Yet despite the importance of getting these practices right, too many organizations’ IMM standards and norms have prioritized measurement over management. As a result, they end up focusing on compliance, instead of collecting data to inform and enhance their operations and impact.

Based on our extensive engagement with other IMM practitioners over the years, most of the impact data being collected is not actually informing decisions. It tends to be gathered mainly to satisfy investors’ requirements, and often ends up gathering digital dust. This is because IMM infrastructure was built for the investors that own or manage the capital, rather than the enterprises and non-profits that do the work. Indeed, those organizations often find that arduous reporting requirements can actually constrain their ability to create the impact they’re expected to measure. Too often, this reporting does not benefit them, or the communities and individuals they serve.

When organizations fail to manage their impact, they miss opportunities to increase the breadth and depth of this impact, weakening the performance of impact investing as a sector.

In March, almost 100 advanced IMM experts — including asset owners, asset managers, standard setters and measurement experts — gathered in Montreal. During a breakout session facilitated by the authors of this piece, we asked ourselves three questions which led to the five takeaways in this article:

• How can we help investors make more informed and intentional decisions to improve impact?
• How can we support business and non-profit leaders in their value creation processes by integrating impact decision-making throughout their strategy and operations?
• How can we more closely align IMM with investee processes, capacity and operations to inform improvements in practices that enhance impact?

In the article below we’ll highlight several actions we can take today, as asset owners, asset managers, measurement experts or impact-producing entities, to right-size IMM and make it fit for investees.

1: Treat investees as drivers of impact, not just data sources

Business and non-profit leaders building products and services that benefit people and planet got into this work to address real challenges. They don’t need others to convince them that impact matters. In fact, by the time they receive IMM mandates from an investor, they are often already measuring and managing for impact, through models designed around the needs of the communities they serve. They see firsthand how their work interacts with the wider systems around them. Imagine what becomes possible when asset owners and managers consult their investees, and adapt their frameworks accordingly. Investees often care more about impact than anyone else, and IMM can be a resource that supports that commitment rather than a tax on their time.

The current system extracts from these organizations: their time, their staff capacity, their goodwill. And it too rarely gives anything back. Sometimes an investee receives a benchmark they can use, a helpful peer insight, or a reflection on how they are doing compared to others. But more often, their data simply goes into a report that feeds into a fund’s portfolio management system, never to surface again.

This is not only extractive, it’s also inefficient and redundant.

IMM could instead treat investees as the core partners and drivers of impact that they are, not just as data sources. When IMM professionals and investors close the feedback loop and co-create IMM metrics and data collection systems with these organizations, they target the type of data that can help them make better-informed decisions about how to deliver broader, deeper and more equitable impact. This kind of data collection can actively enhance impact, building on what is already working in an organization’s core model to unlock greater depth and scale. Investors are well placed to encourage and enable this collaboration.

2: Reduce the burden of data collection

More data does not equal more impact. This seems obvious, yet the default mode of impact investing has long been accumulation: more indicators, more frameworks, more reporting cycles. The implicit logic was that rigor required volume, and that volume meant credibility. In fact, the opposite is true; we risk drowning in data and losing relevance.

IMM is at its most powerful when it is driven by the decisions an organization needs to make, rather than by pre-defined indicators or reporting templates. When every data point traces back to a question that impacts the investee’s operations, the surveys and data forms get shorter and the data actually gets used.

It also helps to be clear about which decision the data serves. For instance, the information an investor needs to decide whether to invest (e.g., the depth and credibility of the impact thesis, who the investee serves, and the risks that could threaten its impact) is a larger, one-time ask which fits naturally in due diligence. Ongoing monitoring can then be lighter: a small set of indicators tied to decisions the investor and investee will actually make together during the investment, such as where to focus support, when to adjust strategy, or whether the impact thesis is holding up.

Too often, the depth of due diligence carries over into quarterly reporting, and that is where the burden builds up. It is important to be clear about the tradeoffs (costs and benefits) of capturing and using the associated data. In practical terms: Apply a utilization screen to IMM by identifying the question/s you are trying to answer, and what a “good enough” level of evidence looks like. Map your IMM metrics to the decisions they will inform and to what is actually being used. Letting go of data that isn’t used frees up the investee’s time and attention to sharpen its remaining indicators, so each one is key to improving understanding and informing decisions.

3: Align data requests with investees’ capacity, maturity — and limitations

A seed-stage venture working with its first 50 customers or a non-profit with a staff of three people is not in the same place as a growth-stage company or large non-profit with a proven model and significant human and financial resources available. Expecting the same data sophistication from both doesn’t make the seed-stage company or small non-profit more rigorous; it distracts them from core operations and likely reduces the impact they can create.

But right-sizing is not only about volume: It is also about asking for the right kind of data. A seed-stage venture or small non-profit can tell you who it is reaching, share what customers or beneficiaries say about the product, and assess early signals of whether its model is working. It usually cannot tell you about long-term outcomes or impact it can clearly attribute to its work, because that evidence does not exist yet. Asking for it produces hypotheses dressed up as evidence. IMM at small non-profits or early-stage companies should instead aim to be a fast-learning engine, testing key assumptions and generating quick feedback, with more rigorous outcome measurement growing alongside the model.

Guidance calibrated by stage of growth and type of capital would encourage a data collection process better aligned to investees’ realities and limitations. Investees should be empowered to advocate for IMM approaches that evolve with their model. That starts with involving them in selecting metrics and co-creating data collection approaches that align with their reality. It also means lowering the cost of collecting data. Before building new portals or bespoke reporting systems, leverage the operational software, native workflows and lightweight tools investees already use to automate data capture and analysis. For early- and growth-stage teams, integrating data collection into existing processes can help make IMM practices sustainable.

4: Raise awareness of IMM requirements that don’t improve impact

Where there is money, there is power — and there are also demands. IMM requirements should be open to negotiation, and funding conversations are an opportunity to co-create shared expectations on impact.

Asset owners answer to trustees and public bodies, and they carry the reputational risk if their investment decisions lead to harmful or disappointing outcomes. Asset managers answer to their own reporting obligations. Donors operate within frameworks set by their boards and funding priorities. Under current practices, the path of least resistance has been to accept whatever IMM requirements come attached to a check. This has shaped a generation of impact measurement standards and systems that serve capital providers more than they serve enterprises, non-profits or communities.

IMM practitioners often work in this chain, setting and serving IMM requirements. In solidarity with those delivering the impact, we can thoughtfully push back on IMM requirements that don’t improve impact, by educating and influencing capital providers and standard setters. When a requirement doesn’t add value, we can and should say so. When a framework doesn’t fit the stage or sector of portfolio investees, we can propose one that does. And when we’re building IMM systems, we should ask ourselves: Does this serve the people closest to the problem, or does it serve the people furthest away?

That said, the institutions with the most leverage in this system (asset owners, asset managers and other standard setters) have the greatest opportunity to model right-sized IMM, and the most power to shift practices in that direction.

5: Pay for the full IMM system while demonstrating its value

IMM isn’t free, but many investors have been pretending it is.

Investees are expected to collect data, report on it, and continuously refine their approaches with little or no additional resourcing. Technical assistance is offered intermittently, if at all. The “data pipeline” from collection to reporting and action requires sustainable investment, in people, systems and time.

When the time investees spend on IMM is funded, it opens the door to capacity building, hands-on support and learning — including learning from failure. Learning is not just a byproduct of IMM, it is an outcome worth funding in its own right. Learning means making sense of what the data shows, including the parts that reveal that a strategy isn’t working, and using that understanding to change what happens next. It comes from structured reflection, honest documentation of what failed and why, and time set aside to synthesize patterns across a portfolio, not simply from collecting more numbers. Without it, IMM produces reports but doesn’t change decisions, and investees end up repeating mistakes that could have been avoided if they had captured and responded to these learnings in the first place.

Asking investees to measure their impact should also involve an offer to help them do it well, financially and technically. Smaller companies and non-profits will likely need more support, while larger, more established companies and non-profit organizations may have systems and resources already in place.

IMM is not free, especially at the early stages, but it has value — as we learned in the Founders in Focus survey. Done well, demonstrating impact can create real value for the investee itself, providing a market opportunity, not merely a reporting burden. It’s time for investors and IMM practitioners to understand investee needs more deeply than we currently do. That starts with understanding what they already do, then asking how demonstrating impact can support them directly: Does it build more loyal customers, reach more beneficiaries equitably, help attract further investment, sharpen understanding of client/beneficiary and market needs and context, or reveal potential for product or market expansion? The strongest IMM is tied directly to the investee’s underlying economics and core drivers, so that performance and impact reinforce one another rather than compete. Approached this way, IMM stops competing with the investee’s other needs for time and resources, and becomes part of how it evolves to achieve its mission.

Evolving toward IMM that works — a call for action

The convening last March that led to these takeaways generated both honest assessments of the shortcomings of current IMM practices, and a drive to right-size them. It was clear to all of us that our systems have too often rewarded compliance over impact, extracting more from investees than they’ve given back. And we all shared the conviction that when IMM is designed for real-world use — aligned to actual decisions, and integrated into core operations rather than bolted on as a reporting layer — it sharpens strategy, improves outcomes and unlocks funding.

Looking ahead, we see an opportunity for IMM to go further still: not just making non-profit and business models work, but helping them evolve. IMM rooted in systems and equity asks who gains and who bears the costs. It can help investees use resources more efficiently, share value more fairly across their supply chains, and collaborate with peers and communities rather than compete with them. This wasn’t part of the Montreal conversation, but we believe it’s the next question the field needs to take on.

Good IMM is one of the sector’s most powerful levers — not because it produces more data, but because it produces sharper understanding, better-informed decisions, and a clear view of an organization’s impact and financial performance, even when the data is imperfect. Done right, it creates value, drives collaboration among investees, investors and communities, and is worth the effort and money it requires. That’s why we’re calling on investors and other funders to empower IMM professionals to measure what matters, collaborate, innovate and lead.

Who’s with us? Click here to register your interest in following and informing the ongoing conversation on right-sizing IMM.

These takeaways represent a synthesis of perspectives from the breakout session at the inaugural IMM Convening for Advanced Practitioners, and continued collaboration after the event, including feedback from Laura Budzyna (Beyond Measure), Catherine Dun Rappaport (Social Finance), Kusi Hornberger (IDB-Lab), Luan Mans (while at Acumen, now at BII), C. Sara Minard (Columbia University, Manarine LLC), Belissa Rojas (Fondaction Asset Management), and Dan Waldron (Acumen).

Additional contributors to the session in Montreal include: Lillian Alexander (Prosper Global Ventures), Malika Anand (Community Investment Management), Thomas Hannaford (Power Sustainable), Laura Hollod (Hollod Impact), Marie-Josée Parent (Raven Impact Foundation), Laurentia Perrin (Common Approach to Impact Measurement), Kate Ruff (Common Approach to Impact Measurement), Luba Shabal, Ember Infrastructure, and Becca Shepherd (Independent Consultant).

