Collection of Case Studies 2. - Seas of Change Initiative

Collection of CaseStudies 2.Quick scan case studies for “Seas of Change”

Introduction to Quick Scan Case StudiesIn this collection, a diverse selection of cases studies from partner organisations of the ‘Seas of Change’ eventand from other sources are presented. During the collection of quick scan case studies the focus was onexamples that have proven to be successful in scaling inclusive agri-food market development. We have decidedto print only a few of the quick scan case studies for environmental reasons, but please feel free to visit ourwebsite for more inspiring examples: www.seasofchange.netThe purpose of our efforts has been to understand what contributes to positive outcomes and identifyapproaches that are potentially adaptable to different products and contexts. The examples were also sources ofinspirations and ideas to work with during the design processes for the ‘Seas of Change’ event, and they will beused for discussions during the Seas of Change international workshop.Criteria for selecting case studiesThe following were guidelines for selecting cases on which to focus on. Boundaries were left deliberately a bitopen to be able to look in a particular direction but not to be blinkered by sharp definitions that may precludesurprising adaptations and innovations.Agri-food: the case must be about the agri-food sector.Scale: Cases are therefore about working with or intending to work with large numbers of producers(smallholders, labourers, contract farmers, PO’s, in whatever way) and wanting to structurally improvethe profitability/livelihood security of those involved.Scale can be achieved in single product, single value chain, single company approaches, but alsothrough multiple interconnected small-scale initiatives that combine for greater spin-off.Inclusiveness: there is an explicit attempt to increase the structural inclusion of most/all actors in themarket development. Case study writers were asked to elaborated on how ‘inclusiveness’ was givenshape in the different case studies:o Building long-term trust between actorso Ensuring proper incentives for long-term engagement in the market linkageo Transfer of skillso A balancing of power in decision making within the value chain/market linkageDemonstrable effect: what has proven to be having impact, rather than new ideas that might workKey questionsPlease try to answer the following questions when researching the case study: What model or thinking about inclusiveness and business case was followed? What was the scale of positive change (how many farmers/volume of produce/rate of growth) wasaimed for, what has been achieved to date, what might potential expansion be? What main contextual factors contributed to positive change? How did business, government, civil society and/or knowledge institutions constructively work together? What is the evidence to back the claims of case study? Which successful innovations are potentially adaptable to other products and contexts?For further information, please contact:Jim WoodhillDirectorWageningen UR Centre for Development InnovationE-mail: jim.woodhill@wur.nlPhone: (+31) (0)317-4868152

List of Case Studies1. e-Choupal; internet kiosks in rural areas in India……………………………………………………………..........42. Cocoa chain in Indonesia, Island of Flores…………………………………………………………………..……..83. Food through the private sector, Zambia…………………………………………………………………………134. Rice millers driving productivity and capacity in smallholder rice farming in Lao PDR……………………...….185. Promotion of the rice value chain in Benin………………………………………………………………………..236. Oil seeds in Uganda: Combining business-led development and multi-stakeholder dynamics in boosting adiverse national sub-sector……………………………………………………………………………….……….277. Agro-dealers in Zimbabwe: Scaling input provision as key for successful small farmer engagement…………328. Enhancing onion seed production in Niger…………………………………………………………………….….379. Pastoralist livestock markets in Kenya: Establishing thriving and reliable livestock markets through aninnovative public-private arrangement.………………………………………………………………………..…..4210. São Tome and Principe Participatory Smallholder Agriculture and Artisanal Fisheries DevelopmentProgramme (PAPAFPA) …………………………………………………………………………………...……….4711. El Salvador, Rural Development Project for the Central Region (PRODAP-II) …………………………….....…5012. Initiative for promoting rural entrepreneurship in Rwanda………………………………………………………5313. Pathways towards sustainability: Farmer organisations in the driver’s seat, Ecuado……………………..…..563

