Direct Cost Recovery from Services vs Target Group

Key Messages

The FarmFit team didn’t expect to see much of a correlation between target group and direct cost recovery from services given our experience over the previous 9 years. Our quantitative data analysis confirmed this; in general, we see a weak relationship between target group and direct cost recovery. In fact, most of the correlation that we do see appears to be explained by other drivers.

This page presents the analyses’ highlights but does not include in-depth analysis. Read on for more detail.

Understanding how target group relates to direct cost recovery

The relationship between direct cost recovery from services – the proportion of a business model’s costs that is recovered by charging farmers – and target group has not been an area of focus for FarmFit. Our expectations of there being a strong relationship were rather low. Our results show that median direct cost recovery is the lowest for business models engaging with unorganized farmers and highest for those engaging with formal farmer groups. However, there is a large spread in results and, importantly, a significant proportion of all business across in each of the three target group categories has a cost recovery of 0%. 

Read more on how we define target group

While there are small differences in medians in the chart above, our more rigorous machine learning methods reveal that almost all of those differences are explained by other drivers, and not directly by the relationship between direct cost recovery and target group.

Strong and credible explanations of the relationship between target group and cost recovery also didn’t emerge from qualitative data gathered from our engagements with numerous organizations operating smallholder-inclusive business models.

Nevertheless, this doesn’t point to there being no relationship at all; rather, that the current data does not demonstrate a strong relationship. As a result, this page does not provide related implications, nor does it detail opportunities for further research. As we collect and analyze more data, this may change. We invite input from other organizations that possess valuable data and insights on a relationship between target group and direct cost recovery.

Link to other outcomes

When looking at the relationship between target group and the other two outcomes analyzed in this Insights Hub, we find that:

• For Service Delivery Cost per Farmer, the cost of service delivery is significantly lower when working with farmer groups, regardless of whether they are informal or formal farmer groups. Click here for more details
• For Farmer Value Created, FarmFit data shows that businesses engaging with unorganized farmers create significantly more absolute value for farmers than those engaging with farmer groups. Click here for more details