Unlocking finance for resilient smallholder coffee systems in Minas Gerais, Brazil
Coffee is central to Brazil’s rural economy. But for many smallholder coffee farmers, especially in Minas Gerais, the country’s largest coffee-producing state, the future is increasingly uncertain.
Farmers face a difficult combination of pressures: rising input costs, climate volatility, productivity challenges, and changing expectations from international markets around sustainability, traceability, deforestation-free sourcing, and climate-smart production. For households that depend heavily on coffee as their main source of income, these pressures are not abstract. They shape whether farming remains viable, whether families can invest in their land, and whether local coffee systems can adapt to a changing climate.
This was the challenge Social Finance International explored with Hanns R. Neumann Stiftung Brazil and UBS Optimus Foundation: whether outcomes-based finance could help attract new forms of funding into smallholder coffee systems by making the wider benefits of good agricultural practices and climate-smart agriculture more visible, measurable, and investable.
Where this work began: Building off programme experience
Hanns R. Neumann Stiftung Brazil has deep experience working with smallholder coffee farmers in Minas Gerais through the International Coffee Partners programme. Its work is grounded in long-standing relationships with farming communities, technicians, cooperatives, private-sector actors, and local partners across the coffee value chain.
UBS Optimus Foundation and HRNS wanted to explore whether outcomes-based finance could open up new possibilities for this work. The question was not simply whether farmers could be supported to adopt better practices. HRNS already had a strong programmatic foundation for that. The more strategic question was whether the broader benefits of this work (for farmer livelihoods, climate resilience, biodiversity, and rural systems) could be framed in a way that would attract additional funding.
Social Finance International was commissioned to conduct a feasibility study and support structured conversations with potential funders. The aim was to understand where there might be appetite for outcomes-based finance, what kinds of outcomes different actors valued, and whether a broader set of farm-level and system-level indicators could help HRNS tap into new sources of capital.
What we did: Exploring the value proposition of outcomes based finance
Outcomes-based finance is an approach in which funding is linked to measurable results rather than activities alone. In agricultural development, this creates an important opportunity: to move beyond counting training sessions delivered or farmers reached and instead ask what changes are actually taking place, be those in farming practices, productivity, resilience, market access, environmental performance, and/or livelihoods.
But that shift is not straightforward. Some outcomes are easier to measure than others. Some are more directly within the control of an implementing organisation. Others depend on wider market, climate, institutional, or land use dynamics. The core task was therefore to understand which outcomes could credibly be linked to HRNS’s work, which might be attractive to funders, and how different layers of value could be articulated.
The research explored three connected levels of change:
First, at the farm level, we looked at the adoption and maintenance of good agricultural practices and climate-smart agriculture. These are tangible, observable changes that can improve farm management and create the conditions for better productivity and resilience.
Second, at the farmer livelihood level, we considered whether improved practices could contribute to more stable production, stronger income prospects, reduced vulnerability to shocks, and greater capacity to invest in the farm over time.
Third, at the system level, we explored whether the wider benefits of this work--including climate resilience, biodiversity preservation, landscape scale restoration, reduced environmental risk, and stronger farmer organisations--could speak to the priorities of funders and value-chain actors beyond traditional agricultural development grants.
To test this, Social Finance International conducted field research in Minas Gerais, engaged with HRNS Brazil’s team and local stakeholders, reviewed HRNS’s operational and data systems, and held market-sounding conversations with potential funders and sector actors. These conversations were informed by internal modelling and scenario development, which helped structure discussion around possible outcomes, indicators, costs, and funding propositions.
What we learned: Connecting farm level change to wider system value
The work confirmed that there not only is there real interest in using outcomes-based finance to support smallholder farmer livelihoods and climate resilience, but also that funder appetite depends heavily on how the value proposition is framed.
At the farm level, good agricultural practices and climate-smart agriculture provide a credible starting point. They are practical, measurable, and closely linked to HRNS’s existing work with farmers. Funders and partners can understand the logic: if farmers adopt and sustain better practices, they are better positioned to improve productivity, manage climate risks, and participate in more sustainable value chains.