1. e-Choupal: internet kiosks in rural areas, IndiaAuthor and organization: IFADThis case is one of a series specifically prepared by IFAD and local partners for the “Seas of Change” event. Thebusiness partner involved in the case is e-Choupal.Total cost:NAFinancierPrivate company, ITC (Agribusiness Division)Year of establishment: 2000Value chain approach: Market-driven1. Context and backgroundBackground. An example where innovative ICT applications have been developed by the private sector playersto benefit small farmers and simultaneously enhance the business interests of the company. One such privateinitiative has been undertaken in six states in India by ITC Ltd, a large and well diversified retailing company withannual sales of about USD 4.75 billion, and market capitalization of USD 18 billion.2. Underlying business modelIntervention. In June 2000 the company’s Agribusiness Division undertook a novel approach, by purchasingfrom farmers directly by bypassing local markets (called mandis) that are dominated by middle men. The Choupalis a Hindi word that means “village meeting place”, and the e-Choupal is an internet kiosk, a virtual market placewhere farmers can transact directly with other actors including ITC. The system gives farmers more control overtheir choices, a higher profit margin on their crops, and access to information that improves their productivity. Byproviding a more transparent process and empowering local people, trust and fairness is enhanced. Theincreased efficiencies and potential for improving crop quality contribute to making agriculture more competitive.Part of the innovation is represented by the fact that sanchalaks (computer operators) allow farmers to usetechnology even though they are computer illiterate. Sanchalaks act as agents for ITC and allow farmers topurchase inputs and services through internet. The Sanchalaks are compensated by ITC for their services.Sales to ITC proceed as follows: farmers carry a sample of their produce to a local kiosk, receive a spot quotefrom the sanchalak, and – if the farmer accepts the quote – the product can be sold directly at an ITC collectioncentre where they are paid within two hours. The transportation cost is reimbursed to the farmer, and if thefarmer is located in a remote area, the product can be sold to the sanchalak or to a nearby collection centre.Furthermore, the handling systems at the ITC collection centre ensures that tractors, trolleys, or trucks candirectly unload their produce without spilling any grain, and a modern weighbridge ensures precise weighingreducing production handling losses.This system has proven to be more efficient than that of mandis, the traditional Indian market places. In fact, inaddition to better prices, reduction of losses due to spillage, clear and transparent price and qualitydetermination, lower marketing costs for the farmers, and shorter lead times for receiving payments (two-threehours versus two-three days at mandis) are some of the key benefits of the e-choupal compared to the mandimodel. The biggest benefit arises from transparency. Mandi commission agents use a small weighing scale thatin most cases causes the measurement to be inaccurate. Besides wastage levels are usually higher becauseagents tend to throw away some grain while evaluating the quality.The intermediaries under the e-Choupal model are the samayojaks – coordinators – who assist ITC in setting upnew e-Choupals by conducting village surveys and by identifying the best sanchalaks. They also manage thephysical transportation of sales made at the e-Choupal, collect price data from local auctions and maintainrecords. These coordinators are also compensated by ITC.4

Der Computer weckte ihn sechs Stunden später, exakt eine halbe Stunde, bevor er seinen Dienst auf derBrücke antreten musste. Er würde Tarall ablösen. Branford zog seine Standard-Uniform an und verließdas Quartier. Er betrat einen Turbolift und nannte die Hauptbrücke als Ziel.Als sich die Lifttür öffnete war Branford sehr beeindruckt. Obwohl er schon einmal die Brücke einesSchiffes der Galaxy-Klasse gesehen hatte, war er erneut fasziniert von der Größe und Funktionalitätdieses Raumes.Die Brücke war mit der Minimal-Crew besetzt. Vorne saßen der 2.Einsatzleiter, Lt. jg. Marc LaSalle undLieutenant Pizoll. Im Kommandosessel saß Lieutenant Tarall, als taktischer Offizier war ein jungerFähnrich im Dienst. Branford war erstaunt, da er die blaue Uniform der Wissenschaft trug. Branford gingauf Tarall zu und begrüßte ihn.„Guten Morgen, Lieutenant. Wie ist die Lage?“Tarall erhob sich: „Alles normal, Sir. Wir haben Kurs auf das Relicta-System gesetzt, Ankunft wird beiWarp 3 in 31,7 Stunden sein. Die Crew ihrer Schicht ist bereits eingetroffen, mit Ausnahme von demtaktischen Offizier, Lieutenant Crusher.“Branford nickte: „Danke, Lieutenant. Ich übernehme das Kommando.“Tarall verließ die Brücke. Als der Lift eintraf, stieg Crusher aus.Tarall sagte kein Wort und betrat den Lift.Der Mann ging zur Konsole des taktischen Offiziers. Er wirkte sichtlich unsicher.Branford wandte sich zu ihm um: „Guten Morgen, Lieutenant.“Der Angesprochene nickte: „Guten Tag, Commander. Ich möchte...