Towards a Global Programme on Market Access DRAFT - IFAD

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Towards a Global Programme on Market Access DRAFT - IFAD

DRAFT

IMI

Initiative for

Mainstreaming Innovation

ong>Towardsong> a ong>Globalong> ong>Programmeong> on Market Access

Report of the Pilot Phase


Aknowledgments

Special thanks to the IFAD professional and general service staff who kindly shared their

experiences and supported the development of this pilot exercise.

In particular: S. Abdoulhadi, J.P. Audinet, A. Benhammouche, N. Brett, J.J. Gariglio, P. Glikman, F.

Grassi, R. Haudry, E. Heinemann, S. Jatta, E. Murguia, M. Kerallah, S. Khadka, D. Kingsbury, M.

Manssouri, S. Marzin, F. Nakai, M. Nourallah, R. Omar, H. Pedersen, R. Peňa-Montenegro, L. Rubio;

R. Samii, C. Sparacino, G. Thapa, R. Vargas-Lundius, J. Yayock, U. Wieland.

Our gratitude goes also to our partners from IFAT: R. Dalvai, C. Wills, H. Thorndike; and from

Traidcraft: L. Charrington, L. Kempton, D. Atkinson and all the team, for their inputs and valuable

suggestions. FIDAMERICA and PROMER played a fruitful role in the development of this initiative.

Many thanks to G. Le Breton, S. Hamilton, V. Leproux, M. Maccari and H. Perrett. E. Canigiani led

the preparation of the stock taking exercise and gave valuable overall support. The Latin America

and Caribbean Division provided a positive environment for the implementation of the exercise.

The project was coordinated by R. Hopkins.

The front cover was designed by C. Giorgi.


ong>Towardsong> a ong>Globalong> ong>Programmeong> on Market Access

Report of the Pilot Phase

Initiative for Mainstreaming Innovation (IMI)

First draft 30 August 2004

This version 6 October 2004


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TABLE OF CONTENTS

EXECUTIVE SUMMARY

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I. RATIONALE 1

II. OBJECTIVES 1

III. BACKGROUND AND PARTICIPANTS 2

IV. THE PRODUCTS 3

1. A Virtual Library 3

2. ’Ínto the Market’ – A Manual for Market Access 6

3. Participation in Trade Fairs – A Toolkit 7

4. Business Development Services – The Experience of CIEN 8

5. E-Commerce for Rural Producers 13

6. Taking Stock of IFAD Experience 20

V. LESSONS LEARNT 25

REFERENCES 26

TABLES

Table 1: Current Status of Products 3

Table 2: E-commerce in developing countries 2002-2003 (million of US$) 15

Table 3: Taking stock of IFAD Experience on market 22

FIGURES

Figure 1: E-readiness score in developing countries 15


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EXECUTIVE SUMMARY

The process of globalization is creating challenges and opportunities for small rural

producers. Lower communication and transaction costs have intensified the competition from

foreign suppliers, as have the subsidies granted by industrialized countries. At the same

time, however, globalisation is offering small producers new opportunities to access dynamic

national and international niche markets in which they have, at least potentially, a

comparative advantage.

There has been much international criticism of the unfair rules that dominate the trade arena.

Paradoxically, little has been done in a systematic and consistent way to reduce the

obstacles producers face in terms of information requirements, training, capacity building

and the development of managerial skills, which restrict their participation in local and

international markets. This project is founded on the proposition that there is ample scope for

action to improve market access for small producers, and that IFAD, together with other

organizations, from the private and public sector, can and should take an active role in this

process.

The purpose of this project has been to design and implement, on a pilot basis, a number of

tools to help small producers access markets at both national and international level. This is

consistent with IFAD’s mandate to enable the rural poor to overcome poverty and the Fund’s

strategic objective of helping producers to access markets as a way of achieving the

Millennium Development Goals. Six products have been developed with this aim in mind.

They are:

(i) A virtual library on market access

This is a virtual space where people and organisations working on market access can find

information and documentary resources in English and Spanish. Topics and available

resources are selected according to their relevance and utility to the users, and will

subsequently be linked to the IFAD Portal on Rural Poverty. The pilot version of the library

includes training materials; support services; publications and documents; regional

resources; and other links of interest. The Spanish version was prepared by FIDAMERICA,

an IFAD regional network in Latin America and the Caribbean. The English version is the

fruit of a joint effort between IFAT, IFAD and external consultants.

(ii) ‘Into the Market’ – A manual for market access

This manual is intended to assist small producers in understanding key principles of

accessing markets (local, regional and international). It covers the following basic steps: (i)

identifying opportunities: how to find realistic business and market opportunities; (ii) building

a sustainable business: simple analysis of marketing, operations and financial performance,

strategic planning and issues of sustainability, including stakeholder analysis; (iii) getting the

product right: how to produce the right product for the chosen niche; and (iv) linking with the

market: how to identify potential buyers, use the right sales promotion techniques and

provide good customer service. The manual was prepared jointly by the Traidcraft Market

Access Centre and IFAD.

(iii)

Participating in Trade Fairs: a toolkit

This is a “how to” guide designed to equip small producers to participate successfully in

national and international trade fairs. The guide shows producers step by step how to

organize an exhibit, providing guidelines on four key aspects: i) strategy: determining when

participation in trade fairs can help to increase sales and selecting the most appropriate

trade fair for the business objectives; ii) planning: scheduling the tasks to be carried out and

the deadlines to be set in preparing for a trade fair; iii) participation: targeting and attracting

the right buyers and making the most of trade fairs to gather market information; iv)


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following up on contacts made with buyers and establishing long-term relationships with

them. The guide includes a toolkit, available on CD-ROM, with relevant template forms such

as a planning checklist, product feedback forms and product information sheets.

(iv) Business Development Centres tailored for rural producers

Business Development Centres are advisory institutions that play a key role in providing

support to Rural Micro/Small Enterprises. However, they are often poorly adapted to the

needs of rural producers. This case-study summarises the experience of CIEN (Centros de

Impulso Empresarial), a model developed by PROMER (an IFAD regional programme for

the support of rural micro-enterprises in Latin America and the Caribbean), and discusses

the possibility of up-scaling this experience.

(v) E-commerce for rural producers: lessons and opportunities

The purpose of this guide is to summarise developments in the field of e-commerce that may

be of relevance to rural producers. It first introduces the notion of e-commerce, providing an

overview of the current state of progress and its relevance to developing countries. It then

discusses lessons to be drawn from the experience gained to date, the results obtained and

the barriers that have emerged. It goes on to make some practical recommendations for

those interested in starting an e-commerce activity. This is underpinned by the presentation

of four case studies. Annexes contain a summary of available resources, classified by

continent, and a basic glossary of e-commerce terminology.

(vi)

Taking stock of IFAD experience

The document pinpoints areas of common interest across divisions in order to help decide

upon priorities and identify possible synergies within the institution. The final section

discusses how innovation applies to market access interventions and how IFAD could

provide better and more effective support.

Methodology

Equally important in this project has been its methodology. The project has been guided by

two related principles: (i) working and interacting with leading practitioners in the market

access field; and (ii) promoting a process of sharing and learning among IFAD Divisions and

a positive interaction with IFAD regional programmes.

The project has been implemented in partnership with IFAT, the International Fair Trade

Association. IFAT is one of the leading international organisations in the fair trade

movement, operating as a global network in 59 countries. The project has also developed

an intensive process of in-house discussions to examine IFAD activities on market access

and to highlight some of the main problems and needs that the Fund is presently facing in

implementing market access projects.

Opportunities ahead

The activities carried out during the pilot phase and the fruitful interaction with practitioners in

this field (including an internal seminar and the presentation of some of the materials at an

IFAT international workshop) suggest that there is an opportunity to launch an international

initiative that would build on previous steps taken by IFAD in this field. Several donors have

expressed interest in supporting initiatives in this area.


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I. RATIONALE

The process of globalisation has created challenges and opportunities in developing

countries. Small rural producers face difficulties in accessing markets despite their potential

comparative advantage in the production of certain commodities. In this context, a

coordinated effort is essential, at both policy and operational levels, to help rural producers

benefit from the new opportunities brought about by the process of globalisation, and to

reduce their vulnerability to changes in the international trade environment.

Recent discussions in the media and in the development literature have emphasised the

importance of a change in the trade policies of industrialised countries, focussing mainly on

international trade distortions (such as those highlighted in the Oxfam Report (Oxfam 2002).

A number of studies have also been conducted regarding the effects of trade on

development. Less attention has been given to the processes and policies at the micro level

that could enhance the successful participation of small producers in markets. While there is

an abundant literature on macro level interventions that could create a favourable

environment for market access, little has been written on how to empower small holders and

grassroots organisations to participate actively in markets that are relevant to them. This

project is based on the proposition that there are complementarities and externalities among

the various trade participants that have not yet been fully exploited. It therefore sets out to

find ways of remedying of this shortcoming.

A full process of market liberalisation will not necessarily increase the participation of small

producers to a significant extent unless specific support measures are taken and they move

to a higher value added products. There are a number of “invisible”, yet critical, barriers to

trade that must be overcome (such as the lack of awareness of market opportunities and of

familiarity with standards, limited scale of operations and specific skills, among others).