Julia Mensink is Director of Impact at Acumen; Heather Esper is Director of Performance Measurement and Improvement at the William Davidson Institute at the University of Michigan. 

Photo credit: AndreyPopov

I’m referring to Donor-Advised Funds (DAFs), a type of specialized charitable giving account that lets someone donate cash or assets, take an immediate tax deduction, and direct that money to nonprofits as individual grants over time. These funds are popular with the general public: To take one prominent example, around 48% of Fidelity Charitable DAF accounts had less than $25,000 in assets at the end of 2025. They’re also popular with wealthy families and other high net-worth individuals, who favor them due to their tax advantages and the greater simplicity they provide compared to alternative philanthropic approaches, like setting up a foundation. And they are growing: As of FY 2024 (the most recent data year), more than $327 billion was sitting in U.S. DAFs, earmarked for the public good.

The money has, from a legal and tax perspective, already been gifted to a charitable entity (the DAF), and the donors have already enjoyed the tax benefits of making the donation. But too often, the process stops there. Unlike a private foundation that is required by law to donate 5% of its assets each year, a DAF’s sponsor — often an entity within a larger financial institution — has no obligation to donate anything on a defined timescale. In the meantime, the money sits in an account, invested in the market, growing tax free. That, of course, benefits the company managing the DAF, many of whom are paid a percentage of the funds under management.

Only around $65 billion (~20%) was disbursed as grants from U.S. DAFs in 2024, with the rest remaining in these funds. And though sustainable investment options for those funds exist, and can have incredible impact, other DAF sponsors funnel donors into a narrow menu of options that default to the conventional index funds used by their parent companies. 

While donors deliberate on where to deploy the capital, or defer the decision until later, these billions of dollars already committed for the public good can even be financing high-emission sectors like the fossil fuel industry, which is emitting billions of tons of CO₂ per year. 

Meanwhile, innovative climate startups are in need of funding to accelerate their solutions.

Philanthropy can and should be a key part of the solution, not part of the problem.

Purchasing future carbon credits in Kenya

To understand the sort of impact that could be made if this funding were mobilized, take the example of Kenya-based Octavia Carbon, Africa’s first direct air capture company. They had a strong business case from the start: Use the region’s abundant geothermal energy to power technology that pulls planet-warming carbon from the atmosphere and locks it away. That pairing turns clean power into an exportable product in the form of carbon removal credits sold to global buyers. 

What Octavia needed was buyers for their carbon removal credits. But as with many innovations, carbon removal needs to demonstrate its value before commercial buyers will feel confident that it works. 

Terraset, a climate-focused nonprofit, aims to bridge that gap by paying now for carbon removal to be delivered later. Over the past three years, we have pooled philanthropic funding, including from many DAFs, to purchase future greenhouse gas removal from more than two dozen early-stage climate companies. Each ton of gas removed is represented by one “carbon credit,” a unit that buyers in the voluntary market can purchase to fund climate solutions or offset their own emissions.

Buying carbon credits before the services are delivered is known as a “pre-purchase,” and it provides necessary, early funding to accelerate and build the market for carbon removal, methane abatement and other climate solutions in emerging markets. We’ve noticed that climate technology developers that make it from pilot to institutional finance almost always have both early backers and early customers. The ones that stall, despite validated technology and strong teams, often don’t.

Pre-purchases create the demand signal that helps a company prove its model, develop the monitoring, reporting and verification (MRV) protocols that buyers and regulators require, and reach the commercial milestones that make institutional finance possible. Without this bridge capital, even a technically sound business with cost advantages can stall, and even die, between pilot and scale.

Since 2024, Terraset has made a series of pre-purchases from Octavia, totaling around $300,000. In that same time period, Octavia reports that it has created 160 jobs — 98% of which have been filled by Kenyan youth — and the company is establishing itself as a hub for carbon removal innovation across sub-Saharan Africa. With steady partners and investors like The Catalyst Fund, as well as a $5 million seed round led by African VC firms Lateral Frontiers and E4E Africa, Octavia’s journey illustrates the impact of unlocking different kinds of capital for promising climate innovators. 

The commercialization gap that grants can’t fill

Octavia’s story highlights one way funders can overcome a structural gap in how philanthropic capital typically reaches early-stage climate businesses in emerging markets. Most philanthropic giving is designed around grants: one-time disbursements to support a project, a study or an organization’s operations. Grants are valuable tools, but by not requiring delivery of a product (in this case carbon removal credits), they don’t create the commercial demand signal that tells investors a product has a market.

Pre-purchases do: By committing to buying carbon removal (or methane abatement credits, or other tradable forms of climate impact) at a set price and volume, an early buyer takes on a share of the commercial risk that would otherwise fall entirely on the company. That risk-sharing helps the startup invest in infrastructure, hire staff and demonstrate delivery. It bridges the gap between traditional philanthropic support like grants, and the kind of track record that development finance institutions (DFIs), impact investors and eventually commercial capital require before they’ll commit.

At Terraset, we built a revolving fund specifically designed to channel funding to make upfront pre-purchases from early-stage companies, paying today for tons of greenhouse gas removal that will be delivered in the future as credits. Then, we sell the credits to corporate buyers and recycle the returns into new purchases, creating a flywheel for ongoing impact. The model is built on the notion that the most catalytic thing philanthropic capital can do at this stage of the climate market is to create demand. 

How pre-purchases work across technologies and business models

The pre-purchase model works across a range of technologies and contexts, but the dynamics are especially visible in emerging markets, where the path to institutional finance is longer and the need for early demand signals is more acute. The approach can also be applied across a variety of different business models.

For instance, we have also purchased from Pyrogen, another Kenyan company taking an entirely different approach to greenhouse gas removal. Pyrogen is transforming invasive tree biomass into biochar, which is then incorporated into high-performance, carbon-negative concrete blocks used in affordable housing construction. At full production, the company is targeting the construction of 5,000 affordable homes per year and the removal of over 17,000 tons of CO₂ equivalent annually.

Terraset made a $100,000 pre-purchase from Pyrogen in June 2025. Pyrogen is currently working with Habitat for Humanity via the World Bank’s CGAP-sponsored affordable housing finance program to build Africa’s first low-cost housing using concrete infused with biochar. 

Highlighting this larger institutional partnership is not intended to infer causation but to illustrate the pattern we see across Terraset’s portfolio: Even small contributions of philanthropic capital can unlock much larger institutional capital. In Pyrogen’s case, our pre-purchase allowed their team to purchase a block manufacturing kit, put their concrete mixes to the test outside the lab, and build a fully digitized monitoring system to track each concrete block from harvested biomass to installation. This early support builds the proof of concept, the verified delivery record and the first commercial milestone, all of which helps DFIs and impact investors enter with confidence.

Why DAFs fit the pre-purchase capital model

The pre-purchase model requires a specific kind of capital: patient, risk tolerant, with no market-rate return requirement and no pressure to deploy into proven assets. It is a perfect fit for funds that have already been donated to charity (i.e., DAFs) but have yet to be put to use.

DAFs are a well-established structure, and donors who use them certainly aren’t doing anything wrong. The logic is sound: Accumulate capital, grow it, deploy it thoughtfully. But for climate specifically, timing is essential. Urgency is key.

The leverage available to an early buyer of a company like Octavia Carbon or Pyrogen today is distinct from the leverage available in five years when these businesses have either reached commercial scale or failed to get there. A dollar deployed now — as a pre-purchase from an early-stage climate company in an emerging market — makes an impact that the same dollar cannot match later.

What donors can do

For philanthropic advisors supporting donors who have put their money into DAFs and are interested in climate impact, two things would help move that capital to where it’s most needed.

• Shift the conversation with donors from “what they can do one day” to “what they can do now.” Most climate-focused DAF donors already intend to deploy their capital to the types of projects we’ve discussed here. The question worth raising is whether the planned timing of these deployments is calibrated to the unique impact this capital can make in the short-term for businesses at the commercialization stage, particularly in emerging markets where early buyers make a decisive difference.
• Recognize that the knowledge barrier for donors is real but surmountable. Carbon removal is a technical field, and most donors are not interested in becoming carbon removal experts before making a decision. Intermediaries like Terraset can play a role here, by vetting companies, structuring purchases, verifying delivery and reporting back on outcomes. A DAF holder does not need to evaluate the permanence standards for direct air capture or the MRV protocols for biochar to make a meaningful, verified contribution to a company building climate infrastructure in markets like Kenya. They need a trusted allocator and a reason to act now rather than later.

The next wave of climate-committed philanthropic capital should be driving impact now: the hundreds of billions of dollars that have already been earmarked for the public good, but have not yet been put to work. For climate businesses, the ongoing wait for this funding has a cost that compounds every year. The companies building carbon removal infrastructure are doing it now, and they’ve reached the stage where early buyers can make the difference between survival and scale. The capital to support them already exists: It’s up to DAFs and other funders to deploy it, now.

Adam Fraser is CEO of Terraset, a nonprofit that pools and deploys philanthropic capital to early-stage climate solutions.

Photo credit: Nataliia Kravchuk 

Laying the groundwork for these pilots was a slow, iterative process involving one site visit after another, conversations with power distribution companies (DISCOMs) to understand their concerns, and discussions with farmers who were interested in the additional income but understandably cautious about the risks. DISCOMS are one of the key stakeholders in such projects, as they are the entity that buys the energy generated by the Agri-PV plant.

Somewhere along the way, during this process of testing, questioning and recalibrating our approach, we met Kajod Mal, a farmer in Kundanpura, Rajasthan who already owned a 600-kW ground-mounted PV. He is the farmer with whom we partnered to launch Rajasthan’s first farmer-owned Agri-PV plant under the Indian government’s PM-KUSUM programme. But before he agreed to engage in this programme, he asked us a question that revealed a fundamental concern — one with important implications for the uptake of solar energy projects among Indian farmers.

“After you implement this project, will I still be able to farm and reclaim my fertile agriculture land?” It was one of the first questions he asked us, even before we could finish explaining the fundamentals of an Agri-PV plant.

The question exposed a contradiction we had been grappling with ourselves. India is now the world’s third-largest producer of solar power, and government programmes such as PM-KUSUM have played an important role in expanding renewable energy installation while creating new income opportunities for farming communities. As part of PM-KUSUM, farmers can install grid-connected solar plants on their land and sell electricity to the grid — a significant policy innovation that aligns India’s clean energy ambitions with rural livelihoods. But while the programme originally envisioned the installation of these ground-mounted power plants on barren land, some farmers, like Kajod Mal, decided to install them on fertile agriculture land. Their reasoning was that it made sense to prioritise energy generation, a steady source of higher income, over the more volatile and lower returns they could generate from farming this land.