“Branford unterbrach ihn freundlich: „Lieutenant, ich würde sie gerne im Bereitschaftsraum sprechen.Jetzt gleich bitte.“Crusher nickte und folgte Branford in den angrenzenden Raum.Als sich die Türe geschlossen hatte, begann Branford ruhig und freundlich auf Crusher einzureden:„Lieutenant, sie sind zu spät dran. Ich möchte sie darauf hinweisen, dass ich das in keinem Fall bei denmir unterstellten Offizieren tolerieren werde. Sie haben hier an Bord eine verantwortungsvolle Position.Vergessen sie das nie.“Crusher hatte seinen Blick gesenkt: „Tut mir leid, Sir. Es wird nicht wieder vorkommen.“Branford lächelte: „Das denke ich auch, Mister Crusher. Ich habe ihre Akte gelesen. Sie werden sicherihren Weg machen. Gewöhnen sie sich nur das an, was ich ihnen gesagt habe. Nun sollten wir auf dieBrücke zurück.“Crusher nickte knapp.Branford ging mit Crusher auf die Brücke zurück und nahm im Kommandosessel Platz. Er überprüfte dieBewaffnung und die Langstreckensensoren mit Hilfe der Arbeitstation, die neben dem Sitz platziert war.Unterdessen befand sich Lt. Commander Coburn zusammen mit Lieutenant Tarall in Zehn-Vorne. Siesaßen an einem Tisch genau am Fenster. Coburn hatte sich wie normalerweise einen schottischenWhiskey bestellt, den er allerdings nicht vom Replikator bezog. Er mochte es nicht, wenn kein Alkoholdarin war.In Coburn brodelte es. Er konnte diese Demütigung durch den Captain nicht verstehen. Warum hatte erdiesen jungen, unerfahrenen Offizier einem langjährigen, treuen Untergebenen wie ihm vorgezogen?Tarall bemerkte seine schlechte Stimmung: „Commander, was ist mit ihnen?“„Ach Tarall, ich ärgere mich nur darüber, dass jetzt ein solches Greenhorn wie dieser Branford als 1.Offizier an Bord ist. Das ist es.“ gab Coburn zur Antwort.Der Vulkanier verzog keine Miene. Tarall konnte Menschen recht gut einschätzen, und Coburn war einoffenes Buch für ihn. Er war gekränkt, und das konnte bei einem Charakter wie ihm gefährlich werden.„Commander, ich finde ihre Meinung über Mister Branford kommt doch etwas früh.Kennen sie ihn schon länger?“ bemerkte Tarall.Coburn nahm einen Schluck Whiskey und schüttelte den Kopf: „Nein, ich kenne ihn erst, seit er an Bordist. Aber ich kenne Leute wie ihn. Junge, karriereverrückte Offiziere, die keine Rücksicht auf andere auf

Most importantly, by improving the purchasing power of the farmers, ITC has increased the sales of its productsin rural areas, creating a win-win situation.In the Sehore district, in Madhya Pradesh, the intervention is reaching 35,212 direct beneficiaries and 114,000indirect beneficiaries. According to the e-Choupal project team, agricultural yields have increased by 33% (from 9quintals/hectare in year 2000, to 12 quintals/hectare in 2009) as a result of the e-Choupal intervention.Table 2 shows that under the e-Choupal system the farmer saves an average of USD 6 per MT as a result ofsavings at the selling point (1.37%). However, this figure does not take into account other savings, such as timesaved(transaction at mandis can sometimes take two-three days, and could therefore be quantified in two-threedays equivalent labor cost), quantities of spillage saved (and could therefore be quantified in increased quantitiessold by farmers), accurate weighing and quality measurement systems (which determine the farm-gate pricereceived and the quantity sold).ITC Saagars (supermarkets) offer multiple services under one roof - a marketing platform, store front forpurchasing agro-equipment and personal consumption products, insurance counters, pharmacy & health centre,agro-extension clinic and fuel station. ITC’s engagement in rural areas has also led them to support investmentsin productive infrastructure. In the district of Sehore, for instance, ITC has built a dam to collect water during therainy season.Discussions with an ITC Sagaar store officer in Sehore provided an overview of the typical farmer selling to hisstore. According to his analysis, 30% fell into the small farmer category (with less than 5 acres of land), 40%were medium farmers (with 5 to 25 acres of land), and 30% were large farmers (with more than 25 acres ofland).Price transmission along the soya value chain. Table 2 below provides detailed information regarding theprice transmission along the soya value chain under the e-Choupal and mandi selling channels. Assuming thesame farm-gate price of USD 439/MT, costs incurred by farmers at the selling point are nil in the case of e-Choupals, unlike in the case of mandis (USD 6/MT). This constitutes a 1.37% saving for the farmer. As per thecosts incurred by direct purchasers (ITC in the case of the e-Choupal system and the individual buyer in the caseof the mandi system), a saving of USD 7/MT results from the e-Choupal system, mainly as a result of theelimination of traders’ commission and transportation costs, and of improved quality.Table 2: Price transmission along the soya value chain 3Descriptione-Choupal(USD/MT)Mandi(USD/MT)Farmers’ profitability:Farm-gate price 439 439Cost incurred by producer at selling point 0 6Farmers’ profit 439 433Costs incurred by buyers:Mandi tax 10 10Samyojak commission 2Trader commission 4Entry tax 4 4Packaging material costs 9 9Sanchalak commission 1Labour, packaging, stacking 2 2Transportation to warehouse 3Costs sub-total 28 35Total cost to direct buyer 467 4743Data provided by Dr. Nirmal Reddy, General Manager (Commodities), ITC Ltd - Agribusiness Division.6