This project is directly related to IFAD’s mandate and to one of the three objectives

described in the Fund’s Strategic Framework (“Increasing Access to Financial Services and

Markets”). Small rural producers require greater support in market access and market

development, and IFAD projects are becoming more involved in addressing these issues

(see chapter IV.6 below), while other IFAD units such as the Policy Division and the

Resource Mobilisation Division are increasingly interested in this area. Governments and

several major donors are also taking a growing interest.

This project is a follow-up to several studies promoted by IFAD in this field (Zilveti, 2002 and

Page, 2003) 1 and to the discussions that took place on this topic at IFAD’s Governing

Council (IFAD 2002 and 2003).

II.

OBJECTIVES

The purpose of this project was to develop, in a pilot way, innovative tools and best practices

in order to help small producers take advantage of new market opportunities. Specific

objectives were:

(i)

to produce a set of market access tools to be made available to IFAD staff and

projects, IFAT members and rural producers. Some of these tools are completely

new, derived from the output of this project; others are based on existing work done

1 A shorter version of this paper is found in Page and Slater (2003), published in the Development Policy Review

(see References below). Chapter 5 of IFAD Rural Poverty Report (“Markets for the Rural Poor”) discusses some

of the challenges faced by small producers.


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by IFAT, IFAD projects and regional programmes, and updated in light of the learning

generated by this initiative.

(ii)

(iii)

(iv)

to set up an effective institutional mechanism that would facilitate a learning process

across IFAD projects, IFAT members and, in general, organisations working on

market access issues.

to forge new partnerships between leading practitioners in market access and market

development. This partnership would promote links between IFAD’s regional

initiatives on market access (e.g. PROMER in Latin America), IFAT members and

other trading organisations.

to expand and improve the quality and content of information and communication

technologies on market access and market development available to small rural

producers and their organisations.

The project would specifically promote the improvement of the IFAD and IFAT web-sites,

and include a special window on market development where users could access the latest

tools and materials on this topic. This would link into IFAD’s Portal on Rural Poverty,

enhancing the quality of the information provided on market development and market

access.

III. BACKGROUND AND PARTICIPANTS

The origin of this proposal lies in the activities on market access carried out by IFAD

together with the International Fair Trade Association (IFAT) and Traidcraft, a member of

IFAT specialising in matters of market access and market development. IFAT is one of the

leading international organisations in the fair trade movement, operating as a global network

of over 220 organisations in 59 countries. IFAT’s objectives are twofold: to improve the

livelihoods of disadvantaged people in developing countries; and to change unfair structures

of international trade. It also provides a forum for information exchange to help member

organisations improve their market access conditions at local, regional and international

levels.

Since 2000 the Latin American and Caribbean Division has been working with IFAT on the

development of standards for fair trade organisations and market access activities. Market

access was one of the main topics discussed at their 2002 meetings in Africa (Ghana), Asia

(Indonesia) and Latin America (Cuba). In December 2002 and February 2003, IFAD

organised, jointly with the Overseas Development Institute, ODI, and in collaboration with

IFAT, a study exploring opportunities to increase market access at a global level to benefit

the rural poor. Two workshops were organised, involving NGOs, the private sector, donors

and academics, all with vast experience in market access promotion for small rural

producers. This proposal is a follow-up to the report prepared for IFAD by the consultant who

led the study (Page 2003).

This proposal was prepared in consultation with Traidcraft. Traidcraft plc sells products

through its network of 4000 Fair Trader representatives. It is one of four investors in

Cafedirect, the UK’s leading branded fair trade consumer product. The Traidcraft Market

Access Centre was formed in April 2002 with the aim of assisting poor producers to

overcome the barriers they face in accessing markets.

IFAD has taken the overall responsibility for the coordination of the project. The development

of this initiative is expected to promote greater communication and coordination between


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IFAD staff working in areas related to market access, IFAD projects and IFAD regional

programmes.

Two of IFAD’s regional programmes have been involved in the implementation of this

initiative, namely, FIDAMERICA (www.fidamerica.org) and PROMER (www.promer.org).

FIDAMERICA is an information network entrusted with the task of improving the efficiency

and effectiveness of the projects supported by IFAD in Latin America and the Caribbean, by

stimulating and facilitating communication, learning and knowledge management processes.

The aim of PROMER is to support the development of rural micro-enterprises.

Table 1 summarises the division of labour among the participating institutions and the

current status of each product.

Table 1: Current Status of Products

PRODUCT INSTITUTION INVOLVED STATUS

1. Virtual Library

FIDAMERICA, IFAT, IFAD staff

and consultants

Draft, pending final revision

2. Manual for market access Traidcraft and IFAD consultants Final draft

3. Toolkit on Trade Fairs Traidcraft and IFAD consultants Completed

4. Business Development

Centres

PROMER and IFAD consultants

Draft, pending final revision

5. E-commerce IFAT and IFAD consultants Final draft

6. Taking stock of IFAD

Experience

IFAD consultant and IFAD staff

Completed

1. A Virtual Library

IV. THE PRODUCTS

This is a virtual space where people and organisations working on market access can find

resources and tools in terms of information and documents. The selection of topics and

available resources give priority to their relevance and utility to the users. They have been

developed in English and Spanish, and will be linked to the IFAD Portal on Rural Poverty. It

is expected to expand this pilot version of the library in the main phase of the IMI project.

There is a substantial and ever-increasing amount of internet resources that can be useful to

people and organizations working in the area of market access. These resources are free

but scattered across a large number of websites. This shortcoming points to the importance

of developing a virtual library that gathers all the relevant resources into one site.

The design and structure of the library gives priority to:


• Relevance and utility to the users;

• Clarity of presentation;

• Contents (organised according to main topics and areas of interest); and

• Links (including regional programmes and IFAD’s Rural Poverty Portal).

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The virtual library is addressed to all operators and institutions interested in market access.

It is specifically tailored for those who directly need these information and tools to perform

their work such as producers, decision makers in small businesses, trading associations,

public and private institutions and organisations.

The English version is the fruit of a joint effort between IFAT, IFAD staff and consultants.

The information is structured into the following categories:

• Training: websites of private and public organisations that provide training and capacity

building programmes;

• Research: research centres, institutes and networks that focus on agricultural trade

globally and regionally;

Market reports: agricultural and trade news portals, market report websites and market

information databases. This also includes a section of papers and studies related to

market access;

• Support services: international and national networks, governmental and private sectors

providing support services (for example import promotion, marketing assistance,

resource development);

• Regional resources available in Africa, Asia, Latin America and Europe;

• Financial services: organisations that provide financial services to promote market

access;

ong>Globalong> issues: information related to trade regulations. A section providing statistical

information is yet to be developed.

The Spanish version of the Virtual Library was put together by FIDAMERICA. For the

purposes of this virtual library, this network gathered all its existing resources in relation to

market access into one portal http://www.fidamerica.org/seccion.php?seccion=385. It

consists of the following sections:

• Manuals and guidelines;

• Systematizations and good practices;

• Electronic conferences;

• Publication and general documents;

• Statistical information;

• Regional actors;

• Other sources of information.

The section “Publication and general documents” is in turn divided into eight sections:

Organic agriculture-sustainable agriculture; International trade; Competitiveness; Market

access strategies; ong>Globalong>ization; Rural microenterprises; Organizational aspects involved in

the commercialization process; Trade agreements; and Other documents.

Every two years, FIDAMERICA organises a conference on knowledge management for the

eradication of rural poverty, in which innovative experiences are shared and discussed. One

of the topics in this conference is market access.


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In addition a Fair Trade market access portal was put together by IFAT. This portal is

organised according to the following classification: (i) structure of the Fair Trade Movement:

websites of Fair Trade organisations at international and regional levels as well as investors,

campaigns and labelling issues; (ii) studies: papers on fair trade in specific markets and

regions and general research findings; (iii) E-commerce: information related to the practice

and relevance of e-commerce in developing countries; (iv) capacity building services; and (v)

manuals and guidelines

Virtual Library for Market Access: opportunities ahead

With the realization that information is fundamental in enabling rural producers to access and

compete on markets effectively, development organizations are increasingly assimilating the

latest web technology to maximize ways of sharing and exchanging information successfully

with those producers. It is becoming common practice to broadcast live events through

webcasts, include web video and photo galleries and run electronic discussions and

consultations through e-forums. The following areas of latest web technology could serve the

purposes of the virtual library (to be developed in the following phase of the market access

programme)

(i)

(ii)

(iii)

Broadcasting training sessions, seminars, workshops, consultancies, interviews and

other events related to market access through webcasts over the internet, which

extend the potential audience to whoever has internet access and only requires the

free downloading of suitable software for viewing (e.g. Real Player, Media Player or

Quicktime). These broadcasts can be viewed live and subsequently archived as

video files in a section of the virtual library.

Setting up a (or several) mobile tools that are circulated among rural producers and

their associations, offering them the opportunity to shoot their own web videos. A

typical video would describe experiences and impressions (focusing, for example, on

a recent switch to producing a different crop in order to enter a newly discovered

market; on the process of locating new markets with the assistance of a development

agency; on the implementation of newly introduced agricultural technology). The idea

is to maintain authenticity by minimizing the ‘tailoring’ effect of editing and directing.