Before installing his ground-mounted solar plant under PM-KUSUM, Kajod used to cultivate wheat and millet and earned roughly INR 40,000 per acre annually. After installing a ground-mounted plant and just selling energy to the local distribution company at Rs 3.14/kWh, his net annual income per acre jumped five to seven times. On paper, the programme worked exactly as intended. Yet standing in his field, we saw something it did not capture: The solar panels stretched across the land from edge to edge. The soil that had sustained Kajod’s family for generations could no longer support a single crop. As someone who had farmed all his life, he told us that he missed farming: We saw that the solar plant that was boosting his income was also impacting his sense of identity, and his connection to the land.

This farmer’s experience pointed to a larger question about how India can expand renewable energy without compromising its agricultural land. Conventional ground-mounted solar can generate substantial energy income, but when installed on productive farmland, it can displace cultivation for decades. Agri-PV offers a way to avoid this trade-off. By elevating solar panels up to 10 feet and designing the system around agricultural operations, the same parcel of land can continue to produce both electricity and crops. The objective is therefore not to force farmers to choose between food and energy, but to enable them to produce both, creating an integrated model in which the expansion of clean energy does not come at the expense of food production and agricultural livelihoods. In fact, Agri-PV offers an opportunity to rethink not only how solar infrastructure is designed, but also how policy adjustments could better support farmers’ livelihoods.

To help make the case for this shift in focus, with support from Kotak Mahindra Bank’s CSR initiative, our team decided to retrofit Kajod Mal’s existing ground-mounted solar plant into Agri-PV. We knew the engineering design would be challenging, particularly in ensuring structural integrity. What we underestimated was the complexity of implementation on the ground. We initially assumed that once the technical design was finalised, retrofitting the plant would be largely an engineering exercise. In practice, the bigger challenges lay in coordinating people, processes and institutions. These experiences shaped the lessons we share below.

Designing the Solar Farm Around the Farmer

Going into this pilot program, it was tempting to view the retrofitting of Kajod’s existing PV plant as a series of engineering challenges: Raise the solar panels. Preserve the installed capacity. Complete the construction. Instead, we began with a much simpler question: “What do you want this land to grow?” His answer made his priority clear: He wanted the land to produce crops again, rather than using it solely to generate electricity. If the panels were elevated to approximately 10 feet, Kajod hoped to experiment with maize, tomatoes, cucumbers and chilies, going beyond the wheat and millet he had mainly grown prior to his original PV installation. The partial shade created by the elevated panels would offer different growing conditions and allow him to cultivate a wider range of crops. That answer reshaped our design plans. Row and column spacing, panel height, layout — we reworked all of this to allow these crops to be cultivated comfortably underneath the solar panels, and to allow agriculture machinery like tractors to operate smoothly in his field.

When the retrofit was complete, the same land that had once been completely occupied by solar panels now supported both electricity generation and agriculture. This enabled Kajod Mal to return to farming, and to once again make the key decisions every farmer must make about what to plant and where, based on his own preferences and understanding of the land and market. Seeing him make those choices for himself was an important reminder that the project was not just about adding agriculture beneath solar panels. It was about giving farmers the freedom to continue farming, while gaining a new source of income from the same land. When climate solutions complement livelihoods rather than compete with them, they become far more meaningful and more likely to be embraced by farmers.

Farmer trust in Agri-PV is built through dialogue

The challenges we faced in designing the Agri-PV plant around Kajod’s crop preferences were ultimately solvable. But asking him to dismantle a solar plant that was already generating a reliable income, on the promise that we would rebuild it into something better, was a different kind of challenge altogether. He did not agree immediately. Even though our project covered the retrofit costs, the decision still involved considerable uncertainty for him. It took us multiple rounds of discussions, negotiations and conversations about risk before we established enough trust for him to move forward.

The implementation phase tested that trust further. Kotak’s CSR initiative funded the pilot. The disbursement process took longer than planned because of the time required to complete the necessary documentation, finalise the engineering, procurement and construction (EPC) process, sign the memorandum of understanding, and process the payment through ICRIER’s finance department. The elevated PV structure took longer to manufacture than expected. A lack of coordination between the EPC contractor and the local installation team stalled progress on site. At one point, the plant remained partially dismantled while everyone waited for the next step in the process to move forward.

For Kajod Mal, these were not just administrative delays. Retrofitting requires part of the plant to be shut off, so every day of implementation delay cut further into his steady energy income. Since he had dedicated all his farmland to his existing solar PV plant, these delays were impacting his livelihood. This phase of the project was our stress test, and there were moments when Kajod’s frustration was palpable. We had honored our financial commitments, but the work on the ground remained stalled because the EPC supplier missed the agreed-upon timeline and delivered the required materials and equipment later than expected.

What helped us navigate that period was continuous engagement from our end, along with Kajod Mal’s now-strong determination to turn this idea into reality. We kept visiting the site, explaining what was happening, acknowledging the delays with integrity, and staying engaged with him throughout this difficult phase. That experience fundamentally changed how we think about the implementation of Agri-PV projects. We often perceive trust as something that must be built before a project begins, but our experience suggested something different. Mutual trust might not be fully established before implementation begins; it develops and strengthens throughout the project.

Partnership is the most integral component of an Agri-PV project

By the time construction began, we thought the hardest part was behind us. It wasn’t. We still needed to work with a variety of partners, who often needed to spearhead new designs and processes to bring the project to completion. For this Agri-PV pilot, there was no single organisation that deserves full credit for turning our concept into reality. Every stage depended on various institutions that had never before collaborated on an Agri-PV project.

Throughout the transition, JVVNL, the local electricity distribution company, continued purchasing the electricity generated by the project under the existing agreement and on the same terms. Because this was Rajasthan’s first farmer-centric Agri-PV project, the local EPC contractor was attempting its first retrofit of this kind, and had to fabricate a structure unlike any it had built before. Our funding partner backed the idea even though Rajasthan had no proven model for implementing a farmer-centric Agri-PV project. Our role at ICRIER, as the ideation and implementation team, was to ensure that all of these moving pieces continued moving together. Finally, after almost a year of this collaboration and coordination, our collective effort bore fruit. Kajod’s Agri-PV plant was officially inaugurated on June 24 of this year.

Looking Ahead: Clean Energy that Doesn’t Leave the Farmer Behind

We began this journey with a simple question: Should a farmer choose between agriculture and clean energy?

When we first met Kajod Mal, he had already become an energy producer, but he had stopped being a farmer. The land beneath his solar panels was no longer being cultivated. A year later, that has changed. Standing beneath the elevated panels, watching maize and chilies grow on land where he had once stopped farming, Kajod is once again cultivating his fields. The first harvest is still ahead, so his agricultural income remains a projection. But the potential is significant. The original ground-mounted solar plant had increased his income to around five to seven times what he had earned from conventional farming, but at the cost of giving up cultivation. With the Agri-PV retrofit, he can now combine both sources of income, potentially earning around INR 450,000 per acre, per year — nearly 10 times his former income from conventional farming.

Beyond the substantial increase in his income, something more important has changed. Kajod Mal is not only farming again. He owns the solar project, explains the model to visitors, and is already considering leasing additional land for a second Agri-PV project. In the process, he is moving from being simply a beneficiary of such a project to becoming an active participant in it, and potentially an Agri-PV entrepreneur in his own right.

That, ultimately, is what our pilot demonstrates. Agri-PV is not simply about growing crops beneath solar panels. It is about designing the energy transition around the farmer, so that producing electricity does not come at the cost of producing food. With the right technology, finance and institutional support, farmers like Kajod do not have to choose between the two. They can farm the land, harvest the sun — and earn income from both.

Laxmi Sharma is a Research Associate, and Subhodeep Basu is a Research Fellow at the Indian Council for Research on International Economic Relations.

Photo: Kajod Mal’s Agri-PV plant in Kundanpura, Jaipur. Photo credit: Indian Council for Research on International Economic Relations

Two then-small entities, one in the US and the other in the UK, were tasked with reshaping the globe. One was the World Bank, which opened in 1946 on a single office floor in Washington, D.C., with just 26 people. The other was the United Nations, which established its initial operational footing that same year in a temporary office in London with seconded diplomats and clerks.

From those modest beginnings, the development sector has grown over the subsequent decades into a sprawling ecosystem, including both powerful multilaterals and millions of community-level NGOs worldwide.

But this journey is not just a story of expanding budgets and staff headcounts. It is also the story of how the sector has repeatedly reinvented its tools and techniques to handle the growing scale, depth and relevance of development work.

Today, as traditional aid recedes and legacy tools strain under modern operational demands, the sector has reached another defining inflection point. While the emergence of advanced technologies like AI offers unprecedented processing power, leveraging them requires more than just another software update. It demands a complete reimagining of the digital architecture that underpins global development, impacting how projects are designed, how data is gathered and shared, and how NGOs engage with their field staff and funders. Understanding how the sector’s tools evolved — and where they currently fall short — reveals exactly why this radically new architecture is necessary.

From LogFrames to the World Wide Web

1983 was a watershed year for the use of innovative planning tools in the development sector. It marked the widespread civilian adoption of the Logical Framework Approach (LogFrame), an analog but highly structured algorithmic matrix rooted in 1960s US military planning. When UN agencies and Germany’s GTZ (now GIZ) integrated it into their manuals that year, it triggered the era of participatory workshops in global development.

Because the LogFrame required mapping out a strict logic tree, teams used flipcharts, colored markers and movable note cards to visually build the project matrix together. By moving project design away from isolated bureaucratic deskwork and into collaborative group settings, this represented an intensely human, conversational breakthrough. Yet the moment discussions ended, that living community wisdom had to be rolled up and forced into a static, typed report. Because this final output was merely a text document, it lacked the computational muscle to calculate, scale or link human insight to financial forecasting.

The solution arrived in the late 1990s, when commercial personal computers first landed on NGO desks, triggering the spreadsheet revolution. Born in corporate banking, spreadsheets became an institutional fixture when the World Bank and IMF began deploying spreadsheet-based simulation tools to design structural adjustment programs and verify macroeconomic targets. Almost overnight, Microsoft Excel became the development sector’s primary data capturing tool. For the first time, a field officer could link an activity line to a financial column and project a multi-year budget instantly. It was an intoxicating leap in autonomy. Yet the spreadsheet remained a silent, intimidating void — a blank grid that offered no guidance, required training, and was highly prone to invisible data entry errors.

By the 2010s, the landscape shifted again with the rise of the networked collective. Defined by global programs like the International Aid Transparency Initiative — and coming at a time of genuine, if somewhat naive optimism about the power of open data sharing — this cloud-connected era promised a synchronized ecosystem where local NGOs could seamlessly share data and unlock capital through online portals. But in reality, cloud-based data sharing shifted the power balance backward, turning technology into a mechanism for top-down compliance. These web portals (and the size and complexity of the reporting matrices submitted to them) demand reliable internet access, which often forces local staff to travel great distances just to upload their field data and compliance reports into rigid algorithmic boxes dictated by donor guidelines, instead of using the system to genuinely plan, strategize or learn from their own work or that of their peers.

