Contributing to Systems Change

Insights from the IAP Challenge Fund

Introduction

The goal of the IAP Challenge Fund is to maximize long-term positive social and environmental impact for people living in poverty, by providing catalytic grants to businesses to establish innovative and inclusive business models. IAP tries to select ideas that, once proven sustainable and profitable, can be scaled to benefit more people living in poverty. This sustainable impact should continue to grow independently and necessitates broader systems change to help people structurally exit poverty and social exclusion.

Systems change is about addressing structural barriers that prevent systems from functioning for all, including the ways in which systems are governed, supply and demand dynamics, availability of finance and support services, and people’s attitudes and behaviours. IAP invests in private sector initiatives to enhance the lives of people living in poverty, with a specific focus on agri-food, energy, and water systems across four countries(Cambodia, Ethiopia, Uganda, and Zambia). By partnering with businesses that address systemic barriers, the Innovations Against Poverty programme has helped unlock key bottlenecks and facilitated business expansion. This positive impact may also inspire others to replicate and participate in these efforts.

Some consider challenge funds like IAP as too limited in scope and resources to drive systemic change; the IAP team has found that over time, these funds can contribute to broader system change and inform future policies. Investments in small businesses, even if not designed for system change, can still play a role in fostering it.

The Six Dimensions of Systems Change

SNV uses a simple framework for understanding and analysing systems change. The six dimensions in the framework help frame our assessment of systems change achieved under the IAP programme.

Influencing policies and regulations

Oats for all in Ethiopia

Oats-based food products, rich in nutrients and antioxidants, are widely consumed globally and  can address the issues of food security and nutrition. In Ethiopia, oats were primarily considered animal feed due to concerns about human consumption. Led by CEO and founder, Ms Alem Greiling, Nutridense Agroprocessing PLC introduced oats-based products in 2016. Collaborating with the Ethiopian Institute for Agricultural Research (EIAR), they developed  improved oat varieties. The Ministry of Agriculture’s recent extension manual for oats, mark a shift towards human consumption. With support from IAP, Nutridense is now implementing the first oats value chain for human consumption in Ethiopia, including smallholder farmers as suppliers and targeting people living in poverty as consumers with oatmeal products available in various outlets, including online platforms.

Formalizing land ownership in rural areas of Zambia

MEDEEM, a Zambian company, employs a private sector approach to formalizing land rights. They use the latest land survey technologies, of their tillable land and issues parcel certificates (ParcelCert©) which are signed by the traditional leadership and are valid for 99 years. MEDEEM brings this process of land registration directly to farmers at a cost they can afford. They pay special attention to securing land rights for women, thereby trying to address the issues of insecure ownership to land and challenges in accessing credit. These certificates enhance a farmer’s creditworthiness and improve crop planning. MEDEEM also conducts land surveys in newly settled areas, issuing  30-year Occupancy Licenses. After overcoming initial challenges, they have registered 40,000 parcel certificates and are expanding across the country.

Increasing private sector resource flows

The IAP grants act as catalytic financing, helping innovative products or services become profitable for the companies while creating benefits for people living in poverty. IAP grantees contribute 51% co-investment, in total of EUR 12 million in recent rounds compared EUR 6.3 million in IAP grants. This proof-of-concept paves the way for scaling and reaching more people living in poverty, necessitating additional financing. IAP’s success and efforts have attracted funders, resulting in EUR 32 million mobilised by the IAP companies (50% debt, 29% equity, and 21% grants) over the project period.

Kick-starting new practices and markets

Several IAP grantees brought new products to the local market. In Zambia, 260 Brands offers locally sourced soya-based beverages, filling a gap previously filled by imported soya milk that caters to mainly to high income earners. In Ethiopia, Melkam Endale Dairy Processing is marketing whey juice, a nutritious byproduct of milk processing that is typically waste. They influenced policy changes to allow the registration of whey products in the country. In Uganda, Yellow Start, along with Nutridense and Truluv in Ethiopia, produce fortified cereal-based products targeting both low- and middle-income consumers, sourcing ingredients from smallholder farmers.

Influencing practices and attitudes

Smallholder farmers tend to prioritize short-term cost minimization and immediate financial returns over long term investments effecting soil fertility. They often struggle to afford inputs at the start of the season and lack knowledge for well-informed decisions on seed and fertilizer selection.

Several IAP-supported investees (Solar Green Energy, HUSK and East West Seeds in Cambodia, Mukusu Motors in Uganda, Mesafint and Jemma in Ethiopia, and Afriseed in Zambia) have successfully change smallholder farming practices and attitudes. Increasing smallholder adoption levels of higher priced organic fertilizer, improved seeds, farm mechanization, involvement in seed multiplication, and solar-driven irrigation. This lead to higher yields, longer-term reduced production costs, better quality produce, better prices, and higher incomes. Key success factors include awareness raising campaign, demonstration events, champion farmers, and effective last-mile distribution.

Conclusion

The Innovations Against Poverty programme may not have a conscious generation of systems change at the fore of its goals, due to the limited size of the fund, and the broad spread across geographies and sectors. Nevertheless, contributions to positive systems changes, can be observed. These demonstrated positive results point to the influence that successful inclusive businesses can generate in their respective contexts. When businesses are supported to take necessary risks, it can initiate a change in the wider market system.