4. What are the key implications for scaling inclusive business?Key featuresEffective governance. ITC is the chain governor, and decisions are made to benefit its stockholders. However,a win-win situation has been created because farmers also benefit from cost reductions in the chain, without anyobligation for farmers to sell to ITC. The farmer’s purchasing power has also increased through availability ofcheaper and reliable agricultural inputs sold in the e-Sagaars, along with his/her bargaining power, which hasbeen enhanced through improved access to information.Information flow. Internet kiosks (e-Choupals) located in the villages allow farmers to gain access to informationon weather, crop prices, scientific farming practices, farmer peer groups, soil testing services, trainings; thisenables farmers to improve productivity and make better informed selling decisions. This online information ismade available in Hindi. Furthermore, the recent wide availability of televisions in rural villages has provided anextra means for farmers to access valuable information.Trust. Transparency in the products’ analysis, measurement, and weighing (electronic weighing devices), hasenhanced the level of trust within the chain. Moreover, farmers’ free access to information from sanchalakswithout compulsion to sell to ITC increases the level of trust even further.PPP. This is a private initiative.Provision of credit. All transactions are on a cash basis and no credit is involved.Diversification. ITC is primarily dealing with soya beans.Capacity building. Market and weather knowledge is shared, and training is provided in better farm practices,risk mitigation and holistic crop management.Chain efficiency/Competitiveness. Chain efficiency has been achieved through reduction in costs at thefarmers’ as well as at ITC’s (supermarket) level. The chain’s competitiveness has been enhanced by eliminatingUSD 13/ton of the costs. These savings are shared between the farmer (USD 6/ton) and ITC (USD 7/ton).Inputs. ITC sells high quality inputs at a lower price, and this has allowed farmers to increase yields.Technology transfer. Technology is transferred at ITC Sagaars and is available to all producers.Market linkages. The initiative provides an alternative market linkage mechanism (previously the only options forfarmers were mandis) at a lower cost.Sustainability. Since ITC is the chain governor, sustainability will be assured for as long as the companycontinues to find this to be a profitable business.Drawbacks. No specific attention was given to gender equity or to the landless.Sources:• Field mission: ITC Ltd. Agribusiness Division, Bhopal, 7 th June 2008.• Data provided by Dr. Nirmal Reddy, General Manager (Commodities), ITC Ltd - Agribusiness Division.• E-Choupal: ITC’s Rural Networking Project, case study prepared by Prof. Subhash Bhatnagar and Ankita Dewan at theIndian Institute of Management (Ahmedabad) and Magui Torres and Parameeta Kanungo at the World Bank.• E-Choupal lauded by the President of India, NASC Complex, New Delhi, 5 th June 2007.• E-Choupal Case Study from India. Information Technology and Social Enterprise. E-Choupals Use Internet Kiosks toIncrease Food Price Transparency. Jan 2009.• ITC e-Choupal: Corporate Social Responsibility in Rural India, A. Farhoomand, S. Bhatnagar, 2008.• Nurturing entrepreneurship in India’s villages, The McKinsey Quarterly, Nov 2008.• What works: ITC’s e-Choupal and profitable rural transformation. Web-based information and procurement tools forIndian farmers. University of Michigan, K. Annamalai, S. Rao, Aug 2003.• Use of ICT in Agri Business: Prospects and Challenges. FAI workshop on importance of ICT in the fertiliser andagriculture sectors, May 2006. http://www.faidelhi.org/training%20programme/workshop-Gao-06/Use%20of%20ICT%20in%20Agri%20Business%20-%20Sanjiv%20Sharma.pdf7