The historical arc of technology adoption across the sector, as exemplified by these three milestones, leaves us with a major operational paradox: We have moved from the human but unscalable boardroom wall, to the liberating but silent desktop spreadsheet, to the connected but often suffocating cloud portal. The question for the next era of development is simple: How do we build a tool that captures the intuitive logic of the flipchart and the independent freedom of the desktop, while leveraging the intelligent processing power of the modern digital age?

Unfortunately, existing software can’t simply be adapted to the sector’s current operational realities. The issue is not an absence of tools, but a fundamental design mismatch. Current software forces a false choice: At the frontline level, we either rely on isolated offline spreadsheets that cannot share global data, or heavy, centralized cloud portals that require reliable, high-bandwidth internet and function primarily as mechanisms for top-down donor oversight. This creates a cycle of structural dependence, where local NGOs are locked into either expensive proprietary tech vendors or the fragmented maze of custom-built reporting platforms mandated by their donors. Because these systems were built for top-down bureaucratic oversight rather than frontline execution, simply patching these existing platforms with new features is unlikely to solve their underlying misalignment with the sector’s evolving needs. We need a foundation built from the ground up for development realities.

It is time for a new digital architecture in global development

The solution I am proposing is not to build yet another heavy, donor-centric compliance portal. Nor is it about resigning ourselves to the isolated offline spreadsheets that frontline teams still fall back on today. Instead, it is about building a digital architecture that could move the development sector away from centralized, siloed compliance portals mandated and run by current donors, and toward a decentralized, interoperable ecosystem where an NGO holds its own operational data locally (even offline) and selectively grants access to specific funders via a secure network.

A decentralized architecture would reduce dependence on any single vendor, government or donor-controlled platform while preserving interoperability across the network. For a local NGO, this would mean they could enter their data once into their own local workspace, and the system could automatically translate and route it to an aid organization’s portal, a UN database or a private foundation — without the frontline worker having to log into three different websites and manually type the data out three separate times.

For the sake of this discussion, let’s give this proposed new digital architecture a name: Modus.

Modus would serve as both a framework for standardizing frontline data and an offline-first workspace for managing and sharing it. It would be a global, license-free ecosystem created to bring next-generation project design and execution within easy reach of countless development professionals. If the previous era belonged to the top-down cloud portal, the next era will belong to this sort of decentralized, global data architecture, pairing the independent flexibility of the spreadsheet with an open, secure repository hosted across distributed data networks.

While this system would work on individual devices in low-bandwidth or unconnected areas, when connected to the internet, it would act as a secure gateway: allowing the user to access advanced analytics, simulation tools and comparative insights drawn from the wider network, while maintaining strict control over sensitive operational data. Thus, Modus would allow NGOs to choose exactly which metrics to keep private, and which to selectively share with specific funders.

Frontline digital architecture for NGOs: A walkthrough

The nuts and bolts of this new architecture would best be left to multilateral leaders and Big Tech, who would ideally fund it not as a proprietary product, but as an open-source Digital Public Infrastructure that prepares emerging markets for their own advanced analytics. And once established, other entities  — especially in the public sector in countries around the world  — could easily adapt the architecture to decentralize and customize their project planning and implementation. But the blueprint for building it must be rooted in a deep understanding of the local NGOs and practitioners who face the realities of working at the field level where projects are actually implemented.

We can visualize some of this ecosystem’s core features by looking at how it would translate into quiet, practical value for a single, frontline NGO linked to this global network.

At the user level, the Modus software would need to be a lightweight, easily downloadable freeware developed to work on Windows and Macs, and able to operate seamlessly with or without regular internet access. Crucially, this software should be designed to be a widely used project worktool — built with the universal simplicity of Microsoft Excel rather than the intimidating, specialized complexity of heavy project management software like MS Project.

Let’s walk through the feature set of this proposed platform with Maya, a hypothetical program coordinator at a local NGO who represents millions of frontline practitioners managing multi-sectoral realities in communities that have limited access to the internet.

Phase 1: Strategic positioning and niche design: When Maya opens the Modus interface, an adaptive workspace prompts her to declare a clear operational focus for her NGO — a stark departure from current donor portals that inadvertently encourage scattered, multi-sectoral mission creep. As Maya inputs localized field realities, the tool’s analytical layer cross-references them against her organization’s core competencies to identify unfulfilled societal demands. Instead of traditional, box-ticking aid proposals that rely on broad, catch-all mission statements, the framework guides her to design highly targeted milestones that isolate the NGO’s exact mechanism of impact. This locks the organization into a distinct institutional niche before a single dollar is allocated, helping it differentiate itself from other NGOs across the broader network.

Phase 2: Financial sustainability and tapering models: Maya then switches to the financial workspace within Modus, where built-in calculators operating within the familiar, grid-like simplicity of a spreadsheet automatically project a multi-year budget directed toward an operational breakeven point. Crucially, the interface operationalizes the Diminishing Grant Framework approach I proposed in a recent NextBillion article, by embedding a tapering logic directly into the budget line items. As the system models a progressive reduction of donor funds, in accordance with this proposed framework, it requires her to structurally build local cost-sharing mechanisms, community fee-for-service models, or shared-value partnerships directly into the financial model to replace the receding grant money. By prioritizing the project’s local self-reliance as external aid recedes, the platform ensures that the intervention can survive on its own economic momentum.

Phase 3: Risk simulation and dynamic reporting: Before implementation, Maya connects briefly to the web to activate the platform’s analytical simulation layers. She introduces a hypothetical six-month supply-chain delay and an inflationary spike. The system utilizes AI-driven predictive analytics to instantly model these macro-disruptions across her entire plan — showing where the budget will break and how community outcomes will shift — allowing her to build a risk-adjusted blueprint in minutes.

Once this software is installed across the field teams at Maya’s NGO, these teams begin to upload encrypted qualitative observations phonetically in their local language using standard mobile keyboards. Upon syncing, the integrated system automatically deciphers, translates and structures these localized narratives into professional English. This creates an instant multilingual data bridge that simultaneously updates evaluation models and generates draft donor reports for final human review in real time, greatly streamlining data consolidation.

In considering the efficiency gains that can be generated by this sort of AI-enabled system, it’s important to acknowledge that need for final human review, as human judgment would be essential to the system’s success. While this review would require time and resources, these would pale in comparison to what’s needed to sustain the sector’s current data and reporting practices, where field data is often written on paper in local dialects, manually translated, then typed up days later by someone in a regional office — a process that’s slow, painstaking, and incredibly prone to human error and subjective interpretation. The AI would eliminate much of the manual grunt work of data consolidation, while a program coordinator would review and verify the system’s output, reducing the total time investment for these processes from weeks to hours.

Co-piloting the project lifecycle

The true utility of this sort of platform would lie in its ability to provide real-time guidance at every stage of project design. It would not replace human judgment; instead, by eliminating the mechanical burden of data entry, it would free up the practitioner’s funded hours for high-level strategic oversight. It would use clean interface design and contextual prompts to draw out a practitioner’s deep field insights.

Returning to the example of Maya: As she refines her project, this guidance surfaces a layer of analytical support directly inside the workspace layout, using the following measures:

• Contextual prompts: Instead of leaving the user staring at a blank row in a spreadsheet, the interface utilizes dynamic menus tailored to specific development sectors. If Maya inputs a generic line like “Community Training,” the system prompts her with localized operational questions, like: “Which local groups will lead this? Have seasonal migration patterns been accounted for?” These prompts ensure that routine data entry is consistently paired with rigorous project design logic.
• Cross-linkage scans: The embedded system actively scans the workspace to break down traditional operational silos. For instance, if Maya schedules a climate-adaptation workshop in one component and a livelihood-diversification module in another, the platform flags the duplication: “Similar target groups detected. Can these activities be integrated to save travel costs?” It connects the dots across the framework, ensuring that separate activity streams reinforce one another.
• Integrity filters: To minimize human error in complex, multi-year plans, the system acts as an automated editor scanning the internal logic of the project. If an operational expense is accidentally duplicated across regional sheets, or if an activity line lacks an assigned monitoring metric, the tool applies a gentle visual flag — such as a subtle highlight rather than a disruptive error pop-up. Through these cues, it alerts Maya to structural gaps and redundant lines in real time, guaranteeing a tight, defensible proposal before it ever reaches a donor’s desk. And because Modus is a decentralized framework, the data users enter stays locally with the NGO. Funders cannot peek into the workspace while the NGO is drafting or simulating scenarios: The proposal and its data only become visible to a specific funder when the NGO explicitly chooses to route it to them.

An open invitation for digital CSR

However, as I alluded to above, a transformative technology of this nature cannot be built by the development sector alone. It requires the foundational expertise of the very entities that are at the helm of the modern digital world.

Therefore, if it hopes to implement such an approach, the critical next step is for the development sector to assemble a visioning team with the expertise, tenacity and networks to pitch this as a collective corporate social responsibility proposal directly to tech titans and high-potential startups alike.

By provisioning this sort of standardized platform, major technology providers would have an opportunity to build a shared development utility. This could provide the development sector with a chance to move beyond passive corporate philanthropy and create a shared operational foundation. Within this system, an NGO field officer navigating a remote work site and a director sitting at a multilateral headquarters could operate using the exact same cohesive logic.

The technology to build such a system already exists. The only remaining question is whether — and how quickly — the development and technology sectors would be willing to step forward to build it together.

DISCLAIMER: The views and recommendations expressed in this article are solely those of the author and do not necessarily reflect the official policy or position of any other organization or individual.

Rajat Ray is a Social Innovations Advisor with over 40 years of cross-sectoral experience spanning multilaterals, international civil society organizations and multinational advertising.

Photo credit: Nutthaseth Vanchaichana

Innovative digital wholesalers are offering an opportunity to improve last-mile health services, including companies like mPharma in Ghana, SwipeRx in South-East Asia, Dawa Mkononi in Tanzania and PillTech in Cambodia, among others. Their models and geographical focuses differ, but they all have two things in common: First, they leverage digitization to improve the quality, availability and affordability of medicines at the largely private points of sales LMIC patients typically rely on; and second, they improve the level of services of their clients (i.e., private care providers) by offering value-added support that ranges from accredited training to inventory management.

Since these wholesaler companies represent a unique lever to increase the availability of quality medicines for low-income patients, Sanofi has targeted them in its Impact Fund, supported by the Hystra team, which acts as operating partner. By combining patient capital and technical expertise, the Fund aims to support entrepreneurs who are improving access to healthcare, particularly essential medicines, at the last mile in LMICs. The Fund started to invest in “digitally enabled wholesalers” in LMICs over four years ago, and currently has around 10 ventures in its portfolio.