Cutting out glitches, shaky camera shots or misspeaks is beside the point. It is now

possible to produce a video piece with just a digital camera and a microphone. From

a film-making stance, less technical and directing knowledge can lead to more

transparency. This encourages learning from authentic accounts by those who have

to cope with market access difficulties.

Running video marketing tours that take producers ‘virtually’ to locations of interest

and relevance, e.g. an organic farm-produce fair in Paris, a handicrafts fair in

Bangkok, a fashionable clothes market in London. This can be extended to other

types of tours covering customs procedures or trade regulations.

By cultivating this array of information channels, the virtual library will be optimizing its

potential of providing useful information and business opportunities to its target audience.


2. ’Ínto the Market’ – A Manual for Market Access

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This manual is a joint initiative by the Traidcraft Market Access Centre 2 and IFAD. The goal

is to provide practical tools to support market access for small producers in rural areas. This

is a pilot manual for those seeking a grounding in market access. It can be used as part of a

training package or for self-learning. Follow-up products, with more of a geographic and/or

sectoral focus are planned for later development. All examples are based on real life

experiences of IFAD or Traidcraft clients and partners.

This Manual is intended to assist small producers to understand the key principles of

accessing markets (local, regional and international). It consists of the following building

blocks: (i) identifying opportunities: how to identify realistic business and market

opportunities; (ii) building a sustainable business: simple analysis of marketing, operations

and financial performance, strategic planning and issues of sustainability, including

stakeholders analysis; (iii) getting the product right: how to produce the right product for the

chosen opportunity; and (iv) linking with the market: how to identify potential buyers, use the

right sales promotion techniques and provide good customer service. It has been prepared

jointly by the Traidcraft Market Access Centre and IFAD.

CONTENTS

INTRODUCTION

CHAPTER 1: FRAMEWORK FOR MARKET ACCESS

What are the components of successful market access?

CHAPTER 2: IDENTIFYING OPPORTUNITIES

What is a good business opportunity?

How do I identify good business opportunities?

How do I research the market?

What else do I need to think about before going ahead?

CHAPTER 3: BUILDING A SUSTAINABLE BUSINESS

How do I assess where I am now?

Where do I want to go?

How am I going to get there?

What is meant by sustainability?

CHAPTER 4: GETTING THE PRODUCT RIGHT

What makes a strong product offer?

How can I consistently deliver products that my buyers want?

I have a trial order – what do I do now?

CHAPTER 5: LINKING WITH THE MARKET

Who should I promote my products to?

How do I promote my products to them?

How can I improve my selling and negotiating skills to deal

more effectively with buyers?

How do I make sure that buyers will continue to buy my products

and not those of my competitors’?

ANNEX:

MOF Framework

FURTHER READING

2 www.traidcraft.co.uk/marketaccesscentre


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3. Participation in Trade Fairs – A Toolkit

This tooolkit is a joint initiative by the Traidcraft Market Access Centre and IFAD, under the

project on market access included in the IFAD initiative for mainstreaming information

‘Partnering for Market Access and Market Development’. The objective is to provide

practical tools to support market access for small producers in rural areas. This toolkit can

be used for self-learning or as part of a training package. The Traidcraft Market Access

Centre also offers a training programme in successful trade fair participation.

This is a “how to” guide designed to equip small producers to participate successfully in

national and international trade fairs. The guide will help the producers in organizing their

exhibition step-by-step, providing guidelines around four key issues: (i) Strategy: understand

when trade fairs participation can help to increase sales and select the most appropriate

trade fair for the business objectives;(ii) Planning: preparations tasks and deadlines that a

business should undertake to prepare for a trade fair; (iii) Participation: how to target and

attract the right buyers and how to use trade fairs to gather market information; (iv) Followup:

how to follow-up on contacts made with buyers and establish long-term relationships with

them. The guide includes a toolkit, available on CD Rom, with relevant template forms such

as planning checklist, product feedback forms and products information sheets.

CONTENTS

INTRODUCTION

CHAPTER 1: STRATEGY

Are trade fairs the right sales promotion channel for my business?

How do I choose the right trade fair to participate in?

CHAPTER 2: PLANNING

Can I afford to participate in a trade fair?

What is involved when planning for a trade fair?

When do I need to start planning?

What is involved in stand design?

What promotional techniques can I use?

OO

CHAPTER 3: PARTICIPATION

How do I attract buyers so that they stop at my stand?

How I deal with buyers on my stand?

What other activities should I carry out at the trade fair?

How can I effectively manage this busy period?

CHAPTER 4: FOLLOW UP AND EVALUATION

How do I follow up effectively with buyers?

Why do I need to follow up internally within my business?

Why is it important to review my progress?

CHAPTER 5: TOOLS

Scheduling chart

Planning checklist

Budget

Action plan

Business information form

Product feedback form

Product specification form

Product information sheet

Product list

Equipment checklist

Stand rota

Buyer contact form

FURTHER READING


4. Business Development Services – The Experience of CIEN

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The growth of small and medium-sized enterprises (SMEs) in developing countries has been

pivotal for the achievement of broader development objectives, including the reduction of

poverty in rural areas. Governments and international agencies are trying to tackle the main

constraints faced by SMEs by promoting a series of interventions to enhance their efficiency

and competitiveness, with a strong participation of the private sector.

For many years, the dominant model was to provide services to micro-enterprises with

substantial government subsidies. However, a number of flaws became evident in this

approach, besides the fact that many developing countries governments usually can not

afford to subsidize on such a scale. Moreover, donors can only make temporary

interventions, so long-term needs for training, information and consultancy - the so called

Business Development Services (BDS) - cannot be met in this way.

PROMER, ong>Programmeong> for the Support of Rural Micro Enterprises in Latin America and the

Caribbean, is one of IFAD’s regional programmes working in the area of assistance to

RSMEs. Created in 1999 with the mandate to support rural micro entrepreneurs and small

producers in the LAC Region, it has developed a series of innovative approaches and

methodologies to reach its target population. This case study discusses one of these

approaches: the establishment of the Entrepreneurial Promotion Centres, CIEN, with

particular reference to the experience in Honduras. The purpose is to introduce and assess

CIEN’s characteristics and compare them with other BDS models to determine CIEN’s

specific features and possibilities for up scaling.

Origins and structure

The CIEN (Centros de Impulsos Empresariales y de Negocios – Entrepreneurial Promotion

Centres) initiative was launched during the 2001 meeting of IFAD’s project coordinator in

Nicaragua. In 2002, PROMER carried out a feasibility study to analyse the possibility of

establishing CIEN in Honduras, a region where three IFAD projects were in operation. The

study concentrated on the feasibility of establishing CIEN in the District of Danlí, Honduras,

an area in which the PRODERCO project was working at the time. The study focused on

various aspects and included interviews and contacts with producers associations, trade

chambers, municipalities, telecommunication enterprises and agencies of the Ministry of

Agriculture. The CIEN initiative was promoted among several possible partners, ranging

from the ARSAGRO (Asociación de Servicios Agropecuarios de Oriente – Eastern

Association for Agricultural Services), the Municipality of Danlì, the Trade Chamber, to the

representatives of enterprises in Danlì. CIEN emanated from this consultation process and

was founded in February 2003.

CIEN is by law a non profit organization funded by two charter members: ARSAGRO

(Asociación de Servicios Agropecuarios de Oriente) and the Municipality of Danlì.

ARSAGRO is a regional association representing more than 1600 small rural producers in

the eastern area of Honduras. It plays a key role in ensuring and stimulating the direct

participation of the rural SMEs in the structure. ARSAGRO provided CIEN with a location

and equipment and promotes CIEN services among its members. The Municipality of Danlì

has an important role both in guaranteeing the “institutional side” of the structure and in

supporting technical interventions that contribute to local economic development. Other

organizations supporting CIEN are: the Technical Governmental Secretariat for International

Cooperation (SETCO); the Secretariat for Agriculture and Farming (SAG) and AGROPYME,

an organization managed by Swisscontact and financed by COSUDE, the Swiss

Cooperation for Development. CIEN started its activities in August 2003 and counted 17

affiliated SMEs in July 2004, with another 40 in the process of becoming members.


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Objectives and services provided

CIEN was founded in order to improve the capacities of the rural micro enterprises and to

strengthen their comparative advantages, ultimately contributing to sustainable development

and poverty reduction in local communities. CIEN is a centre dedicated to the organization,

coordination and delivery of business development services specifically tailored for rural

producers. CIEN’s target groups are heterogeneous: small rural agricultural producers willing

to diversify their production; small rural entrepreneurs offering services in the rural areas;

and rural workers interested in creating their own micro-enterprises. Since these groups all

have very specific needs, services are delivered through a demand-led approach. All the

activities are aimed at increasing the human and social capital of the rural micro-enterprises

to convert small producers into small entrepreneurs.

Business development services are offered by CIEN on a fee basis. The fee is relatively low,

due to the fact that micro-enterprises pay an annual membership fee to use CIEN services.

Higher fees are applied to other potential customers such as larger companies and other

BDS centres. It is important to note that CIEN’s services are also entirely available for

representatives and staff from other institutions. This is in line with its market development

approach to support the creation of a prosperous private environment for business

development services.