2. Cocoa chain in Indonesia, Island of FloresAuthor and organisation: VECO/VredeseilandenThis case is one of a series specifically prepared by VECO/Vredeseilanden and local partners for the “Seas ofChange” event. The business partner involved in the case is PT Mars.Why is the case an interesting example?Current practice of sustainable agricultural chain development shows that the initiative of converting chainstowards sustainability is owned by a variety of chain actors and chain supporters. In this case VECO contributesto a link between a private sector enterprise (Mars PT) and local cocoa farmers in Flores, Indonesia.1. Context and backgroundCocoa subsector in IndonesiaCocoa is one of the most attractive crops for farmers around the equator because of the specific climate and thecertainty of income in the long term. The Indonesian cocoa sector has experienced tremendous growth duringthe last 25 years and is now the third biggest cocoa producer with about a 15% share of the total world cocoabean production. Cocoa is cultivated in Indonesia on over 1.5 million hectares, providing the main source ofincome for over 1,400,000 smallholder farmers, generating over USD 1.2 billion in exports annually. Thecountry's cocoa plantations are among the most productive in the world, with each hectare able to producebetween 400 and 800 kilograms of cocoa. Up to now, smallholders contributed 93% of national production.Despite the importance of cocoa cultivation in Indonesia’s economy, productivity, bean quality and farmprofitability have declined. This declining trend is being reversed the last few years with on-farm investments intree rejuvenation, replanting and sustainable farming practices. Such investment did not happen earlier due to thelimited access to credit, to knowledge on sustainable farming practices and due to poor transmission of qualityprice signals to farmers. This latter failure is due to the fragmentation in Indonesia’s cocoa supply chain, withover 90% of the cocoa production on smallholder farms that sell into poorly regulated and highly competitivemarketing chains.The population of Flores is growing and farmers are owning increasingly smaller plots of farmland, incomes aresteady while costs are increasing. There is hardly local knowledge about cocoa farming, because cocoa is notendemic to this region. The farmers of the districts Ende and Flores Timur have organized themselves in smallfarmer organizations. They were informal groups of farmers, setting up credit systems for their members. Thefarmer organizations function as facilitators, helping their members gain access to information and to providesmall amounts of working capital.VECO Indonesia is the Indonesian branch of the Belgian NGO Vredeseilanden working on Sustainable AgricultureChain Development. Its mission is to enhance the position of the organized family farmers. VECO Indonesiastarted in 2009 with the funding and strengthening of the organizational capacity of JANTAN and in 2010 with thepartnership with PT Mars. PT Mars is one of the biggest companies in the global cocoa industry and results of theVECO-PT Mars partnership illustrate how working together with the private sector can create new opportunitiesand resources for farmers.JANTAN is a business-oriented farmer organization in Eastern Flores. They focus their activities on the cocoa andcopra commodities. The overall aim of the organization is the realization of good (economical) quality of life forthe communities of East Flores district, through the development of collective marketing of potentialcommodities, backed by a strong and independent organization.SIKAP is a newly established farmer organization founded by 9 village in Ende district. The overall aim of SIKAP isthe achievement of a fair and sustainable welfare of cocoa farmers by strengthening the bargaining position offarmers receiving a fair price. From the start they had good relations with the local government and were able tosecure support from the government in the form of a warehouse and a drying facility of Cocoa managed by thenew Processing Unit (UPH).Main bottlenecks/problems faced by the cocoa farmers in the chain.8

The farmers of JANTAN and SIKAP participated in cocoa Farmer Field Schools (FFS) organised by VECO Indonesiaand PT Mars, in cooperation with Swiss Contact. They conducted 5 series of FFS in 2010 and 1 in 2011. In 2011they also organised a training for preparation of a business plan. PT Mars partially paid JANTAN and SIKAP to lettheir farmers participate in the FFS and they also sent cocoa experts to the field schools to lecture. This fieldschool covered harvesting, post-harvest management, fermentation, drying and quality control of cocoa seeds,and collective marketing.Actions to create good marketing conditions for the farmers:In 2009, PT Mars opened a buying/fermentation station in Central Flores, as a pilot program. The aim was to buywet beans of the farmers and to ferment it by themselves, to be sure of the quality of the fermented beans. Thispilot program was quite successful since farmers sold large qualities of wet cocoa beans, but farmers could notdeliver the total amount requested and the station was considered as not cost effective.To improve the quality of the farmers’ cocoa, PT Mars offers premium prices for good quality. The target for PTMars for the year 2010 was to purchase 