We’ll discuss our learnings from these investments below, highlighting several challenges these businesses are facing, exploring how funders can help overcome them, and sharing a practical tool that outlines key priorities and performance targets across the digital wholesaler business model in the health sector.

Understanding the Struggles of Health-focused Digital Wholesalers in LMICs

Working closely with these entrepreneurs, we have observed that even well-managed digital wholesalers struggle under a flood of complex choices, driven by limited market information and constrained management capacity. This leads to overstretched teams, along with ill-timed and costly decisions in an increasingly difficult financing environment.

Senior management faces a near-impossible balancing act: Their clients expect reliable service across a huge range of medical and over-the-counter SKUs (Stock Keeping Units, the alphanumeric codes retailers use to track their inventory). Meanwhile, their investors push them for profitability and demand competing strategic initiatives (ranging from customer acquisition through credit programs to international expansion), while their operations teams grapple with daily crises with little middle management support or market information.

Under these pressures, wholesaler entrepreneurs often make decisions that seem reasonable in isolation, but that end up overwhelming staff, accelerating cash burn and, more often than not, frightening away potential investors.

These mistakes undermine the funds they have painstakingly raised. The following examples illustrate the types of issues we’ve seen these wholesalers face:

• Some ventures dramatically increased their inventory across hundreds of SKUs before securing consistent availability of their top 100 products, the products that their clients, such as pharmacies, depend on. The result? Their cash was tied up in slow-moving stock while their core products still faced stockouts.
• Some launched credit schemes to acquire new customers before their operations were stable enough to manage the additional complexity generated by the credit. They spent months chasing overdue payments, burning cash and energy that could have been invested in strengthening their core service.
• Others ordered large shipments from abroad at attractive prices, only to watch their goods, and their liquidity, sit for months in delayed and unpredictable overseas transportation they hadn’t fully anticipated.
• In all these scenarios, we have seen motivated employees being put under pressure, and in many cases, working till exhaustion. This has led to high churn in wholesalers’ teams, which ultimately impacts the venture’s performance. For instance, we have seen ventures struggling to recruit and retain commercial sales managers, in a context where the best candidates are more interested in other, more attractive job positions.

Making matters worse, these mistakes are being made at a time when cash is harder to raise than ever. Ventures in LMICs are caught in a pincer effect: Financial institutions are reluctant to provide them with funding due to heightened risk, while macroeconomic volatility further strains their operations. These dynamics have manifested in multiple ways: Equity fundraising has become more difficult as investors perceive higher risks; local currency loans are scarce; the cost of US dollar-denominated debt has soared (for example, with the naira depreciation, loans taken in US dollars have seen their real cost in Nigerian naira triple between May 2023 and February 2024); and grant funding has declined due to European budget constraints and shifts in US foreign policy.

How Investors Can Unlock the Growth of Digital Wholesalers

In our Fund’s efforts to support digital wholesalers, we’ve faced a structural paradox: Most of them need intensive support to unlock their growth, yet their limited management teams can only contend with a handful of the technical assistance (TA) offerings we provide to companies. For the Fund to be sustainable, we have had to address these issues in a cost-effective way, which has proven to be difficult.

These ventures typically operate with lean leadership teams that must simultaneously drive strategy, fundraise and manage day-to-day operations in a highly hands-on manner, often due to limited middle management capacity. While they would benefit from support across a wide range of operational areas, their bandwidth constraints mean they can only address a few priorities at any given time, making rigorous alignment and prioritization essential.

Given their early stage, most of the ventures we invest in also have a limited capacity to absorb large investment tickets (typically ranging from $100,000 to $1 million). This creates another structural challenge: The limited upside potential of small tickets, combined with ventures’ constrained ability to co-finance the technical support we provide (a requirement for our portfolio companies), continues to make cost-effective TA a difficult equation to solve.

Nevertheless, playing a truly transformational role in these companies’ growth requires more than capital and high-level strategic guidance. It requires us to help entrepreneurs identify the top current priorities for their team, and to provide tailored and targeted support to ensure that they are able to achieve them.

To that end, we have supported our portfolio companies with hands-on technical assistance across critical aspects of their business models. These assignments have taken many forms (varying in duration, scope and intensity), but they have consistently shared a focus on addressing core drivers of growth by looking at what is truly happening “under the hood” at these enterprises. This support has included:

• A six-month in-person engagement in Cambodia helping PillTech’s team strengthen procurement, warehousing and sales practices to expand their rural reach.
• A hybrid assignment (a mix of in-person and remote support) to implement sales and operations planning for Viebeg in Rwanda.
• An assignment we launched in Tanzania in early 2026, to support Dawa Mkononi in turning around sales performance.

A Practical Tool for Supporting Digital Wholesalers in LMICs

Building on these field engagements, alongside some ongoing coaching we’ve provided to CEOs and leadership teams across our portfolio (including to the most mature ventures), we have consolidated all the insights we’ve gathered into a practical tool: “The  Journey of Health Digital Wholesalers in LMICs.” Designed with and for entrepreneurs, the tool aims to help ventures identify and focus on what matters most at each stage of their growth, while also enabling the Fund to take a more cost-effective approach to delivering technical support.

This tool outlines key priorities and performance targets across the digital wholesaler business model (including areas like the value proposition, operational model, financial and IT model, and team) tailored to each stage of a venture’s maturity.

The journey is split into three stages of maturity, which should be mastered sequentially to ensure that no capital is wasted, and that staff know where to focus:

• Stage 1: Build Your Foundation. Prove that your value proposition has traction by winning over 100+ repeat customers, thereby confirming your “right to play” in this business space. Here, the goal is to establish a minimal value proposition, with a small but repeat customer base. For example, at this stage, a venture is expected to have a client interface working and 200-300 SKUs in stock to confirm traction.
• Stage 2: Nail it, Then Scale it. Consolidate for profitability, becoming a trusted wholesaler for a customer segment in a given geography thanks to deepened relationships and high reliability (i.e., aiming to achieve 99% availability for your top 100 SKUs). Then scale to new geographies/segments while maintaining service quality and product availability, with the goal of deepening your share of your pharmacy clients’ merchandise to up to 70-80% (ideally).
• Stage 3: Grow Beyond Drug Supply. Develop innovative services that help private points of care transform their operations and serve their communities better. For example, these services could help pharmacists better manage their inventory, validate their licenses (a difficult task in some LMIC markets), or broaden the services they offer to patients (e.g., adding diagnostic services to their existing offerings).

Our ambition in codifying this knowledge was threefold:

• First, to give CEOs a cost-effective way to assess where they stand and prioritize the goals they must accomplish to grow their businesses, by making actionable operational insights directly accessible to them and their team.
• Second, to conduct diagnostics in parallel to our due diligence, translating findings into a Value Creation Plan co-developed with the venture. This ensures that TA funds go towards the areas they are most needed.
• Third, to foster knowledge-sharing across the broader ecosystem of practitioners.

Since its inception, this tool, tested with several portfolio companies as part of a diagnostic exercise, has proven to be valuable. It has helped not only ourselves as investors, but also the companies and their top management to align on which of the three stages of maturity the enterprise is at — a key prerequisite to seeking alignment on strategic priorities. When using the tool with these portfolio companies, we often started by identifying unsuspected misalignment on maturity among top management, which needs to be solved before moving forward.

For example, when running the tool with top management teams, we realized that some initially did not agree on how well they were segmenting customers, or how well their sales teams were delivering the sales pitch. These leaders also realized that some of their planned initiatives — e.g., geographic expansion, warehouse openings, and complex technology features or product importation — were premature. They needed to focus on the fundamentals first: from improving customer segmentation to ensuring reliable availability for their top 100 products. These were not the most exciting priorities, but they were the right ones for their stage of growth.

This tool continues to evolve, and we expect it to grow in line with experience and external contributions, as part of a broader set of solutions developed by the Sanofi Impact Fund. Clarifying the journey of health digital wholesalers is one of many components of the Fund’s TA approach, and we expect the insights generated by these efforts to evolve as we learn more from ventures, co-investors and the ecosystem.

Indeed, this tool was generated from the start with the support of entrepreneurs: Back in 2024, when we first started the codification of our learnings, we organized a peer-learning session between all ventures of the portfolio (at the time), where the more mature ones could reflect back on their journey while the early-stage ones reflected forward. It was a key moment that generated rich insights and helped us refine the tool to match entrepreneurs’ perspectives.

If you are keen to learn more about this topic, or interested in contributing, we’d love to continue the conversation and share the diagnostic tool derived from these insights — a ready-to-deploy methodology delivered through 3-5 day in-person operational assessments. Feel free to reach out to the Sanofi Impact Fund (via Laura Collet, Head of Sanofi Impact Fund) or Hystra teams (via Alice Magand, Project Manager).

François Lepicard is a Senior Partner, Alice Magand is a Project Manager and Guillaume Massot is a Project Manager at Hystra; Laura Collet leads the Global Health Unit Impact Fund at Sanofi.

Photo credit: PeopleImages

According to Africa: The Big Deal – Startup Deals Database, a database listing funding deals secured by startups in Africa, since 2019, there were 208 equity exits across the continent. And while agriculture made up 10% of investment flow (436 out of 4,173 deals), it accounted for just 3% of exits (seven out of 208). To put it another way, for every 62 announced ag deals, there has been one ag exit. In comparison, the energy and water sector saw one exit for every 33 deals, while fintech saw one exit for every 16 deals. The chart below shows the ratio of exit to deals for each sector, expressed as a percentage. Agriculture has, by this measure, the lowest ratio of any sector in Africa.

It’s not just the lack of a steady flow of exits that raises a red flag. A healthy investment ecosystem is also characterized by a mix of exit types — including strategic acquisitions, initial public offerings (IPOs) and secondary transactions — at consistent or rising multiples that create reasonable returns. In US venture capital, according to Pitchbook’s VC Exit data, 38% of exits in 2025 came via acquisitions, 33% via IPOs, and the remaining 29% from secondary sales of shares in private companies: a nice, healthy mix.

In agriculture, we see much more concentration. According to Pitchbook, 23 out of 26 exits in smallholder agriculture across emerging markets were via merger and acquisition (M&A). The remaining three were via two buyouts and one IPO. That overreliance on M&A decreases both the likelihood of an exit (since there are only so many acquirers out there), as well as the value returned from those exits (since acquirers are well aware that companies do not have many other options available).

Impact investors are at a crossroads, with two possible paths before us. On one path, investors simply stay the course, maintaining the hope that big exits for smallholder-focused agri-SMEs are around the corner, and that when these exits finally come they will enable companies that are achieving rapid scale to proceed through the traditional venture capital and commercial market routes.