The services delivered by CIEN can be divided into two main areas: a) business promotion;

and b) entrepreneurial support services. Each of these include specific sub-areas that CIEN

covers through different methodologies and tools. Business promotion services include four

sub-areas:

(i) Technical Assistance (TA)

TA services are carried out through an extension methodology that guarantees the continuity

of the services based on a minimum of two monthly visits to rural micro-enterprises. The

core activities are: support in business planning for micro-entrepreneurs; market studies for

existing or potential new products; design and product development tailored for small

processing enterprises; support in product quality improvement and packaging of agricultural

products; technology transfer of equipment and development of productive infrastructures;

legal assistance (e.g. legal advice, insurance advice, assistance with licensing and

registration procedures for health standards, brand registers, and bar-code systems);

promotion of new organizational models for rural micro-enterprises and support to

strengthen small rural producers associations and networks.

(ii) Access to markets

The specific goal of this area is to increase the market access and market share of products

and services offered by rural micro enterprises. To achieve it, CIEN provides courses,

consultancy services and other interventions aimed at improving the skills of small rural and

urban producers and micro-entrepreneurs. The skill areas are: management, administration

and finance; commercial and marketing techniques and business planning. The identification

of new business opportunities for micro-enterprises is carried out through different

methodologies: organization of business meetings with producers and buyers; creation of

direct commercial linkages within micro enterprises, buyers and clients; product promotion

through the media (e.g. radio and advertising in fairs); organization of trade fairs and guided

visits to other producers businesses and developed market areas; and support for the

creation of networks producing the same products (clusters).


10

(iii) Information and communication

CIEN aims at enabling rural micro-enterprises to have access to updated and selected

information that could help them in developing their capacities. The centres’ library in Danlì

is a valuable source of information where several databases are accessible. The available

information covers different areas of expertise: agricultural products prices in the main

markets; information on wholesalers (e.g. products of interest, address and contacts);

financing opportunities; training opportunities (e.g. seminars, courses and how to apply) and

information on raw material and machinery purchasers. Information about other BDS

providers is also available as well as a roster of accredited specialists. CIEN seeks to

improve information access for as many rural micro-enterprises as possible. To do so, it is

taking advantage of the development of information and communication technologies (ICT):

CIEN’s web-site (www.cnegocios.cl) is designed to provide all the necessary information

and, at a later stage, to enable SMEs to conduct their business on-line. CIEN is also trying to

attenuate the digital divide that excludes illiterate and remote rural people by running specific

training modules in computer literacy and by providing free-computer-access in its offices.

(iv) Training

The training and education activities offered by CIEN aim to improve the entrepreneurial

capacities of SMEs and strengthen their competitiveness to boost their access to markets.

The courses are organized according to the specific demands coming from micro

enterprises and follow a double methodology: (i) a “vertical training” provided by experts in

the SMEs priority areas; and (ii) a “horizontal training” provided by selected and

consolidated micro-enterprises transferring their knowledge to other micro enterprises. The

main thematic areas of these courses and modules are: management; administration;

finance; business planning and marketing. Other subjects are: quality of products; feasibility

and market analysis; rural tourism and innovation.

CIEN guarantees the micro-enterprises access to a series of specific services and tools,

which are directly provided at the centre. They are basic operational instruments aiming to

strengthen the human capital of the rural micro-enterprises. The main services are computer

literacy courses, secretarial assistance and access to the library. Other services include free

access to computers and to the internet, as well as the availability of printers, a scanner, a

digital camera and a fax.

Innovative Aspects of CIEN

Promising elements with regard to the organisation’s effectiveness have already emerged.

Many aspects of CIEN’s structure seem to fit with IFAD’s IMI recommendations (IFAD 2003)

on IFAD’s style of innovation, like “poverty impact oriented”; “developed closely with the

poor and recognizes their capabilities” and “demand-driven”.

In its first year of activity (August 2003 to June 2004), CIEN achieved promising results by

delivering an array of services: 4 training courses in business planning for 97 technicians of

BDS providers; 3 courses on product quality for 3 micro-enterprises; approximately 20

courses in computer literacy for 111 small rural producers; legal health registration for 4

SMEs and the production of informational material. 17 new rural micro-enterprises became

affiliated with CIEN and about 40 are in the process of becoming members. Several contacts

were developed in the area of product commercialisation and in niche markets such as the

organic coffee market. These initial results helped CIEN in strengthening its role and in

promoting its services among new possible clients. There are four areas in which CIEN’s

performance seems to be particularly outstanding:


11

(i) Structure and types of services

The structure of CIEN, as described in the previous sections, presents many parallels to the

models described in the BDS literature. CIEN developed its structure in an innovative way,

by combining the application of the most recent theories on BDS modelling with an approach

based on demonstrated capacities of adaptability and flexibility. By comparing it with the

models described in the latest BDS studies, it appears that CIEN has managed to integrate

all the recommended services and key BDS principles in its structure. CIEN therefore

qualifies as model of the Market Development Approach without being a conventional BDS.

CIEN offers a high degree of flexibility and adaptability to provide the best-tailored services

for rural producers..

(ii) Capacity to tailor services for rural micro-enterprises

CIEN operates in rural areas characterised by a modest BDS market, both on the demand

and the supply side. CIEN has made a sustained effort to design interventions that could

best fit the rural environment and to address the specific rural restrictions that have emerged

since the establishment phase. Some of these restrictions are:

• The difficulties in promoting BDS interventions among rural micro-enterprises. They are

usually unaware of market opportunities: CIEN is working to raise their awareness of the

importance of the service provided by BDS in developing their businesses.

• The promotion of CIEN services: CIEN is promoting its services by contacting new

potential client rural microenterprises. ARSAGRO, one of CIEN’s charter member,

constantly promotes CIEN services among its members.

• The difficulties related to the absence of infrastructure (rural roads) that cramps the

access to marginalized groups: for this reason, CIEN will be acquiring a vehicle to enable

its personnel to reach marginal areas.

• The absence of infrastructure also increases the costs of delivering services and is

obviously a major constraint for the rural SMEs’ negotiation capacities.

(iii) Flexibility: provider and facilitator at the same time

Provider or facilitator? CIEN acts mostly as a facilitator by promoting the creation of a

collaborative environment with other BDS, but it is also involved in direct service delivery.

This dual function reveals some interesting aspects. An organization like CIEN, according to

its mandate, can act as a facilitator, provider, or a combination of both at different stages of

the program. A weak BDS market, like the one in Honduras requires CIEN to play this dual

role. Deciding what role to play is made internally and based on CIEN’s overall objectives,

policies and abilities, as well as considering other existing players, opportunities and gaps in

the market. Before anything, CIEN tried to ensure that its efforts do not distort, but facilitate,

market development. It also follows a pragmatic approach depending on the presence of

BDS in the chosen market. In general, acting as a provider is regarded only as a temporary

measure. Finally, this dual function allows CIEN to act with a high degree of flexibility and,

most of all, to have a direct and constant contact with potential clients. This pinpoints CIEN’s

strength in cultivating direct and proactive relations with rural SMEs.

(iv) Participation in decision making

An efficient provision of BDS requires the involvement of local groups with international

expertise in order to ensure that local needs are met and new technical skills provided.


12

CIEN, as demonstrated by its membership list, has reached this goal of harmonizing the

participation of different stakeholders. The involvement of local groups in the early stage of

planning activities is essential in creating greater ownership and long-term sustainability.

Since its foundation, CIEN has proven to be responsive and interested in developing strong

linkages with local groups and specifically with small rural producers and micro- enterprises.

Rural micro-enterprises actively participated in the definition of CIEN’s program, making

proposals such as that to create other smaller centres in the villages. This positive partnering

with a group of active and enterprising clients emerged as a pivotal point upon which to build

a successful demand-led service strategy. SMEs collaborating with CIEN also proved to be

innovative producers in their own right, able to formulate their own ideas about their

business requirements and playing a key role in the design and development of new BDS

solutions. From this perspective, client SMEs could definitely be considered as active codevelopers

of CIEN’s new strategies and services.

Is it possible to upscale CIEN?

Up-scaling refers to a process of replication and dissemination, improvement in skills,

designing new products based on the knowledge of final customers, employing new

technologies and taking on new functions and actions that lead to greater competitiveness.

CIEN is committed to elaborating a programme for the development of services over a

longer period of time, which focuses on several challenging areas. It intends to take on

innovative and sustainable approaches in these areas to meet the demands coming from its

clients in an improved way.

One area relates to widening the range of interventions. CIEN wants to deliver new and

better tailored services in the areas of training and technical assistance in order to provide

rural SMEs with a complete range of business support services. Regarding the area of

market access, CIEN is trying to identify and develop new niche market opportunities by

providing rural SMEs with punctual market information.

CIEN also wants to widen the issues covered by its services. An issue of priority is that of

gender. In this field, CIEN could get valuable support from PROMER, which has gathered

notable experience in gender related issues in the past few years, partly through its

collaboration with PROGENDER, the Regional ong>Programmeong> to Consolidate Gender-

Mainstreaming Strategies in IFAD-Financed Projects of Latin America and the Caribbean.