60 tons of wet cocoa from JANTAN. Sales criteria for quality have notbeen met due to insufficient quality control at the villages’ cocoa collection point level and the work systems inJANTAN and SIKAP.JANTAN and SIKAP organized the purchase of wet cocoa beans from farmers, funds for buying were provided byPT MARS. However, in 2011, PT Mars has changed its policy of buying wet cocoa directly from farmerorganisations towards buying dry cocoa through local traders. PT Mars has indicated that they are willing to buydirectly from FO’s (Including JANTAN and SIKAP) when they are able to provide them with dried/fermented cocoabeans of a good quality. A minimum shipment of 8-10 MT dried Cocoa beans is needed and the shipment has tobe organized by the FO’s.After changing the purchase policy, PT MARS is continuously present in Flores with 2 staff members based on theisland. They will implement a system for local Traceability of Cocoa beans, they will check whether the pricesetting for purchasing cocoa beans from the farmers through weighing, moisture content, mould and waste determinationis transparent and honest, provide JANTAN and SIKAP with technical assistance/training, and they willfacilitate the Internal Auditing process of Cocoa beans bought from business partners.Through the multi stakeholder involvement that is the basis of this project, guidelines in several areas have beenformulated or applied. The national sustainability criteria encourage future cocoa production that rehabilitatesagricultural lands and forms part of a strategy to preserve remnant forests and develop habitat corridors.Farmers have to obey to criteria that minimize the use of agrochemicals as insecticides, herbicides, fungicidesand chemical fertilizers.Both at the FFS and trainings as well at the CSP-forum, the farmers learn that biodiversity on their farms isnecessary and need to be preserved. The multicultural systems that are applied by the farmers consist mostly ofintercropping cocoa with seasonal and long-term plants, such as corn, and annuals such as coconut. The onlynegative effect is that the cocoa yields per hectare are lower. At the trainings of PT Mars, farmers also learn howthey can get a safer farming environment with respect to exposure risks to pesticides and other risks.4. ImpactThe perspectives of moving towards sustainability of chain actors differ and often are an expression of ownsurvival in the long run. In that sense, the efforts of PT Mars of securing their supply of cocoa, has resulted insustainable changes in the cocoa chains on Flores.1. Farmers’ organizational and marketing abilities improveda. To do business, both FO’s realized that registration is a basic requirement if you want establish a sustainabletrading relationship with buyers. The opportunity of selling Wet Cocoa Beans to PT Mars, gave a boost to JANTANas a business organization. Later in 2010, SIKAP also entered this field facilitated by VECO-Indonesia andreceived the status of association. JANTAN is recognized as Multi-Purpose Cooperative, which makes it easier tostart business activities and to investment as it is able to accumulate some capital. Also the government tends tobe more supportive to cooperatives.b. The negotiation position of farmer families improved a lot. A good example is the negotiation of the farmerorganizations with the government to obtain a cocoa seedling nursery. They also obtained land use rights to build10

a cocoa processing unit in Nangapanda district. In East Flores, through JANTAN, farmer families successfullynegotiated a price with local traders of USD 1.18 to 1.42 per kilogram dried beans.2. Farmers’ organisations resilience for coping and adapting to new situations has increased.a. JANTAN has to adjust to the new situation (no more wet beans), but should be able to sell dried beans during2011. The changes in PT MARS policy to buy dry beans has motivated SIKAP to process its own beans moresystematically with the needed moisture content. The fermentation is another possibility but takes some time tobe organized both for SIKAP and JANTAN. The fermentation boxes (JANTAN) are only covering part of thecapacity needed for members, but serve as a model to introduce this technology in the area. These boxes areeasy to construct and materials are cheap.b. With the new situation, the farmers are facing changes that need to be tackled very fast. PT Mars change ofpolicy has encouraged them to train the farmers to do their own processing. This has resulted in processed,better quality Cocoa beans for which a better price will be paid.c. Farmers’ organizations have the capacity to attract new business partners. Through this development they areable to sell larger volumes of Cocoa beans to different buyers.d. As a result of the change in PT MARS purchasing policy, JANTAN and SIKAP do not have sufficient funds topurchase wet cocoa beans from farmers, the funds which were previously provided by PT MARS. The number offarmer members paying membership fees is still low because the administration systems are still inefficient.However, thanks to the collaboration and negotiation with the new traders, the collective marketing activity of theorganisation continued.3. The skills of farmers are strengthened (technical, economical, organizational)Farmers of JANTAN and SIKAP have been trained on different issues. This has resulted in changes:- At the farmer level: more frequent harvesting, pruning, fertilizing and sanitation activities as a result ofthe dissemination of last year’s farmer field school results.