The other, less-traveled road requires us, as investors, to build the exit pathways that we’ve been hoping for. Taking this path would be more difficult, but it would give us the freedom to explore exit strategies that are more appropriate for early-stage companies that work directly with smallholder farmers, while strengthening their resilience and improving their livelihoods.

Rather than continuing to operate under existing market structures, emerging models, such as impact secondary funds and impact buybacks, show that there are still untapped opportunities for impact investors to build innovative funding solutions that are better suited for smallholder-focused agri-SMEs. In the article below, I’ll discuss the challenges of achieving exits in smallholder-focused agriculture, highlighting the limitations of current investing models and exploring some of these emerging alternatives.

A trickle of exits, rather than a steady stream

According to Africa: The Big Deal – Startup Deals Database, between 2019 and 2025, 74 of the 208 equity exits (36%) from companies across Africa were in fintech, while only seven were in agriculture. Four of these companies were grocery delivery platforms, two were dinner kit/meal plans, one operated in the food and beverage sector, and one was a seed potato farm. None of these companies demonstrated a focus on smallholder farmers.

Cross-checking this with data from Pitchbook, since 2006, there have been 385 exits in the agriculture industry across East Africa, West Africa, India and Latin America. Yet agriculture comprised only 4% of exit deal flow, while sectors like financial services (35%), healthcare (20%) and energy (16%) dominated. Of these agriculture exits, only 72 companies had a focus on smallholder farmers. Compare that number to over 2,500 and 1,500 exits in financial services and healthcare, respectively.

The exits we have seen in smallholder agriculture can make it tempting to believe that more exits are coming, but these few successful cases do not necessarily demonstrate scalable or replicable exit solutions. Mercy Corps Ventures, for example, saw successful exits or partial exits from its investments in Pula, Umoja and Topl. Pula is a microinsurance firm serving over 20 million farmers across 22 countries in Africa, Latin America and Asia. Umoja provides Web3-native hedging solutions for currency and other financial risk assets. Topl’s blockchain solution links smallholder farmers with value-add service providers, like weather information, insurers, lenders and input providers. In addition to these heavy tech play companies, recent years have also seen Truvalu’s exit from GrowPact and Pamoja Farms’ full acquisition of Ten Senses Africa.

But while these examples are promising indicators of the potential of agri-SMEs, they are the exception rather than the norm. The common challenges of working in agriculture help to explain why there have been such sporadic and limited exits to date.

The unique challenges of exits in agriculture

Agriculture is a notoriously difficult sector to invest in, given the asset-heavy nature of the companies, alongside their mostly low margins, and long research and development, sales, and cash conversion cycles. ISF Advisors found that offtakers sourcing from smallholders, like traders and processors, often lend to these farmers at a loss, hoping to either secure farmer harvests, or help enable greater productivity or other impacts. These losses are driven by low loan pricing, high cost of funds, and a high cost of risk when a climate shock hits: Offtakers’ lending losses increase from 13% when farmers don’t face any climate shocks, to 42% if a shock occurs. Businesses within the sector must also deal with a wide range of value chains, perishability of their primary goods, slow farmer adoption of new practices, and susceptibility to climate change and seasonal variations. One of Acumen’s portfolio companies, Kentaste, experienced this firsthand back in 2021-2023, when a two year drought significantly impacted the coconut harvest, with supply falling by 38%. The impact of climate change, combined with its debt obligations, led to a drastic shift in the company’s unit economics.

In addition to the economics of agribusinesses, the operational complexity of these companies’ business models requires Patient Capital and more creative financing. For example, vertically-integrated models — wherein a smallholder-focused company offers farmers a combination of inputs, hands-on training and direct market access — demand precise coordination. These companies often need to establish regional hubs where trained agents have the resources to pay farmers, aggregate and store product, and deliver or process the raw material on time. Typical investment products and timelines are usually not suitable for their needs.

Agriculture needs both debt and equity

Considering the factors laid out above, it’s reasonable to wonder whether or not equity is the right tool for investing in agriculture. If debt can reliably get investors their money back and still help agribusinesses achieve their objectives, why continue to invest equity?

It’s because, as Acumen has seen, equity capital can be catalytic for early-stage agri-SMEs.

Equity is appropriate for companies that demonstrate significant revenue growth and potential to scale. From Acumen’s own equity portfolio, S4S Technologies — which sells solar dryers to dehydrate fruits and vegetables, restoring the value of smallholders’ rejected produce — more than doubled its revenues two years after our initial investment. Equity capital plays a role in a blended instruments approach that can provide critical support to agri-SMEs that serve smallholders, while also being pragmatic about investors’ liquidity needs. Impact investors want to support the needs and work of agri-SMEs, but they also need to see some level of return on their investments. Ensuring that companies have a healthy mix of debt and equity can help achieve both.

I spoke with two agriculture impact investors to get their thoughts on why we should continue to invest equity and not just debt into agri-SMEs. According to Tamer El-Raghy, Managing Director of the Acumen Resilient Agriculture Fund, Acumen’s later-stage agriculture investment initiative, “Companies require equity to maintain a healthy balance sheet. Excessive debt can lead to over-leveraging, substantially elevating the risk of survival during both macroeconomic and microeconomic fluctuations.” Similarly, Chris Isaac of AgDevCo stated, “For early-stage agri enterprises, equity is essential as a buffer for inevitable shocks. Relying on senior debt only is high risk, because a bad season or a market shock could knock you off course.”

Equity still plays a critical role in scaling agri-SMEs, and so the need for more potential exit pathways remains.

Current exit approaches are limited for impact investors in agriculture

We believe that impact investors cannot continue on their current path, hoping that agriculture exits are just around the corner and believing that traditional financial structures can sufficiently serve the needs of smallholder-focused agri-SMEs. That long-expected increase in exits will never arrive as long as these exits continue to occur on a one-off, sporadic basis, with both investors and entrepreneurs tasked with identifying potential buyers.

Common exit strategies in Africa involve one of three routes: strategic acquisition, a secondary sale, or management buybacks. AVCA’s 2025 African Private Capital Activity Report found that 38% of exits across sectors were sales to strategic buyers, followed by secondary sale transactions at 26% and management buybacks at 19%. But while these are feasible strategies, there are limitations to each.

In agriculture, local and multinational corporations are often considered the most likely strategic buyers. However, corporate expectations around investment and scale can make it challenging to pitch a smallholder-focused company.

One example is Olam, one of the largest commodity trading firms in the world. Olam had previously backed a digital farmer services platform, Jiva Ag, but ultimately closed the company “in light of the expected continuing investment required to sustain its operations in these challenging times and difficult market conditions.”

Similarly, when Acumen asked another large multinational corporation about their level of interest in acquiring or investing in agri-SMEs, they expressed their hesitations: “We would partner with an ‘ESG’ company in a heartbeat. It’s a nice story. But it’s a different story of wanting to invest. Is there a financial ROI? Is there AI? How would a[n investment] partnership make our unit economics more favorable?” Given these concerns, a smallholder agri-SME would need to achieve significant scale, volume and profitability to be attractive to a large corporation.

In the case of management buybacks, three things need to happen: First, the company needs to generate enough cash that a buyback is even an option, and buying back shares needs to be seen as a reasonable use of this cash, which likely means the company needs to be intensely profitable and/or have reached a slower-growth steady state. Additionally, the company must have decided to not raise significant amounts of additional equity, which would counteract their repurchasing of company shares.

Finally, when it comes to secondary sales, a lack of buyers makes this a rare option. A key barrier here is the unwillingness of development finance institutions (DFIs) and multinational development banks (MDBs) (which provide much of the capital to potential acquirers) to support secondary transactions. As a recent report from Third Way Capital, sponsored by British International Investment (BII), said: [DFIs’] mandates emphasise primary capital deployment and [their] impact frameworks include a use of proceeds lens, which often excludes transactions that buy out existing investors rather than deploying capital into new assets.”

However, a 2024 sale of BII assets to Blue Earth Capital is a hopeful sign. More openness to these types of vehicles among DFIs and MDBs is essential to building the kinds of consistent and appropriate exit pathways that are ripe for exploration in agriculture.

We need to start building alternative, more appropriate exit pathways

In response to these challenges, alternative ideas and vehicles are beginning to emerge and take shape in the agriculture sector. These include:

• Impact secondary buyers, such as Blue Earth Capital and Coller Capital, which offer exit opportunities for impact investors. 
• Approaches like Planetary Impact Ventures’ evergreen capital structure with no carried interest, which enables individual investors to exit after five years while the fund continues. 
• Entities like Africa Eats, which foregoes exit expectations altogether via an impact holding company modeled after Berkshire Hathaway.   
• Impact buybacks, another sustainable exit pathway wherein a company buys back investor shares by meeting impact milestones. 
• Revenue-based buybacks, which could create a more financially feasible alternative for companies by allowing them to buy out investor stakes over time based on the revenue they’ve generated. 
• Employee ownership models, as explored extensively by Transform Finance and the Predistribution Initiative, which have been primarily based in the United States but offer room for further research and application in emerging markets.

There are certainly more questions than answers when it comes to exploring these alternative pathways: Where will the capital come from and how can investors raise it? What kind of fund structure would be needed to deploy them? What happens to the companies and their capital needs once a secondary buyer or evergreen holding company invests? What would it take for investors to be willing to accept impact milestones as a way for companies to buy back investor shares?

Unlike the current exit pathways that are common across the sector, these solutions are more financially feasible for small agri-SMEs, and some of them — particularly impact secondary buyers and holding companies — have potential to scale. If these practices received wider uptake, investors and companies alike would not need to keep searching or hoping for the next buyer.

The path where we wait for traditional exits to happen and solely seek investments that fit existing market structures leads to nowhere. The growth, return and timeframe expectations of traditional market structures were not designed with smallholder farmers or climate resilience in mind. It’s time for us to start forging the less-traveled path.

What other exit pathways are out there? We’d love to hear about other ideas and solutions that you’ve heard about or are interested in exploring. Share your thoughts with us here.

Coco Lim is Manager of Insights at Acumen.

Photo credit: Peter Irungu for Acumen

But there is another number worth looking at: Out of nearly 95.2 million enterprises registered in the country, over 99% are micro.

As of September 9, 2026, the Ministry of MSME Dashboard reported 95,236,393 enterprises across the Udyam Registration Portal and Udyam Assist Platform, which aim to give MSMEs a formal identity and registration number, along with access to lending and other benefits. Of these, 94,651,631 were classified as microenterprises — about 99.4% of the total. 

