The Market Development Facility (MDF) operates in diverse sectors, such as Agricultural inputs (seeds, technology, fertiliser and mechanisation), Tourism, and Specialty Coffee, with a focus on fostering economic growth and enhancing private-sector investment. In this interview, Dulanga Witharanage, MDF’s Climate Change Coordinator and a lead in the MDF Sri Lanka Agriculture team, delves into the organization’s unique collaborative approach with partners, while also discussing their aim to support climate resilience by working with agribusinesses to build a resilient business case for investing in long-term climate-smart solutions. The Market Development Facility is a multi-country initiative funded by the Australian Government.
MDF at Upcountry Brothers coffee drying house
DIMO Agriculture cultivating hybrid seeds with enhanced disease resistance
Onsite polytunnels assessment by MDF and DIMO Agriculture
Can you give us an overview of MDF’s operations?
MDF catalyses business innovation in emerging and frontier markets, and we focus on enhancing private sector engagement for economic growth. In Sri Lanka, we support business competitiveness and champion gender equality and environmental sustainability.
Thus far our partnerships with agribusinesses are aimed at co-investing in commercially viable business models that promote climate-resilient agriculture whilst improving competitiveness, and diversification with export generation.
To meet both domestic and global demand, MDF continues to identify new opportunities that contribute to Sri Lanka’s economic recovery. We actively seek collaborations with industry leaders and leading firms to contribute significantly to the economic recovery in this sector.
What are the challenges that businesses in Sri Lanka face due to the impact of climate change?
Sri Lanka faces considerable vulnerability to climate change due to its diverse and intricate agroecology. The agricultural sector, which relies predominantly on rain-fed cultivation, is particularly susceptible to the effects of climate change. Variations in the monsoon system, extreme heat leading to droughts, and diminished soil moisture significantly impact crop growth. The rise in pests and diseases is another impact of climate change. Additionally, this year, El Niño is anticipated to exert a significant influence on Sri Lanka’s agriculture. All of this means that agricultural businesses face risks to their day-to-day operations and long-term sustainability.
To meet both domestic and global demand, MDF continues to identify new opportunities that contribute to Sri Lanka’s economic recovery. We actively seek collaborations with industry leaders and leading firms to contribute significantly to the economic recovery in this sector. At MDF, our primary focus right now is to address the uncertainty surrounding climate change for agribusinesses and minimise the risks associated with investing in viable solutions to combat the impact.
I would say that this effort has become our most significant contribution to the industry, especially considering the diversity of agribusinesses in Sri Lanka, ranging from large to small and medium-sized enterprises. Each entity perceives and prioritises climate change differently – and has a different level of ability and willingness to invest.
It’s heartening to note that some of our existing business partners have taken steps to enhance the climate resilience of their supply chains, but there remains much to be done. Since last year, MDF has observed that the economic crisis has shifted the immediate priorities of most companies, especially agribusinesses, with climate change becoming a secondary concern. While understandable, this shift could pose problems in the long run for agribusinesses.
What strategies do you employ to help businesses adapt and mitigate the effects of climate change?
At MDF, our approach extends beyond adaptation where we take actions to adjust to present and future impacts to encompass mitigation (reducing harmful greenhouse gas emissions) when addressing climate change’s impact on businesses. Our primary role is to identify the business case for investing in climate change initiatives. We conduct in-depth assessments of sectors and markets to understand precisely how climate change affects them. Subsequently, in collaboration with our partners, we develop tailor-made solutions aimed at strengthening their bottom line.
Our strategies not only assist businesses to maintain their operations but also to improve their overall efficiency and revenues. In the realm of agricultural inputs, for instance, our efforts are geared toward helping businesses comprehend the risks posed by climate change and, crucially, mitigate these risks to ensure that businesses can be sustained. Thus far, MDF has supported major agriculture input companies like DIMO Agriculture, CIC, SenzAgro and Ellawala Horticulture with product testing of climate-resilient seed varieties, improving their distribution and customer engagement.
Our objective is to include a pathway for input companies in terms of de-risking, piloting and scaling innovative business models to improve the availability of climate-smart agricultural inputs. In doing so we aim to empower businesses by providing them with effective solutions to mitigate operational risks. In addition, we actively support Sri Lanka’s farming communities, contributing to their resilience in the face of climate challenges.
How does MDF address the challenges posed by climate change in specific industries, such as coffee, and what strategies have been employed to make supply chains more resilient and adaptable to changing climates?
MDF has worked in the specialty coffee space for several years now, so let’s consider the example of coffee. We’ve observed that climate change significantly affects the sun-drying process in coffee production, which is traditionally done for years. Sri Lanka’s coffee seasons are now impacted by lengthier and wetter rainy periods in certain years. This impacts smallholder coffee farmers, coffee collectors (middlemen), and coffee processors in different ways. The shifting rain patterns are attributed to climate change.
At MDF, we’ve proactively identified these challenges and developed easy and affordable solutions to ‘climate-proof’ the coffee supply chain. This includes co-investing with businesses to establish ‘dry houses,’ which are enclosures that support coffee farmers and businesses to adapt to climate change by providing a controlled environment for their coffee beans. Investing in these solutions helps the coffee businesses to retain the quality of their beans – and earn a higher price for them in the market. It’s good business.
In other regions, such as Anuradhapura in the North-Central Province, we’ve worked with partners like Ellawala Horticulture to create a farming model tailored to the dry zone. Most of our recent work has been geared towards assisting larger firms in better-serving smallholder farmers as they navigate the economic downturn. Enhancing agricultural production is crucial to Sri Lanka’s recovery, and we are open to collaborating with businesses that share our commitment and are willing to take risks and innovate to guarantee that our efforts aid farmers in adapting to climate change and reducing agricultural emissions. This approach involves supporting the cultivation of crops better suited to the local climate. Notably, this not only benefits farmers but also ensures a consistent supply of produce for businesses. Our perspective extends beyond farmers to encompass the private sector as well.
At MDF, we emphasise the long-term sustainability of our initiatives, aiming for benefits to persist beyond the duration of our project. As such, our efforts are geared towards equipping the private sector to effectively tackle both adaptation and mitigation challenges in climate change, ensuring businesses are well-prepared to reap lasting advantages.
Can you elaborate on MDF’s unique approach to working with partners and what sets it apart?
One crucial aspect worth highlighting is the distinctive approach that sets MDF apart from other models in the field. Our teams are deeply involved in working in the field, allowing us to bring valuable insights to the table, which are highly appreciated by our partners. They recognize and value the expertise we contribute, which, in turn, empowers us to take calculated risks alongside our partners.
A significant shift that we bring to the table is ensuring that our partners view our collaboration not as a standalone project for MDF but as a concerted effort benefiting the business and the entire sector. Investing in climate change adaptation and mitigation has a wider positive impact, and MDF is keen to pursue it, but we believe that without commercially viable business models, these investments would only work in the short term. Our teams excel in navigating this complex space, and we have seen success as a result.
Climate change is a real threat to businesses, and we’re starting to see the signs in Sri Lanka. This is a turning point for agribusinesses in particular to invest in solutions, and MDF is excited to be able to support this.