- At the processing level: at SIKAP processing units are used to process the cocoa, while at JANTAN theprocessing is done by the farmers. This means their knowledge and skills in processing quality cocoa isgrowing.- At the marketing level: Several members of farmer groups that are members of SIKAP and JANTAN areable to negotiate prices for the Indonesian National Standard quality cocoa with local traders.- At Organizational level: Women are starting to play a clearer role in JANTAN, above all in marketing. Thisis partially because of the sustainability criteria that PT Mars helped to develop and partially because ofthe program that VECO developed with the farmer organizations. However, the role of women in thecocoa production stays more centred around the initial stages, while men have the control over farmplanning, selling and decisions concerning new technologies.4. Consumer’s demand is better satisfiedMars Incorporated's business value is to consistently deliver quality and value for money that customers wantwith efficient and reliable service. They try to do this by satisfying the consumer's demand for chocolate andchocolate products and by predicting this demand in the future.5. What are the key implications for scaling inclusive business?The case of the cocoa farmers in Flores is very much a case of scaling up the production that meets new productdemands. The private sector, in this case PT Mars, has the interest of acquiring cocoa beans of a certain qualityin order to meet consumer demand. VECO contributed in bringing local farmers and a global enterprise together,benefitting the farmers by increasing their income and securing their livelihoods and benefitting PT Mars byproviding them with more cocoa beans that meets PT Mars’ standards. The case shows that this kind ofcooperation can trigger positive results.Before the cooperation farmers got USD 0.92 per kilogram of wet beans and this has now become USD 1.13.The partnership between JANTAN and PT Mars is unwritten, because the price of cocoa fluctuates with the dollarexchange rate. Since the new system of 2011, the farmers have to negotiate with the middlemen about theprices of their beans, instead of with PT Mars. Besides these better prices, farmers can get large quality fees ifthey are able to meet PT Mars’ production and quality standards. The farmers have gained skills to negotiate andthey are able to deal with different buyers. This and the fact that they are able to deliver higher volumes, andbetter quality of the beans are supporting issues that ensure a good/better price on the long term.11

The intercropping yields in a more secure income for farmers because when the cocoa harvest is poor, thefarmers still have an income from the other crops. Also, before the participation in the farmer field schools, theproduction was only 30 fruits per tree. After the training this became 40 fruits per tree because of theimplementation of the P3S’s technique and losses were lower.12

3. Food through the private sectorAuthor: Etah Manda; Onward MandebwuOrganization: SNV ZambiaThis case is one of a series specifically prepared by SNV and local partners for the “Seas of Change” event.These cases cover a range of commodities and specific approaches in value chain development across Africa,Asia and Latin America. They include, for example, the strengthening of producer organisations, value addition,business development services, realisation of inclusive business models, marketing and trading arrangementsand improved chain financing. Among the collaborative partners are: IFAD, FAO, EU, USAID, DANIDA, Helvetasand IDB. The business partner involved in the case is Local rice Processors.Why is the case an interesting example?This case is an inspiring example because it provides evidence that private sector companies are key inaddressing issues of integrating the poor who are mainly food insecure into formal market channels and at thesame time increase the marginalized communities’ access to food.1. Context and backgroundSNV is a Netherlands-based international development organization providing capacity development services tolocal development organizations towards poverty reduction and better governance. SNV