Another challenging area for the next phases of CIEN is the one related to the use of

subsidies. The operational costs involved in the implementation of business support services

in rural areas, especially isolated areas, are initially subsidized, but an exit strategy, implying

the withdrawal of subsidies, has to be elaborated. The challenge for BDS centers like CIEN

is to develop low-cost service “products” and delivery mechanisms that meet the needs and

willingness-to-pay of small-scale clients, while ensuring that the financial sustainability of the

structure does not become entirely dependent on subsidies. CIEN is actively working to

determine -and eventually adopt- instruments and methodologies that could guarantee a

sustainable and effective cost strategy. This could also include the possibility of

distinguishing “free services” from “free services (and the price scale applicable to the latter)

according to the size of the enterprise and the scale of its operations.


13

5. E-Commerce for Rural Producers

Since the beginning of the ‘dotcom’ boom in the late 1990’s, thousand of traders around the

world have embraced the opportunities offered by the potential of e-commerce. The internet

emerged as a tool that could attract and enhance trading activities, motivating many

businesses large and small to develop online retail and wholesale websites.

It was, and still is, an enticing business model and expectations from investing in such a

venture remain high. During the initial boom phase, e-commerce was seen as a possible

solution to the market access difficulties traditionally faced by rural producers and small and

medium rural enterprises in the developing world. As an accessible communications tool, the

internet was, and still is, expected to facilitate the access to regional and international

markets, creating a business interface free of intermediaries and other agents on an

unprecedented scale.

The potential that e-commerce offers in assisting rural earners directly relates to the

mandates of IFAD and IFAT -the international Fair Trade Association-. IFAD’s Latin America

and Caribbean Division has already developed an e-commerce portal, linked to its Regional

ong>Programmeong> for the Support of Rural Micro Enterprises (PROMER), to facilitate links between

producers and buyers.

In this context, this case study sets out to highlight the lessons learnt from e-commerce

practice in developing countries, and to look at the opportunities that have arisen. Its aim is

to reflect on the potential of e-commerce models and strategies and to examine their

relevance to small scale producers in developing countries.

It first introduces the notion of e-commerce and discusses the advantages that e-commerce

can bring to rural producers. This is followed by a discussion on the lessons to be drawn

from the experience gained to date and the barriers that have emerged. It finally makes

some practical recommendations for those interested in starting an e-commerce activity.

Annexes contain a summary of available resources, classified by continent, and a basic

glossary of e-commerce terminology.

What is E-commerce?

The term e-commerce encompasses the production, distribution, marketing, sale or delivery

of goods and services by electronic means, mainly through the internet. Three main stages

constitute a commercial transaction: the advertising and searching stage, the ordering and

payment stage and the delivery stage.

E-commerce can be divided into two main categories:

• Business to consumer (B2C): enterprises sell directly to final consumer. In this way it is

often possible to cut out wholesalers or retail outlets. This is the most commonly known

type of Internet business.

• Business to business (B2B): enterprises use the internet and ICT (Information and

Communication Technology) to enhance the whole series of business to business

activities. This implies procurement of supplies, communication with contractors and

sales channels, servicing customers, integrated data management and so on.


14

E-trade can be conducted directly by producers but often requires intermediaries. We can

divide these intermediaries into four categories:

• Classified ads and directory services providers: they can facilitate the search for goods,

as they often specialize in product categories

• Match makers: they attempt to connect buyers and sellers of specific goods. These are

much more information-intensive than directories and exploit the internet’s capacity for

interactivity

Market place providers: electronic markets allow buyers and sellers to exchange

information about products and prices

• Auctioneers: these are market places where prices are negotiated publicly according to

certain rules

E-commerce and rural producers from developing countries: expectations

The assimilation of e-commerce in the agricultural sector of industrialised countries,

particularly in the United States of America, triggered a great deal of optimism regarding the

potential of this technological ‘equaliser’ (Humphrey 2003) to facilitate market access for

small rural producers in developing countries.

Agriculture usually represents a significant, often dominant, share of total export earnings

and Gross Domestic Product in developing countries. Expectations from introducing this

technology to this fundamental economic activity in developing countries have commonly

been that e-commerce would improve the capacity to export to industrialized countries, by

enhancing:

• Lower transaction cost related to distance

• Better information and transparency about prices, markets and agricultural trade-related

issues

• Less dependence on middlemen and intermediaries

These changes can be beneficial to low-income producers who typically participate in

fragmented and spatially dispersed agricultural markets, and may be able to by-pass this

handicap by trading in e-marketplaces. Up until now, these producers have usually been at

the starting point of a market chain involving several intermediaries, with the market power

largely concentrated at the buyer’s end .

E-commerce in practice: lesson and opportunities

Official statistics regarding e-commerce transactions are relatively scarce, especially for

developing countries. According to the forecast cited in UNCTAD’s E-commerce and

Development Report (UNCTAD 2003), the value of e-commerce in 2003 was estimated to

range between $1,408 billion and $3,878 billion, and the most optimistic scenario expects

the value of $12,837 billion for 2006. The share of business-to-business transactions is

commonly around 95%, consequently business-to-consumer transactions account for less

than 5%.


15

Table 2: E-commerce in developing countries 2002-2003 (million of US$)

REGION

B2B B2B B2C B2C

2002 2003 2002 2003

ASIA-PACIFIC* 120.000 200.000 15.000 26.000

AFRICA 500 900 4 71

LATIN AMERICA 6.500 12.500 2.300 4.500

TOTAL 129.002 215.403 19.306 32.574

*Japan included

Source: UNCTAD (2003)

It is estimated that over 95% of the world’s e-commerce takes place in developed countries.

Africa and Latin America account for about 1%, and developing Asian countries for the

remaining 4%.

Within the developing world, the Asia-Pacific region is the more dynamic region, where the

adoption of e-commerce is increasingly perceived by enterprises as the natural business

future. Governments in the region tend to prioritise the improvement of infrastructure and

upgrading of skills that are necessary to participate effectively in the digital economy. B2C

levels in the Asia-Pacific region remain modest in comparison to B2B transactions, despite

accounting for about 10 per cent of global B2C online sales, but vast majority of these

volumes were generated by Japan, Australia and the Republic of Korea. The ever-increasing

amount of internet users in China remain resistant to buying online.

In Latin America, the volume of B2B e-commerce is driven essentially by developments in

Brazil, Argentina and Mexico. Brazil has achieved higher development as an internet market

and accounts for between 50 and 60 per cent of all Latin American online retail sales. In

contrast to Brazil, Argentinian and Mexican internet activities have remained more confined

to the higher socio-economic strata. In many developing countries, the lack of trust is the

predominant reason for not buying online, followed by the lack of direct contact with the

seller, higher costs, and delivery difficulties.

Figure 1: E-readiness score in developing countries

e-readiness score

9

8

7

6

5

4

3

2

1

0

Pakistan

Algeria

Source: EIU “The 2004 E-readiness report”

Viet Nam

Indonesia

Nigeria

Iran

Ecuador

China

Sri Lanka

Egypt

Philippines

Saudi Arabia

Peru

India

Turkey

Venezuela

Thailand

Colombia

Argentina

Brazil

Malaysia

South Africa

Chile

Taiwan

South Korea

Hong Kong

Singapore


16

The Economist Intelligence Unit (EIU 2004) calculates an annual e-readiness ranking. It is

essentially a measure that indicates how amenable a market is to internet based

opportunities. The EIU e-readiness index is the result of the combination of nearly 100

criteria, qualitative and quantitative, organised in six categories: connectivity and technology

infrastructure, business environment, consumer and business adoption, legal and policy

environment, social and cultural environment and supporting e-services. It clearly appears

that Asian economies are far ahead in e-readiness, especially the first and second

generations of NICs. Positive signs have been registered in Latin America: governments are

increasingly supportive of e-commerce activities and the internet is becoming less of an

exclusive access. Few of the African and Middle Eastern countries are included, but South

Africa clearly appears as the most e-ready country.

The Reality of E-commerce in the rural sector of developing countries

One consistent research finding to date is that the expected business-to-consumer linkages

between businesses in developing countries and end-consumers in the northern hemisphere

have not materialised. However, business-to-business opportunities in e-commerce have

arisen for small producers in developing countries. There has been an increase in their

participation in e-markets and on-line auctions for the marketing of agricultural exports. E-

commerce has not triggered a new business model, but has improved effectiveness and

efficiency at different stages of the existing supply chain, by strengthening the relationships

between existing trading partners.

It appears that e-markets for agricultural products from developing countries have not been

able, until now, to attract enough stakeholders, buyers and sellers, in order to demonstrate a

satisfactory level of effectiveness. This is due to a lack of information about the market

efficiency that is generated through e-markets, and because of the common adversity to risk,

meaning that buyers and sellers prefer to maintain their long established offline business

relations to ensure transactions on the basis of agreed quality and sales conditions. For

trading purposes, the internet is predominantly used as a source of information on prices

and products. Some interesting results were however achieved, as is the case of online

coffee auctions organized in Brazil. This experience proves that an appropriately designed

and implemented new technology can influence the structure of a commodity market

(UNCTAD 2003).

