Sri Lanka’s agriculture sector has weathered several storms in the past few years. The fertiliser ban of 2021 was followed closely by the economic crisis in 2022, which brought significant disruption to the sector. Farmers experienced acute shortages of agrochemicals, fuel and power outages crippled supply chains, and many agribusinesses were forced to reduce operations or close down. However, like all disruptions, the crisis also revealed new investment opportunities and openings for innovation.
The Market Development Facility (MDF) is an Australian Government-funded initiative that helps organizations to identify and develop profitable and scalable business opportunities in Sustainable Tourism and Agriculture. Its agriculture portfolio is focused on agricultural inputs – primarily seeds, agri-technology (agritech), fertiliser and mechanization, and specialty coffee.
Amid the turbulence of the crisis, MDF observed changes in the agriculture investment landscape that, if quickly leveraged, could drive long-term economic growth in Sri Lanka. Working with a network of private and public sector partners, MDF emerged as a critical catalyst in driving innovation and resilience in the agriculture sector.
MDF and Ellawala team sharing methods of pest control within crops
In this interview, Asitha Mendis, Aravind Ganesan and Nadhia Najeeb, Business Advisers from MDF Sri Lanka’s agriculture team, explore MDF’s pivotal role in identifying new business opportunities and working closely with agri-businesses to build innovation-led initiatives that can deliver business returns alongside the positive social outcomes crucial to recovery.
Tell us about MDF’s overarching strategy in driving innovation within Sri Lanka’s agribusiness sector.
Agriculture is Sri Lanka’s ‘traditional’ sector, but it has immense innovation potential. MDF’s strategy has been to work with change-makers – be they leading agribusinesses or emerging players – to engage with farmers in new and meaningful ways that promote improved agriculture inputs and technology. This is where the innovation lies. The sustained use of these improved inputs has the potential to be highly lucrative for agribusinesses, while also paving the way for a more robust agriculture sector. The basis of this work is usually the detailed research and market analysis that we conduct, where we identify high-growth investment opportunities that the private sector might deem too risky. We then form a strategic partnership with the agribusiness, to develop and promote the adoption of the innovation. Co-investment is one way that we can reduce their risk of innovation, and this is often complemented by technical advisory. These initiatives are not only supporting businesses to thrive in evolving market dynamics but are also transforming agricultural practices at the grassroots level.
One of the key changes in 2023 was the overhaul of the agricultural subsidy delivery mechanism. How did MDF capitalize on this change?
The overhaul of the subsidy mechanism opened up new competitive avenues for agricultural input businesses, which was a significant shift from the previous dependency on government contracts and large plantations. MDF seized this opportunity by partnering with companies such as CIC Agri Businesses, DIMO Agri Businesses, Lanka Bio Fertilizer, Sassrika Lanka and Modern Agri to support them with their market entry strategy. Together, we developed and promoted the use of cost-effective, improved fertilisers and climate-resilient seeds, while developing internal business capacities. Our partners, with MDF support, identified new areas for customer acquisition through more effective market segmentation, enabling more focused marketing strategies. These initiatives aim to meet not only the growing demand for sustainable agricultural solutions but also foster business-centric approaches to farm-level challenges.
Innovation seems to be a central theme in MDF’s strategy. Could you elaborate on some of the innovative approaches and technologies you have introduced?
Certainly, our innovation efforts are multifaceted and tailored to our partners’ requirements and capacity. MDF has worked with agribusiness partners to promote advanced agricultural inputs that are less resource-intensive than traditional inputs, develop innovative distribution and retail models, and improve the flow of information and advisory services to farmers and other stakeholders. In the agritech space, we have worked with partners to enhance farmers’ access to quality advisory services and promote the digital traceability of agribusiness procurement systems. We’ve also been utilizing climate-smart data to inform agricultural practices and support the adoption of protected agriculture technologies. By co-investing with businesses to develop and disseminate improved fertilisers and more climate-resilient seeds, we are driving significant advancements in agricultural productivity and sustainability.
MDF’s value proposition lies beyond a product or technology; it’s in its ability to look for new solutions through innovative business models and proceed to absorb the risk of piloting them. We learn fast, through close monitoring, and readjust the models to fit the requirements of the business problem. Once we’ve successfully tested and developed a business model, we support scaling up the model to ensure lasting impact across the sector.
How is MDF addressing the need for inclusive opportunities within the agricultural sector, particularly concerning women’s economic empowerment?
Inclusivity is a core aspect of our strategy. A big part of what we do is to guide business partners through the process of identifying market segments that provide clear business opportunities to engage more with women. And this can be with women as employees, suppliers or even customers. For instance, our research has identified that women have less access than men to essential resources and opportunities in agriculture. Our innovation with partners will then include improving women farmers’ access to information, farm support services, agricultural inputs, agritech solutions and mechanization tools. Added to this, when our partners set up supply chains that include women farmers, the women also gain access to markets and a steady flow of income. Through targeted initiatives in value chains such as protected agriculture and TJC mango, we understand the unique roles and opportunities for women and share these insights and data with businesses to develop more effective business strategies to help target the different market segments. This not only broadens the market reach for businesses but also empowers women, creating a more inclusive and diverse agricultural economy.
Innovative digital solutions can be a particularly useful tool. MDF supported our partner Agrithmics to set up a digital weighing scale mechanism at several of the partner’s tea factories. The idea was to reduce weight tampering and ensure transparency. Although a relatively small change, the innovation resulted in easing the transaction process for women workers, reducing income loss and increasing the factory’s efficiency.
MDF and Sassrika Lanka team discussing farming techniques with smallholder farmer
The Agritech market faced setbacks due to the economic crisis. How is MDF helping Agritech companies regain traction and drive innovation?
The economic crisis did challenge the Agritech sector, but we’ve seen resilience among established firms. While technology adoption faced significant interruptions due to import restrictions, the agrochemical ban increased the demand for tech-based solutions that could help to use scarce inputs more efficiently. As the economy began to stabilize in 2023, this demand persisted, resulting in a surge of interest in Agritech and climate-smart solutions. The crisis also hindered farmers’ access to information and advisory services. Here, MDF played a crucial role in improving information flow to farming households through digital tools, and through support for initiatives such as the Govi Mithuru app developed by Dialog. We also co-invested further with businesses to develop climate-resilient farming clusters, such as through the use of irrigation equipment, particularly in the dry zone, and we supported Senz Agro to promote precision farming technology to agribusinesses for improved productivity and reduced resource usage. Our strategy is to support the adoption of Agritech solutions that enhance produce quality, supply chain transparency and efficiency, helping agribusinesses address rising production costs, labour shortages and global competition.
How do you see MDF’s role in shaping the future of Sri Lanka’s agricultural sector?
Flexible and adaptable support – be it financial or technical advisory – can be a game-changer when it comes to investing in innovation, particularly in a sector like agriculture. This is where MDF can really add value. Also, sustainability is core to our approach. In other words, our working model ensures that private sector investment continues to grow independently after MDF’s engagement ends, benefiting the sector and the farming communities that depend on agriculture for a livelihood. This approach fosters overall sector growth and creates opportunities for new market entrants. Our business partners are innovators, and we are well-positioned to continue to support them and other change-makers to pave the way for a more resilient, sustainable, and inclusive agricultural future in Sri Lanka.
To learn more, visit: https://marketdevelopmentfacility.org/