Insights Explorer

Direct Cost Recovery from Services

What we mean by cost recovery

Greater private sector investment in smallholder agriculture is crucial for the sector’s viability. Showing a positive return on this investment is key to convincing companies and investors to scale up their investment. Direct cost recovery from services looks at the most direct way of getting a return on investment and is therefore a key indicator in the Insights Hub.

Direct cost recovery from services refers to the proportion of a company’s service delivery cost to smallholder farmers that companies are able to recover through service revenues.

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Want more detail on how we define direct cost recovery? Click here.

Our data on over 100 business models shows a huge spread in services-led cost recovery. Figures range from a minimum of 0% to a maximum of 137%, with mean and median values of 44% and 33%, respectively. 

Among the many benefits of studying this indicator, there are two that are key to highlight:

Firstly, understanding direct cost recovery can help us better understand individual smallholder-inclusive business models. The main motivator for companies and investors to invest is to achieve a return on their investment. The most direct way of doing so is to directly charge customers – in this case smallholder farmers – for the goods and services provided to them. Knowing how much of its costs a company can recover by charging for services helps to highlight the remaining subsidy that would need to be covered from other sources.

Secondly, we hope that by providing initial insights on direct cost recovery, FarmFit will help change perceptions of investing in smallholder farmers. A widely-held perception in the sector is that service provision to smallholder farmers is, almost by default, a loss-making venture requiring large public, development, philanthropic and CSR subsidies. Due to a lack of credible and comparable data, there is very little visibility and comparability on the return to companies of their investments in service delivery to smallholder farmers. As we have seen in the New Paradigm section, there is a massive need for increasing private sector investment in smallholder farmers and we are optimistic that our work will help us move towards this new paradigm.

There exists a range of more specific benefits to studying and understanding direct cost recovery that differ for different types of organizations, including:

Our insights on direct cost recovery

There is a huge spread in direct cost recovery for the 100+ models that FarmFit has analyzed, ranging from no cost recovery at all to well over 100%. To date, the Insights Hub has found the most interesting relationship to exist between direct cost recovery and the following outcomes, contextual drivers and design drivers:

Other outcomes

Service Delivery Cost per Farmer

Farmer Value Created

Contextual Drivers

Crop Type and Value Chain Organization

Type of Provider

Design Drivers


Last Mile Delivery

Target Group