The internet’s role as a trading tool has remained secondary to its role of influencing

purchases carried out in the offline markets. The website is rapidly becoming the gateway to

a company’s brand, products and services, even if it does not sell online. It increasingly acts

as an online businesscard, crucial to any business’ success, and Small or Medium

Enterprise (SME) in the developing world must embrace the reality that the future of trade,

and especially of marketing, is digital. SMEs must strive to realise their potential as

professional and sophisticated business portals backed up by sound infrastructure in order

to attract and maintain mainstream attention.

In order to benefit from e-commerce, sound marketing strategies need to be implemented;

websites enhanced; customer service improved; internal capacities strengthened;

relationships with the end-consumer made relevant; brand confidence built; and product

quality well monitored. But first of all, it is imperative to understand how the producer firms

integrate in the supply chain and to assess the types of transactions they are involved in

before applying ICT to their sector-based strength. Focussing solely on the potential of the

most sophisticated ICTs is inadequate. Improving the weak telecom and internet

infrastructures often found in developing countries to address the ‘digital divide’ is not in itself

a sufficient policy for a successful assimilation of e-commerce.


17

Local organisations, regional networks and E-commerce

Commercially oriented organisations of small producers (groups, producer associations,

cooperatives) are essential to enable producers to pool their input requirements as well as

their outputs (IFAD 2003: 19). Organisations working at a regional level can support and

facilitate this process taking advantage of the available information technologies. Regional

networks in developing countries may aim towards B2C markets more successfully via e-

commerce platforms. Resources offered by regional organisations can provide strengthened

infrastructure and better focussed marketing strategies. Regional networks may enhance

grassroots capacity building in the form of training at field level. They can also provide an

opportunity to share information, experiences, resources and expertise. In theory, they can

act as sound base for building trust and co-operation at field level in order to achieve

maximum market impact. They can also reinforce the members of a particular region as they

come together under one umbrella to do business.

The B2C domain is typified by many small orders that require expert packing processes,

immediate availability of stock, logistics, dispatching and delivery, as well as secure credit

card encashment and reliable software and systems. This scale of operations is out of

proportion to the management resources of SMEs in developing countries.

E-commerce solutions in developed countries

Another option for farmers and craftspeople is to continue with capacity building activities at

local levels and increase their participation in regional networks, while letting portals in

countries of their targeted markets make the sales. The challenge is to recreate this

business model guaranteeing a fair price to the organisations engaged at grassroots level.

E-commerce sites offered by networks or organisations in the target market country bring the

consumers closer to the producers, have more experience in online sales and are logistically

simpler. This is the case of Novica, a stylish US-based website that sells globally-source

craft products to a well-targeted section of the US market. The CatGen website is another

example: a business portal that promotes fairly trade good from marginalised groups and

acts as a catalogue in which producers are responsible for updating their share and

representation.

In Europe, for example, the UK Fair Traders network could be used as a base to create a

model as currently proposed by one of its members, Ethical Shopper

(www.ethicalshopper.net), providing a centralised point of sale for fairly traded groceries and

non-food items on display on the website, complimenting a valuable opportunity in that 20%

of UK households now have internet access. The model being promoted is based upon the

convention that existing Fair Trade wholesalers in the UK would supply to various retail

outlets around the country. An order is processed via a centralised e-commerce site holding

the product and producer information. It is then passed onto partners organisations, these

being the existing network of around seventy independent Fair Trade shops in the UK (each

making a financial contribution for being part of the ‘co-operative group’) closer to the

geographical location of the customer to make the delivery. Aside from delivery, the retail

partners would add and maintain information about stock levels, content and other business

information (including the best selling products) onto one shared, centralised application. A

sound centralised marketing and PR campaign would compliment the process. In theory, this

model could be replicated in any target market location.

While the usual challenges in terms of capacity and funding certainly exist, with the right

resources and business planning this proposal may be an interesting and effective solution

to help those at the bottom end of the supply chain find new markets. However, to

completely emulate the Novica model would require professional infrastructures and

business interfaces directly with the country of production, hence eliminating the traditional


18

import/wholesale function. The important issue, however, is that the model proposed by

Ethical Shopper would still be closer to the consumer in the country of consumption. Here,

the links to the target market are invariably stronger, enabling the mainstream consumer to

explore and enjoy to the concept of Fair Trade within their ‘comfort zone’ through the

message that is diffused to them by an effective, appealing, well-promoted website.

Barriers to E-commerce

Infrastructure for telecommunication:A preliminary barrier to e-commerce for rural producers

is the availability of reliable and affordable internet access.. There are hopes that developing

countries can skip both copper-based and fibre-based land line infrastructures by using

wireless technologies, but wireless networks are unlikely to become reliable and reasonably

affordable for some time. For small rural producers, the establishment of public tele-centres

with internet facilities can provide an initial access. The development of an effective e-

commerce facility however requires a well functioning transport infrastructure for fast delivery

services. Rural producers in developing countries lag far behind developed countries in their

access to the technical pre-requisites for conducting electronic trade, and

telecommunications services are often unreliable, expensive or both. There are also

enormous differences in access to telecommunications between and within developing

countries. For instance, while a considerable proportion and sometimes a majority of the

population live in rural areas in developing countries, over 80 per cent of the main telephone

lines are located in urban areas.

Regulation: Private sector participation in the telecommunications markets is essential for

generating the required investment and for providing affordable internet access. A level

playing field for enterprises investing in this sector can lead to major price reductions for user

firms. In addition, the involvement of competent public regulators with discretionary powers

is needed to encourage competition and to ensure an equilibrium between highly profitable

provision in the main urban centres and less profitable outreach to distant communities.

Education and training: The providers and users of internet-based services require

adaptable skills. Frequently changing hardware and software make e-commerce a learningintensive

form of trade. Public agencies can help by offering tax incentives to encourage

investment in internet resources among producers’ organisations, companies, schools and

vocational training centres.

Consumers expect high service standards: Consumers expect high standards of service

from retailers (such as next day delivery or customer service). This can present a barrier to

artisans in developing countries hoping to sell direct to individual consumers from developed

countries.

Trusting the company/brand: Customers are wary of ordering from companies or shops

unknown to them, since it can be hard to determine a company’s efficiency from its web site

alone.

Financial security: Consumers also have legitimate concerns about using their credit/debit

cards to make on-line payments, especially internationally.

E-trading: practical recommendations

Developing effective web sites and e-commerce facilities can be done through a series of

useful steps. For many producers, their first usage of the internet for the sale of their

products is likely to be by email; and this can be followed by creating a few web pages to

exhibit a small selection of goods. In time, producers may go on to register their domain

name, create and manage their own web space, and perhaps finally add facilities to process


19

financial transactions and manage the dispatch of their product.s. But first of all, producers

must make a realistic self-assessment of their capabilities of maintaining and updating their

websites. Key factors to consider when creating a web site are (Batchelor 2002):

• Define the target and strategy: before starting to think about web site content, design and

navigation, be clear about the audience and strategy. The target audiences will

determine the approach and the information about the products and the

company/producer.

• Develop a customer service: This means organising the resources to handle

email/telephone enquiries, and deal with sales, deliveries and complaints online.

• Register with search engines and optimise ranking: The search engine is the main form

of on-line search. There are some simple steps to maximise listing and ranking in search

engines: register the site, and re-register new pages and content according to how

people are expected to search for pages/content.

• Build web-links: One of the most effective ways of promoting a site is to link it to related

business websites (by sector, by country, by type of product).

• Off-line promotion: use the existing literature (such as letterheads, business cards,

advertisements) and promotions of the organisation to promote the website.

• Start an email newsletter: use email to promote your business and web site. Begin with a

short (one-page) newsletter by email, to inform your contacts and clients about new

products or other news. Provide links to your web site in the email, so readers have

access to more information on items of particular interest.

Conclusions

The main outcome of internet access for the rural producers who took on this new

technology has been one of enhancing their traditional economic linkages: the internet

revolution did not open up as many markets for rural products as was initially expected.

Some positive examples however indicate that the internet can provide a window of

opportunity, especially in relation to improving the marketing of agricultural goods in

developing countries. Governments, international organizations and donors may play a

crucial role in providing not only funds, but also in building up the trust factor. The lack of

trust represented one of the main sources of failure in different initiatives. With access to the

right kind information and to institutional support, significant benefits can be generated for

small rural producers. The role of an international organisation like IFAD may be critical in

facilitating the use of E-commerce among small producers, by providing information and

practical tools.

Local and regional networks that can build the capacity of grassroots agricultural and craft

producers must be assisted and strengthened. In the case of craft products and commodities

in business-to-consumer markets, e-commerce platforms (or e-markets) in developed

countries may represent easier solutions, acting as new types of internet-based

intermediaries. A stronger collaboration between international organizations and alternative

trade organizations (at local, national and international levels) will create important

opportunities for craft and agricultural producers in developing countries to access and trade

on electronic markets.


20

6. Taking Stock of IFAD Experience

As part of the activities of the pilot project, a preliminary stock taking exercise on IFAD

experience in market access was carried out. The purpose was to assess the organisation’s

relevant field experiences in enabling small rural producers to access local, national and

international markets. The exercise did not aspire to be an exhaustive inventory, nor an

evaluation of market access interventions in IFAD projects, but an initial step, promoting

institutional learning in the area and a preliminary attempt to provide a platform for enhanced

dialogue across PMD Divisions.

