or support improved livelihoods. This is in addition to ensuring 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.

4 FPOs advocate for farming communities and negotiate on their behalf in international markets.