However, the word “micro” needs some care here. Under the revised MSME classification effective from April 1, 2025, a microenterprise can have investment of up to ₹25 million (~US $265,000) and annual turnover of up to ₹100 million (~$1.06 million). So being classified as micro does not, by itself, tell us that a business is tiny. What the numbers do tell us is that the overwhelming majority of registered enterprises (about 73 million) are still at (or technically “under”) the first rung of the MSME (micro, small and medium) classification. They are classified as “nano,” a subset of “micro” that includes businesses with less than ₹10 million in annual turnover. These enterprises are mainly cash-based and family-run, and the majority of them are rural. They have the capacity and aspiration to grow, but no dedicated ecosystem to help them transition and scale.

India has clearly become very good at bringing enterprises into the formal system. What we have not become equally good at is helping viable enterprises move beyond micro and into their next stage of growth: becoming large enough to attract formal investment.

The Gap Between Nano and Investable

At the end-point of that journey sits the Self-Reliant India Fund. The fund was set up to channel growth equity to MSMEs through a Fund-of-Funds structure. According to government data from July 30, 2026, 766 MSMEs had been assisted between the fund’s launch in 2021 and June 30, 2026, with more than ₹30 billion invested ($316 million) by the government. An additional $900 million of government funding is yet to be deployed.

Put these two numbers next to each other and the gap becomes hard to miss: Tens of millions of enterprises have entered the formal system. But just hundreds have grown large enough to obtain equity funding from a government platform designed to provide them with easy access to this support.

What happens to everyone in between?

That question has stayed with us through much of our work with rural and semi-urban businesses. At Quiver Catalyst, a rural enterprise scaling platform, we work with growth- oriented entrepreneurs who are ready to move beyond day-to-day survival. Our support combines practical mentorship, business support and advisory, investment readiness, and growth capital in the form of micro-equity — because we have found that capital alone rarely addresses the barriers that emerge as a business grows. 

We conducted a year of fieldwork with more than 850 enterprises across four states of India, combining the findings with national data to produce our latest white paper, “Beyond Survival: Unlocking Growth Pathways for India’s MSMEs,” which examines the transition from microenterprise survival to sustained growth. In the process, we’ve seen that many Indian enterprises are not struggling to survive. They have customers. They sell something people are willing to pay for. Some have been around for years. The entrepreneur has already done the difficult work of getting the business off the ground.

And yet, when the time comes to grow beyond the nano stage, things begin to get complicated. The books that were perfectly adequate for running a nano business may not be enough for an investor trying to understand its margins, working capital or cash flow. The entrepreneur may know exactly how to sell within her district but have no idea whom to call when she wants to expand into the next one. A large order can look like an opportunity until the business realises it does not have enough working capital to fulfil it.

Then there is the question of the money itself: The business may have outgrown the microloan that helped it get started, but that doesn’t mean it is unbankable. It may just be too large for the smallest loans and still too small, informal or unstructured for many institutional investors. For instance, it may need $5,000 or $25,000 to make the next jump, not $50,000 and not $1 million.

This is where a lot of businesses get stuck.

Other Obstacles Faced by Growing MSMEs

These MSMEs also face an obstacle less visible than finance. In a small enterprise, the founder is often doing almost everything: speaking to customers in the morning, buying raw material in the afternoon, checking production, following up on payments and somehow maintaining the accounts in between.

As the business grows, the decisions this entrepreneur must consider start to change:

• Should I hire someone now or wait?
• Can I afford more equipment?
• If I sell through a distributor, what margin do I give up?
• Can I take this loan if my sales drop for three months?
• How much stock should I hold before the main selling season begins?

In a larger company, there are people whose entire jobs are built around answering questions like these. For a first-generation entrepreneur, they can become decisions that determine whether the business grows at all. And where the entrepreneur is located changes how difficult it is to find those answers.

Ambition is not a Mumbai privilege — Access is

For instance, we have repeatedly seen that MSMEs located outside of major population centres face unique challenges that aren’t shared by their urban counterparts. This is not because entrepreneurs in smaller towns lack ambition or capability. It is because the networks that support business growth are far less dense and often much harder to access outside India’s major commercial centres. These enterprises are hampered by the three Ls: location, missing market linkages and lack of leverage.

Consider what an entrepreneur’s journey can look like in a major city like Mumbai (India’s financial capital) compared to a small, remote Indian town. At different points in this journey, a growing business needs a banker who understands it, an accountant who can help put the numbers together, a distributor willing to take a chance, a mentor who has solved the same problem before, and a network that can provide connections to investors and buyers.

In places like Mumbai, many of these people are relatively close. In a small town like Gadchiroli, the entrepreneur may have to travel much further — both socially and physically — to cover each of these needs.

Supporting MSME Growth in India Requires More than Just Capital

The question then is: What would make that distance shorter?

Expanding access to incubators and accelerators is clearly one part of the answer. Jagriti Enterprise Centre – Purvanchal, PRIME Meghalaya, Villgro and a growing number of incubators use different models, but all point to a simple need: Entrepreneurs outside the large business centres need access to mentors, markets, knowledge and networks, not only classroom training.

But incubation cannot end with a workshop and a certificate. An entrepreneur trying to grow a business needs someone to turn to when the distributor does not pay, when the margins change, when new equipment suddenly looks necessary, or when the loan that looked affordable on paper begins to feel very different in an off-season.

Finance needs some rethinking too. A rural agricultural processor can have a perfectly healthy business over the course of a year, and still have very uneven cash flows within those 12 months. But a fixed installment payment does not care whether it is peak season or lean season: The monthly repayment amount remains the same.

Government programmes have done a great deal to expand formal credit and credit guarantees for small businesses. But access to credit and access to the right kind of capital are not always the same thing. For some businesses, revenue-linked or cash-flow-linked structures may make more sense. For others, debt may still be the right answer. The larger point is that the financing has to understand the business rather than forcing every business into the same repayment pattern.

And even the right capital will do very little if the enterprise has nowhere new to sell.

Market access sounds like a broad development-sector phrase until you sit with an entrepreneur and realise it can mean something as simple as finding the first reliable distributor outside her district.

Government channels have opened useful doors for businesses navigating the challenges of growth. The Public Procurement Policy for Micro and Small Enterprises sets a 25% annual target for the amount of goods procured from MSEs across Central Ministries, Departments and CPSEs, while the MSME Ministry’s Procurement and Marketing Support Scheme is intended to help MSMEs improve marketability and reach new markets. But getting through those doors still requires documentation, quality control, working capital, competitive pricing, fulfilment capability and relationships.

That is why we have slowly come to believe that the transition from nano to investable cannot be solved by capital alone.

Sometimes the business needs money. Sometimes it needs six months of better record-keeping before taking on that money. Sometimes it needs a distributor, someone to sit with the entrepreneur and work out whether buying that new equipment will actually improve the business. And sometimes the most useful thing for an entrepreneur is simply helping her understand how an investor or lender is likely to perceive her business before she sits across the table from one. We have therefore started one step earlier than the question, “How much capital does this business need?” We ask: “What is actually preventing this business from growing? What needs to change before more capital can genuinely help?”

The answers to these questions are different for every enterprise. That is precisely the point. Every MSME faces its own challenges in moving from nano to small and medium-sized. India needs to do a better job of addressing those obstacles if it hopes to see its successes in formalising MSMEs translate into actual, sustainable business growth and job creation.

Quiver has embarked upon a journey to develop a new capital stack led by risk capital, along with an enabling system to help transition these enterprises. But India needs tens (or hundreds) of like-minded organisations to join us, if we hope to scale the country’s millions of nano enterprises. 

Read our full white paper at https://www.quiver.in/insights

Pranshu Chhabra is a development professional working with Quiver, Rudra Midhun Kumar is part of Quiver’s Diligence Team, and Chiropriya Dasgupta is the Director of Investments at Drishtee Foundation and Co-Founder of Quiver.

Photo credit: Quiver

However, scaling these innovations could also provide NGOs with a solution to that funding challenge. The development sector has reached a firm consensus that it needs to depend less on grants, so hybrid business and operational models are becoming increasingly important for NGOs seeking to remain sustainable, relevant and adaptable as the aid landscape evolves. There’s a growing need for these organisations to explore approaches like rethinking their funding architecture, claiming a clearer niche, and evolving the support systems they can draw on. Strategies to generate earned revenue could play an important role in that ongoing evolution toward diversified funding.

But this transition often costs money before it makes money. And this “messy middle” — the period where early support falls away before a business model can stand on its own — is where social innovations stall. This is the stage the Enabel Innovation Hub focuses on. Enabel is the Belgian Agency for International Cooperation, and its Innovation Hub supports mission-driven organisations in Africa and the Middle East in scaling innovative solutions to complex societal issues. The Hub’s research looked at what has to change from within for NGOs to execute this transition — an organisational and mindset shift the sector has been far quicker to call for than to fund. And what we learned is that the transition between grant dependency and financial sustainability goes beyond finding a different type of payer. Instead, it may require an organisation to change what it provides and to whom, how it is governed, who it employs, and what it chooses to say “no” to.

There is no clean path from grants to revenue 

Since 2018, the Enabel Innovation Hub has provided “transition-to-scale” support to over 50 non-profit social innovations across 18 African countries through grant funding and capacity-building technical assistance. 

For a long time we worked on the assumption that scale — funded by a larger grant with more ambitious targets — was the next natural step after a successful pilot. But our grantees’ lived experience showed us that doing more of the same thing in more places is rarely what the job requires. The harder task is changing what an organisation is and where its money comes from.

Those changes were easier to contemplate when grant budgets were growing. Now they are shrinking while expectations rise, and NGOs are being told to diversify as though there were a clear route from grant money to a sustainable model, in markets where programme beneficiaries cannot afford the full cost of the service or product being provided.

To better understand how NGOs are successfully diversifying, we undertook a study involving 18 mission-driven organisations operating across Africa, with varying degrees of financial diversification and at different stages of their journey. Our goal was to better understand how NGOs can scale their innovations while pursuing financial sustainability.

We found that as organisations scaled, financial sustainability was often a condition they continuously managed, with diversification often being the first visible shift. Of all the organisations we spoke to, almost none had moved neatly from grants to earned revenue. They layered and rebalanced income streams as circumstances changed, whether due to funding volatility, policy shifts, affordability pressures or operational demands. Shocks such as losing a grant often prompted diversification and model evolution more than strategy alone.

Financial diversification is not the same as scaling, but it brings many of the tensions involved in scaling to the surface. Deciding to sell something forces an organisation to figure out what it is uniquely good at, who will pay for it, and whether it is prepared to stop some of its regular programming to make space for this new focus (or to hand over its innovations to external partners that will take them to market).

Diversification did not relieve short-term financial pressure for the NGOs we spoke with, because it introduced complexity and demanded capabilities the organisation did not yet have. However, we did find that those NGOs that were more financially diverse were often the most resilient.

The Anchoring-Balancing-Compounding Archetypes

To make sense of the patterns we were seeing, we developed the Anchoring–Balancing–Compounding (ABC) archetype model. It describes three archetypes that non-profits occupy and move between as they diversify their funding sources. And crucially, it identifies the different demands each one places on the organisation and its backers — e.g., showing funders the different types of support required.