The resulting document (Canigiani 2004) brings forward issues of common interest across

Divisions, which were selected on the basis of the outcomes of the stock taking exercise.

These issues call for further discussion to improve the groundwork for the development of

IFAD’s market access strategy.

The document starts with a discussion on the current challenges faced by IFAD in

supporting the access to markets of low-income producers in rural areas. This is followed by

a section that looks at the approach of each Division to market access, the description of

main activities at country level, and the identification of the problems and needs. Areas of

common interest across Divisions are also emphasised to determine priority fields of

intervention and to locate possible synergies within the institution. In the examination of their

respective market access projects, the Divisions considered the following aspects:

background, approach, main problems, type of projects, areas for improvement and relevant

experiences.

The projects’ inventory was drawn from a series of interviews with CPMs and other IFAD

professionals. We are grateful for their openness in sharing their experiences in market

access with us. In addition to this, a review of all the relevant material available on market

access within the institution was carried out. Particular attention was given to the market

access and trade papers discussed at the Governing Council (IFAD 2003 and 2004).

Main Findings

One of IFAD’s greatest assets is its field experience. Paradoxically, valuable information at

the project level remains scattered and under-utilised. This impedes the potential for learning

and developing tools and policies. Relevant experiences cannot be built upon because they

remain in the consultants’ hands or are not fully reported. This frail knowledge management

at the institutional level hinders the learning process and an efficient allocation of resources.

Table 1 provides an overview of the main outcomes of the exercise by listing the relevant

experiences examined in the study, the main features of market access interventions in

IFAD projects and the areas of interest that emanated from the interviews. A list compiling

the studies and research papers available in the various Divisions is also included.

There is a large number of projects that include market access activities. However, many of

them consist of multi-functional projects with main components focussed infrastructure

building, promoting rural enterprise development, building up market linkages with the

private sector to training. In most IFAD projects, market access represents a small

component in relative terms.

The approach to market access differs across regions, sometimes in a remarkable way. The

Eastern and Western Africa Division, for example, has defined its approach within the wider

framework of its regional strategy. The Division is managing two different types of projects

with market access as their main objective: those establishing the prerequisites for trade and

those addressing specific aspects of the value chain. In the Latin America and Caribbean


21

Division priority has been given to the development of a regional program that provides

services to support IFAD projects in the area of market access. Differences are also be

related to specific contexts. For example, a number of countries in the Asia and Pacific

Division faces severe infrastructure and communication shortages that cramp its market

access assistance. This directly results from having prioritised the mountainous areas where

a substantial proportion of the rural poor live. In the case of the Near East and Northern

Africa Division and the Western and Central Africa Division, recent market liberalisation

measures brought about ongoing changes leading to a shift from increasing production to

improving access to markets. This variety of contexts, creates a rich environment for

institutional learning across Divisions.

It is important to recognize the relatively small importance of market access activities in IFAD

projects (at least in quantitative terms). Generally speaking, market access is only a small

component of a project or a set of activities included in other components. Sometimes it

even overlaps with them (the case, for example, of projects including rural roads building). In

such circumstances, when market access activities, and the resources allocated to them, are

not distinct from other project components, it becomes difficult to assess their effectiveness.

Another key area of interest is the relation between project financing and Technical

Assistance Grants (TAGs). So far, TAGs are relatively independent from the financing of

core project activities. They have played the role of financing riskier activities. Taking risks is

fundamental in testing innovations and acquiring practical experience to detect problems and

determine how to cope with them effectively. However, improved marketing for specific

products does not happen overnight. It is the result of a complex and longstanding process

of enabling the environment and developing the best product for the market. All these

processes need to be financed on a regular basis to reach completion. Some interesting and

very original initiatives in market access have been financed by TAGs. It would be interesting

to examine the possibility for creating a stronger link between TAGs and market access

projects in order to ensure the continuity and sustainability of these activities.

It is very difficult to generalize and make overall statements about the main obstacles that

rural producers face to access markets. However, some requirements have recurred

strongly in different contexts: the need for information, for technical assistance in product

development and for training to improve entrepreneurial and managerial skills. This is where

IFAD’s new challenge lies. Up until now, the Fund has mainly concentrated on providing

infrastructure. Service provision is far more complex. It demands a selection of the most

appropriate services for the specific area/sector/product. It also requires the identification of

potential partners and/or service providers able to deliver effectively and efficiently. Given its

distance from this type of assistance, this is not an easy task for IFAD and “best practices”

for partnership building still have to be found.

Areas for improvement

In several projects, the market access strategy needs to be strengthened and additional

effort is required in order to develop a set of consistent and coherent instruments to support

field operations. Market research is generally conducted during the implementation phase

rather than during the formulation phase. The lack of a systematic approach in targeting the

main problems and in identifying the sectors/products in need of assistance impedes the

coherence and accuracy of the activities as well as an efficient allocation of resources.

Problems during the implementation phase usually result from basic flaws in the

identification of intervention priorities, the planning of activities and implementation

modalities. Initiatives are sometimes undertaken in an ad-hoc manner, which hinders the

possibility for replication and scaling up of successful initiatives. This also limits the


Relevant

Experiences

Main features

and areas of

interest

Thematic

Studies and

Research

Papers

PL

- PROMER - Regional

ong>Programmeong> for the Support

of Rural Micro Enterprises

- National ong>Programmeong> for

Rural Development in the

Eastern and Central

Regions (Guatemala)

- PRODECOP -

Development Project for

Rural Communities and

Small Producers (Chile)

- Puno-Cuzco Corredor

Development Project

(Peru)

- Sustainable Development

Project for Agrarian Reform

Settlements in the Semi-

Arid North-East (Brazil)

- New market opportunities

(i.e. organic, fair trade) and

marketing channels (i.e.

supermarkets)

- Leverage products’ identity

- Supporting farmers’

organizations

- Use of IT as a tool for

improving knowledge

management

(FIDAMERICA), market

linkages (PROMER)

- Promotion of economic

corridors

- Esperiencia de

Comercialization en los

Proyectos del FIDA en

Centroamerica (Zilveti,

2002)

- The Adoption of Organic

Production among Small

Farmers in Latin America:

Opportunities and

Challenges (IFAD,2003)

Table 3: Taking stock of IFAD Experience on market

NENA

PN

- Rural Development Project

for the Mountain Zones in

the North of the Wilaya of

Msila (Algeria)

- Rural Development Project

in the Mountain Zones of

Al-Haouz Province

(Morocco)

- Relief and Development

ong>Programmeong> for Gaza and

Jericho (RDP I)

- Smallholder Livestock

Rehabilitation Project

(Lebanon)

- ong>Programmeong> of Action to

Reach Rural Women in the

NENA Region

- Capacity building to support

micro enterprise

development also through

e-learning

- Strong gender focus in the

marketing activities and

successful results in their

implementation

- Opening of new marketing

channels (i.e.

supermarkets) and building

linkages with them

- Support to set up importexport

activities

CEN

- AFSP - Agricultural

Financial Service

Project (Macedonia)

- Mountain Area

Development

Project (Albania)

- Target the activities

to specific commodity

sectors

- Use specific tools for

mapping the supply

chain and identify

specific bottlenecks

to target

- Strong focus on

partnering with the

private sector

Thematic Study on

Comparative

Advantage and

Agricultural Marketing

in the CEN Region

Phase I (2004) –

Phase II (ongoing)

PF PA PI

Projects Establishing the Pre-conditions

for Trade:

- PAMA Support Project (Mozambique)

- SHEMP - Smallholders Enterprise and

Marketing ong>Programmeong> (Zambia)

- Agricultural Marketing System

Development ong>Programmeong> (Tanzania)

- REAP - Rural Enterprise and

Agribusiness Promotion ong>Programmeong>

(Kenya, Mozambique and Zambia)

Projects Addressing to Specific Value

Chain Improvement:

- Smallholder Cash and Export Crops

Development Project (Rwanda)

- Vegetable Oil Development Project

(Uganda)

- PhytoTrade

- Market access as project focus

- Extensive use of specialized NGOs as

service providers

- Ad-hoc based implementation

- Two-fold approach: enabling

environment and supply chain

improvement

- Cross-cutting studies among the

different countries (i.e. gender

mainstreaming into marketing

operations, marketing and credit

services)

- Gender and Poverty Targeting in

Market Linkages Operations (2002)

- Agricultural Marketing Companies as

Sources of Smallholders Credit –

Experience, Insight and Potential

Donor Role (2003)

- Ex-post Review of the Rural Enterprise

and Agribusiness Promotion

ong>Programmeong> (2004)

- RITP - Roots And

Tuber Improvement

ong>Programmeong> Phase II

(Ghana)

- PROMER - ong>Programmeong>

for Rural Micro

Enterprise (Senegal)

- Establishing a Private

Sector Partnership for

Accessing International

Commodities Markets

(Sao Tome and

Principe)

- Convert production

oriented projects into

market oriented ones

- Find new product uses

and add value to meet

new markets

- Explore new market

opportunities (i.e.

organic, fair trade) and

build up market linkages

Accès aux Marché,

Compétitivité et Pauvrété

rurale en Afrique de

l’Ouest (ongoing)

- Matale Regional

Economic

Advancement

Project (Sri Lanka)

- Western Upland

Poverty Alleviation

Project (Nepal)

- Livelihood

Improvement

Project for the

Himalayas (India)

- Infrastructure

provision as a

main focus

- Build up linkages

with the private

sector

- Use of IT as a tool

for improving

knowledge

management

(ENRAP)

Rural Enterprise and

Poverty Reduction in

Asia and the Pacific

Twenty-Seventh

Governing Council

Discussion Paper

(2003)

22


23

consolidation of partnership arrangements with service providers, which could be

very helpful in performing specific tasks at field level.