But the market-sounding also showed that practice change alone is unlikely to be enough to unlock significant new funding. Potential funders were more interested when these changes were connected to broader livelihood and system-level benefits. They wanted to understand not only whether farmers were changing practices, but whether those changes could contribute to more resilient production systems, improved income stability, stronger cooperative or market linkages, and progress against climate and sustainability goals.
This points to an important lesson for HRNS and similar implementers. The strongest funding proposition may not sit solely at the level of individual farmers or individual practices. It may come from showing how farm-level change contributes to wider system outcomes, including more resilient supply chains, reduced climate vulnerability, improved sustainability credentials, and stronger rural economic systems.
The study also highlighted the importance of “stacking” different types of value. A single outcome may not be enough to attract a funder on its own. But a package of co-benefits (e.g. averted losses, yield gains, biodiversity preservation, functional connectivity) may speak to a wider group of actors, from philanthropic funders and development agencies to corporate foundations, cooperatives, roasters, and other value-chain participants.
At the same time, the findings were honest about the limits of what can be financed immediately. Livelihood and system-level outcomes are attractive, but they are harder to measure and attribute than farm-level practice indicators. Productivity and income are shaped by many factors outside the control of any one programme, including weather, prices, pests, input markets, and buyer relationships. That means any outcomes-based approach would need to balance ambition with credibility, using near-term indicators that are measurable while continuing to build evidence around longer-term livelihood and systems change.
What Next?
The study provided HRNS Brazil and UBS Optimus Foundation with a clearer view of where outcomes-based finance may have potential, what kinds of outcomes are likely to resonate with funders, and what further work would be needed to turn interest into funding.
The most promising path is not to present outcomes-based finance as a standalone solution, but as a way of organising conversations around value. For HRNS, that means being able to show how its work with farmers creates benefits at multiple levels: better farm management, stronger resilience, improved livelihood prospects, and more sustainable coffee systems.
Future work could build on this by refining the indicators that matter most to different funders, strengthening the evidence base around livelihood and resilience outcomes, and identifying where co-financing might be possible across philanthropic, public, and private-sector actors. Cooperatives and value-chain partners are likely to be especially important, both because of their proximity to farmers and because of their role in connecting farm-level change to wider market systems.
The opportunity is to use outcomes-based finance not only as a funding mechanism, but as a strategic lens: a way to ask what changes matter, who benefits from them, who might be willing to pay for them, and how different benefits can be combined into a stronger case for investment.
A starting point, not a conclusion
This work was not about proving that a single financing model is ready to be launched. It was about helping HRNS understand what might be possible.
The central insight is that smallholder coffee farmer resilience cannot be seen only at the farm level. Good agricultural practices and climate-smart agriculture matter, but their value extends beyond individual plots. They connect to household livelihoods, supply-chain resilience, climate adaptation, market confidence, and the long-term sustainability of coffee-growing regions.
For Social Finance International, HRNS Brazil, and UBS Optimus Foundation, the work created a foundation for more strategic conversations about how these different layers of value can be recognised and financed. It showed that outcomes-based finance may help bring new actors to the table, not by reducing complex agricultural systems to simple metrics, but by making the links between farm-level change and system-level outcomes clearer.
In Minas Gerais, the future of coffee will depend not only on what happens on individual farms, but on whether the wider system can support farmers to adapt, invest, and thrive. This study was a step towards understanding how finance can better support that transition.
Interested in applying outcomes-based finance to agricultural development and smallholder livelihoods?
Connect with:
Cooper Renfro Director, Social Finance International
cooper.renfro@socialfinance.org.uk
María Alejandra Urrea Associate Director, Social Finance International
maria-alejandra.urrea@socialfinance.org.uk
Partners Hanns R. Neumann Stiftung Brazil
UBS Optimus Foundation
Location Brazil