Better Cotton Boosts Bankability for India’s Cotton Farmers

Better Cotton wants to financially empower smallholder cotton farmers in India .

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The world’s largest sustainable cotton initiative signed a memorandum of understanding with German investment fund FS Impact Finance to support gender equality and climate resilience for this sector of growers.

Most of the world’s cotton farmers are smallholders—over 90 percent, according to the nonprofit—and they often have trouble receiving financial support because their Farmer Producer Organizations (FPO) lack a credit history , considering the concept of these entities, which advocate for and negotiate on behalf of farming communities, wasn’t developed until 2003. By eliminating the financial barrier, the fund aims to incentivize cotton farming communities to invest in field-level sustainability and women’s empowerment , aligning with Better Cotton’s 2030 strategy .

The fund will initially pilot in India—the birthplace of FPOs—and is committed to reaching one million women in cotton with programs promoting equal farm decision-making opportunities, building climate resilience or supporting improved livelihoods. The goal, Better Cotton said, is to “fast-track” field-level results and improve their bankability.

“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,” Alan McClay , CEO of Better Cotton, said. “Access to finance for smallholders is always a challenge and we are excited at the prospect of helping to change that.”

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India currently has 16,000 FPOs representing more than 5.8 million farmers. However, only a few large (those with a minimum of 500 individual shareholders) and well-established FPOs have access to “formal financial markets.” According to the Indian agri-enterprise network Samunnati, this accounted for only 5 percent of producer companies in 2020. The remaining 15,200 FPOs “lack the turnover” to qualify for capital, which is a “prerequisite” for growth, Better Cotton said.

The impact fund, therefore, will support these smaller or less developed FPOs in developing their credit history while providing services that should create strategic and sustainable prospects for future growth. Vetted FPOs—those compliant with financial and governance-related due diligence processes—throughout the country will be eligible for funding jointly facilitated by the investment firm focusing on emerging markets and developing countries.

“We look forward to jointly developing this innovative financing solution in the cotton sector that complements Better Cotton’s great work in this area ,” Martin Cremer, managing director at FS Impact Finance, said. “Our goal is to improve the situation of smallholder farmers and contribute to the development and professionalism of players along the local value chains.”

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