Weak project management is often another problem. It can be due to the lack of

project experience at the “micro” level as well as to the resistance in applying

“business” principles and modalities to development projects. The outsourcing of

activities is still mainly done through NGOs and governmental agencies, which in

many cases do not have the adequate abilities to handle business management and

market related activities and usually offer a restricted range of relevant services. It is

also a problem of human resources. More needs to be done with the private sector

and with the help of experienced professionals able to combine development

knowledge with business management skills.

It is difficult to assess the cost-effectiveness of market access interventions. These

activities are scattered and isolated or included in broader components, and their

costs are not always distinct from those of the other activities. It is also hard to

develop indicators, making impact and efficiency difficult to measure.

Innovation

Innovation is clearly present and plays an important role in IFAD activities.

Nonetheless, a problem that IFAD faces all too often is that innovative experiences

are not fully documented nor integrated into a learning process to facilitate replication

and/or scaling up. There are a number of initiatives that are highly innovative and

could provide a model in the design of future interventions. Some examples are:

• Small-scale initiatives focused on strengthening linkages with the private sector in

order to facilitate marketing and trade of agricultural products e.g. PhytoTrade

(PF); and the organic/aromatic cocoa trade from San tome and Principe (PA);

• Thematic regional studies, e.g. the “Market access, agriculture competitiveness

and rural poverty in West Africa (PA) and the Thematic Study on Comparative

Advantage and Agricultural Marketing in the CEN region (PN)

• Regional ong>Programmeong>s such as PROMER, the Latin America and Caribbean

Regional Network for Rural Micro-Enterprise Development (PL)

• Large-scale projects aimed at promoting the involvement of the private sector in

project management and implementation e.g. Matale Regional Economic

Advancement Project in Sri Lanka (PI).

Among these, small scale initiatives such as Phytotrade and Sao Tome are proving

to be very effective. Their peculiarity, bearing in mind their small scale if compared to

standard IFAD projects, is that they are very focused (the first one is to provide

services to improve the marketing of natural products in South East Africa; the

second one to establish an agreement with a private company in order to sell organic

cocoa from Sao Tome) and have no intermediaries (IFAD is directly financing the

companies as a non profit enterprise in the case of PhytoTrade, or as a consultancy

in the case of Sao Tome). This facilitates the development of indicators that can

measure the project’s impact (i.e. sales volume, return on investment, among

others). It also favours the ability to manage the project activities and promotes better

communication through continuous feedbacks on the project developments. These

projects provide precious information on demand, trends, prices and best practices in

both technical and commercial issues and cultivate direct links with key actors in the

market.


24

Other innovation include: (i) examples of partnership arrangements with financing

private companies, rather than NGOs; (ii) examples of new implementation

modalities through the establishment of a private company for the project

management rather than through a government unit (i.e. Sri Lanka and Uganda);

(iii) examples of engagement in policy dialogue to enable the environment for

implementing activities and attracting private sector investments (Uganda); (iv)

example of testing new tools to study market environment (i.e. India, Albania) and

micro enterprise development (PROMER in Latin America). However, all these

innovations are still scattered, casual and often difficult to detect, just like market

access activities themselves. As a result, it is difficult to take advantage of them for

replication or scaling up.

The number and variety of initiatives show that these innovations have a great

potential despite their early stage. The innovative country projects engaged in similar

activities could also benefit considerably from exchanging the knowledge gathered

from respective experiences (for example the Matale Project in Sri Lanka and the Oil

Development Project in Uganda ran into very similar problems in setting up a private

company for the project management). In this context, it is a pity to observe that

interaction between Divisions is still very limited.

The challenge of mainstreaming innovation – some suggestions

A clear market access framework would be helpful in order to promote and

mainstream innovative market access initiatives into IFAD projects and programs.

This would give rise to a more systematic approach to the design and management

of market access projects, and would favour a “learning loop” through which to

identify and assess the potential of innovations. The Traidcraft-IFAD market access

manual could be regarded as a step in this direction.

A market access strategy could be introduced at the COSOP stage and then the

framework adapted to the different phases of the project cycle. For example:

(i) Inception: market/marketing study; (ii) Formulation: marketing plan; (iii) Appraisal:

networking through partners identification and selection (with relevant stakeholders

depending on the needs outlined in the marketing plan); (iv) Implementation:

partnership arrangements/agreements; (v) Evaluation: development of specific

indicators to evaluate the impact of market access activities e.g. internal rate of

return, sales, export, employment, salary, among others).

There are other possibilities for mainstreaming innovation into IFAD field level

operations and culture, such as:

Partnering with leading practitioners. IFAD’s role in promoting innovation would be

that of a facilitator, mediator and enabler. This requires the capacity to identify and

select the best partners among the leading practitioners that actively support access

to markets for the rural poor and among other service providers that can assist

operations at the field level (i.e. in many projects, NGOs have proved to be good

partners for capacity building but inadequate in providing business services).

Collaborating with specialised agencies. Market access has a lot to do with having

the relevant information at the right time. It is crucial to develop collaboration

mechanisms with existing networks and institutions that are experts in that area. For

example, trade commissions in developed countries could provide information,

services, and field support (through their country branches).


25

Supporting regional trading networks. While the general principles for market access

are often the same, strategies and operation modalities vary from product to product

and from market to market. A thorough knowledge of the local products and markets

can only be obtained through a close interaction with field practice.

V. LESSONS LEARNT

The Initiative for Mainstreaming Innovation has crossed the Divisional boundaries by

promoting a fruitful process of sharing and learning across divisions. One of IFAD’s

strength lies in its well-defined structure related to the project cycle, but this

sometimes cramps a healthy process of interaction between different units. A positive

attitude concerning a genuine process of learning and sharing is evident among staff.

IFAD and IMI in particular could capitalize on this

At the same time, there is ample scope for a productive collaboration between

diverse organisations such as IFAD, an international development organisation, and

IFAT, an international association of producers. The potential of this partnership lies

in the organisations’ complementarities. IFAT has acquired credibility and leadership

in the fair trade movement over the years, and now functions as a highly efficient

international network. IFAD should also continue exploring and developing

partnerships with specialised NGOs working on market access (such as Traidcraft

and other regional organisations) and private sector companies working in this field.

There is a substantial and increasing amount of internet resources than can be useful

to people and organisations working in the area of market access. These resources

are free but scattered across a large number of websites. This shortcoming points to

the importance of developing a Virtual Library that would gather all the relevant

resources into one site.

E-commerce can provide a window of opportunity, especially in relation to improving

the marketing of agricultural goods in developing countries. Governments,

international organisations and donors can play a crucial role in supporting this

development. The role of an international organisation like IFAD may be critical in

facilitating the use of E-commerce among small producers, by providing information

and practical tools.


26

REFERENCES

Batchelor and Webb (2002), E-commerce options for Third World craft producers.

http://www.big-world.org/projects/141.asp

Canigiani, Eleonora (2004), “Taking stock of IFAD Experience”. Report produced for

IFAD.

Economist Intelligence Unit (2004) “The 2004 e-readiness rankings” London.

Hopkins, Raul (2000), “Impact Assess Study of Oxfam Fair Trade”. Oxford.

Humphrey, Mansell, Pare and Schmitz (2003), The reality of e-commerce with

developing countries.

IFAD (2001), Rural Poverty Report, The Challenge of Ending Rural Poverty. Oxford

University Press.

IFAD (2003), Information Note: IFAD Initiative for Mainstreaming Innovation. EB

2003/80/inf.4

IFAD (2003), Promoting Market Access for the Rural Poor in Order to Achieve the

Millennium Development Goals. GC25.

IFAD (2004), Trade and Rural Development: Opportunities and Challenges for the

Rural Poor. GC27.

Maccari, Michele (2004), “Business Development Services – the Experience of

CIEN”. Report produced for IFAD

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Oxfam web-site. http://www.oxfam.org/

Page, Sheila (2003), “ong>Towardsong> a ong>Globalong> ong>Programmeong> on Market Access:

Opportunities and Options”. Report produced for IFAD.

Page, Sheila and Rachel Slater (2003), “Small Producer Participation in ong>Globalong> Food

Systems: Policy Opportunities and Constraints”, Overseas Development Institute,

Development Policy Review, 21, (5-6): 641-654.

Thorndike, Hilary/Leproux, Vittorio (2004), “E-commerce for Rural Producers”. Report

produced for IFAD

UNCTAD (2003), E-commerce and Development Report, New York and Geneva

Zilveti, Veruschka (2002), “Experiencia de comercialización en los proyectos FIDA en

Centroamérica”. Informe realizado para el FIDA

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