Anchoring organisations are predominantly grant-led, bringing in a small share of earned income that helps subsidise costs while grants remain their main source of revenue. Their most pressing need is room to experiment: unrestricted or flexible capital to test revenue models, support to work out pricing for users who cannot pay the full cost, and permission to fail without a restricted grant’s deliverables pulling them back toward premature scaling.

Balancing organisations run grants and earned revenue in rough parity and are actively holding mission and commercial logic together, often through dual legal structures. Here the constraints shift from experimentation to management, creating a need for other types of support — e.g.: governance and legal support for a hybrid structure, working capital to run several income streams at once, and assistance with the harder, less fundable task of managing the tension between mission and revenue as both grow.

Compounding organisations are led by earned income, retaining grants for what markets cannot or should not fund, and they often present as social enterprises with a strong core mission. Their needs are different from those of the other two archetypes, and they include: strategic, catalytic grants ring-fenced for any non-commercial work, the partnership and government-relations capacity to embed into public programmes or procurement systems at scale, and the evidence infrastructure that performance-linked or outcome-based finance demands.

These archetypes raise two key questions for non-profit organisations: Which financial model best serves the organisation’s mission, and what would it need to change to operate with that model?

The ABC Archetype Model, developed from Enabel’s Pathway to Sustainable Scale research and refined through Enabel’s implementation with the Fit4Scale portfolio.

The capacity limbo that no one pays for

An organisation moving into Anchoring, Balancing or Compounding brings assets a new commercial entrant would need years to build. Most have spent a long time working in contexts where markets are thin and public budgets are constrained. They’ve also built relationships a newcomer simply doesn’t have. They know how to design with users rather than for them, and how to translate between what is happening on the ground and what a donor’s reporting template will accept.

However, none of that transfers automatically to a commercial model. Knowing a community well will not tell you how to run three income streams at once, price a service that has never had a price before, or judge when another organisation is better placed to carry an innovation forward. Those are different jobs, and they usually need different people.

This challenge can be seen in the insights we learned from Aflatoun, a global education organisation that empowers children and young people through social and financial education. It set up AflaVentures as a profit-making arm to generate earned income, and then could not staff it with the parent organisation’s existing team. According to a representative at the organisation: “AflaVentures has mixed success, partly because as an NGO … you really need to have commercial people to be successful in that, and finding a person who is interested in doing commercial activities for a nonprofit isn’t easy … at the moment we are not doing fantastic in that area but it’s purely a staffing issue more than anything else.”

Hiring is one part of the transition. A commercial function also has to sit inside an organisation whose systems, incentives and culture were built for non-profit delivery, and that can require a second legal entity with its own board.

In situations where the current team cannot stretch far enough, the grant work and the commercial work compete for the same people. For instance, Green Farmlands has a core team small enough that staff double up across roles. Yet it cannot resource everything at once, so it chooses between its non-profit activities and its revenue-generating ones month by month.

The organisations we interviewed described this as capacity limbo: more demand and opportunity than the team and its systems can carry. This situation is most challenging when an organisation is moving from founder-led delivery to formal operations, or running an innovation alongside core programmes with no dedicated capacity for either. At myAgro, for instance, roles shifted every few months and process knowledge sat informally in people’s heads, which made it difficult to bring in new staff.

This is why the form of support offered to these organisations matters as much as the amount. NGOs at this point need funding that’s flexible enough to let them build capability and change course when a model fails. They also need backers who behave as learning partners rather than compliance monitors checking whether fixed project deliverables have been achieved.

The hidden challenges behind financial diversification

To help address these interrelated challenges, Enabel launched its Fit4Scale initiative earlier this year, which aims to build the capabilities NGOs actually need as they pursue financial diversification and scale, working directly with the leaders who have the decision-making power to make these calls.

We’re supporting organisations’ efforts to: test new commercial business lines which bring in earned revenue, establish commercial enterprises, set up governance mechanisms that can subsidise their non-profit activities, and explore partnerships and alternative funding models to scale their innovations.

But these structural model shifts are only part of the decision. Underneath lie harder challenges.

One involves a change of mindset. Much of the NGO world is built around a particular idea of social mission: doing good for its own sake, delivering projects, meeting donor commitments, etc. But earning revenue requires a different mindset that enables the marketing and selling of products and services — one that holds a commercial logic alongside the social one. This not only changes what an organisation does, it also changes the kinds of people it needs to do it. As Mark Thomson, Director of Business Strategy and Delivery at IWMI, a global research organisation addressing water challenges in developing countries put it: “The hardest shift for IWMI hasn’t been strategic … it is cultural. We had to stop thinking of our digital tools as project outputs and start thinking of them as products that need to be maintained, improved and sustained over time to deliver ongoing impact. That reframe sounds simple, but it cuts against decades of how research institutes are funded and how our people are incentivised. Grant cycles reward novelty. Sustaining what works well requires a completely different mindset.”

The other challenge is often more emotional: balancing mission alignment. Financial diversification forces NGOs to confront questions around mission drift — e.g., as you bring in earned revenue and new capabilities to scale your innovation, does this protect your mission or shift you further away from your original purpose? As Ian Pringle, Executive Director of Farm Radio International described it: “Our expertise in participatory communication, audience engagement, radio, digital platforms and data, for example, can be viewed not only as tools for delivering development programmes, but as capabilities that can solve problems for other organisations. The difficult part is knowing what to commercialise without commercialising our purpose. For Farm Radio, the test is not simply whether something can generate revenue. It is whether we can build a viable offering around what we do exceptionally well, while continuing to reach the people and communities who are unlikely to be served by a purely commercial model.”

Scaling can also mean partnering with others to bring in the skillsets the NGO doesn’t have, sometimes handing them a piece of what the NGO built. And that’s often where the discomfort sits. Handing an innovation to someone else to scale can feel like losing it, even when another organisation is better placed to carry it forward. As Martin Jacobs, Global Rehabilitation Specialist at Handicap International put it: “For the first time, we are looking at our eHealth application through a scaling lens. Instead of simply asking how to do more with more inputs, such as replicating a pilot elsewhere, we are examining our unit cost of delivery and our long-term financial model. This puts our mission as an NGO into question: Where does our mandate end? When and how should we let go and hand the solution to others better equipped to commercialise it? And how do we ensure those partners prioritise impact over profit?”

Commercialisation can pull financial resilience and organisational values into direct conflict. Earned revenue can be less reliable than a long-term grant, particularly in thin markets with volatile demand. And diversification only leads to scale when there is a market to diversify into, which can rule out a substantial share of the work the development sector exists to do. Additionally, though deciding to spin off a commercial activity is perfectly valid (and often represents the most sustainable route to scale), this is not an outcome that is typically rewarded by grant funders.

So the financial support for commercialisation efforts has to reach further than revenue. NGO leaders need the space and the support to decide how their impact should scale, and to shift both skillsets and mindsets across the organisation in line with that pathway.

What funders would have to change

The overarching question is: What types of support are funders prepared to provide, to help organisations implement these changes? We see three core areas where this support could focus:

Funding the transition itself: As mentioned above, moving to new financial models generates costs before it creates returns. These organisations need transition capital: temporary funding that enables them to learn what type of organisation they need to become, and then funds their efforts to become that organisation.

None of this requires the sector to spend more than it already does. Most grant budgets allow a small amount for capacity building, and it is usually spent on compliance training to meet the donor’s reporting standards. The work that moves an organisation from one funding model to the next is different: It involves everything from pricing and financial modelling, to the slow business of learning to sell something. It produces no immediate beneficiary numbers, and it’s difficult to attribute to a funder’s intervention, which is why it is often overlooked.

Designing for learning, not only delivery: How money is designed matters just as much as the amount. Field realities move faster than reporting chains, so a leader who discovers in month eight that the business model does not work has two bad options: Acknowledge that the attempt has failed, and risk being seen as a poor planner. Or keep struggling to deliver the original deliverables across the original grant period and lose two more years.

Funding arrangements shape whether organisations have the space to make these choices well. As one leader at myAgro, which helps smallholder farmers save for agricultural inputs, put it: “If you come up with a list of requirements and deliverables, we’re just going to steer towards those requirements, and not towards finding a real solution.”

Timing matters as well. An organisation moving towards the “Balancing” stage of the ABC archetype takes on cost and complexity well before it sees any return, which is exactly the profile a one to two-year grant cycle punishes. Judging its finances at the moment the grant ends catches it at its worst point.

The organisations that shifted the furthest across archetypes in our study shared one thing: leadership that had accepted that the organisation needed to become something different. That mattered more than market opportunity did, and it strengthens the case for funders to work with NGO decision-makers themselves to get shared buy-in for full organisational change, rather than treating this diversification like another small-scale innovation project within the organisation’s broader programming. But this is as much a behavioural shift for funders as it is for organisations. It requires a new psychology of grantmaking, where the goal stays fixed, but the ways to get there can change based on what you learn.

Redefine what scaling success looks like: Funders also need to broaden what counts as progress. During a transition to new revenue streams, most of an NGO’s progress is invisible on a standard grant report. This reporting isn’t designed to capture the capabilities and systems an organisation needs to deliver at scale, such as a viable pricing model, new commercial capability, stronger governance, a partnership that establishes who carries the work, or the evidence that a business model should be abandoned before more is spent on it. Sometimes the end result of this process is that the NGO decides that it should continue to be predominantly grant-funded, or that an external partner is better placed to take an innovation forward.

The ABC model makes that conversation more specific. Instead of assuming every organisation should travel from grants toward earned revenue, it encourages funders to ask three questions: Where is this organisation now, where does it need to go to achieve greater impact, and what capabilities, structures and funding will it need to get there?

If funders are serious about scaling impact, they have to pay for the transition itself, not just the pilot that precedes it and the scale they hope will follow. That means transition capital: flexible funding, committed for the years an organisation spends becoming something different, that pays for the partnerships, governance, structures and skills the ABC process demands. Until that money exists, the sector will keep asking NGOs to cross a gap it refuses to fund.

Disclosure: Enabel is the Belgian Agency for International Cooperation. The Innovation Hub is Enabel’s innovation unit, funded by Belgium and the EU, supporting mission-driven organisations active in Africa and the Middle East in scaling innovative solutions to complex societal issues. The Enabel Innovation Hub is supporting the organisations mentioned in this article, IMWI and Farm Radio International, with grant funding and capacity building technical assistance. It also commissioned and published a mixed methods study which interviewed Aflatoun, Green Farmlands and myAgro. 

Toon Driesen is the manager of the Enabel Innovation Hub, funded by Belgium and the EU; Alex Losneanu is Innovation Director and Pritika Kasliwal is Innovation Lead at Brink, which is a partner to the Innovation Hub.

Photo credit: cagkansayin