directly and inpartnerships with business and other development organizations provide capacity development services togovernment, the private sector and local civil society to enhance their role towards development. SNV fullysubscribes to global efforts to eradicate poverty and promote sustainable development. In addition, they fullyembrace the growing global partnerships between business and development organizations towards making theworld a better place for all, hence our work in agriculture which is based on a three pronged approach; enhancedpositioning of (small holder) farmers within value chains; promotion of climate change friendly agriculture andfacilitating increased access to food. This rice value chain case is based on the third approach - facilitatingincreased access to food.Globally food insecurity poses a serious threat to almost one billion people, many of them women and children.This is especially true in rural areas of developing countries, where four out of five people go hungry every day 4 .If this would not be enough, scientist are estimating that world population will grow to 9.1 billion by 2050. In asituation where natural resources are already dangerously degraded, fossil fuels are becoming scarce andclimate change is on the door step, this poses a serious challenge.In sub Saharan Africa, per capita food production has stagnated for three decades 5 Agriculture productivity hasnot kept pace with population growth resulting in 2 out of 3 people being undernourished and a total of 200million people being malnourished. The majority of the undernourished people are children below the age of fiveand make up 28% of the overall figure of under-nourished people. Thus the challenge of how to feed the growingpopulation in the face of climate change, poverty, declining food security and growing competition for naturalresources is a real issue. As a development organization SNV felt it imperative to contribute to addressingpoverty through improving food security. In Zambia SNV chose to focus on the rice sector and our work is basedon enhancing the position of smallholder producers in the value chains and facilitating increased access to food.At the outset of SNV support in 2007, rice production in Zambia was 18,000 MT mainly produced by small-scaleand subsistence farmers, while consumption was estimated at 35,000 MT with 12,000 MT informally tradedmainly to DRC through cross border traders (Fewsnet: 2007). This created a deficit of 29,000 MT which wasbeing met through imports mainly from Eastern Asia (perceived to be of higher quality and also cheaper). Averagenational productivity per hectare was at 0.9MT/ha for the 70, 000 rice farmers in the country.SNV’s choice to support the pro-poor growth of the rice sector was informed by the following factors: 25,000 rice producers operated across 3 SNV selected provinces, mostly at subsistence level Rice is one of the staple crops consumed in the country and in East and Southern Africa region which are netimporters of rice (demonstrating untapped demand)4FAO, 2010. http://www.fao.org/news/story/en/item/45210/icode/5http://www.fao.org/tc/tca/work05/cirad.pdf13

An unsatisfied domestic market (29,000 MT imported) as at 2007 There was potential for commercialising rice as a smallholder cash crop. Availability of suitable land providing potential for the growth of the subsector Potential for income for small scale farmers to reach USD 1,000 p.a. for 1 hectare per producer by 2012 The advent of the global food crisis that provided an excellent opportunity in the global markets The need to plan for increased regional food security in the face of future impact of climate change.SNV´s total investments in the rice sector amounts to € 1,046,801 provided in the form of direct Advisory daysprovided and through use of local capacity builders over a period of five years.2. Underlying business modelIn supporting the rice sector in Zambia, SNV applied the value chain development approach as our model with astrong focus on getting the private sector to take the leading role in driving the value chain. As such a detailedrice value chain study was done to identify and analyse the entry point of our support but also evaluate the levelof development of private sector actors. The detailed study and later the baseline studies provided us with themajor prevailing issues that led to smallholder producers being poorly integrated into markets, their productivecapacity being largely untapped and being food insecure.The following were the major issues that the sector experienced:- Low production volumes, not meeting the national demand; low productivity per hectare- Use of recycled comingled seed with no organisation providing inputs.- Limited access to government extension services which lead to poor farming methods and cropmanagement practices resulting in low productivity amongst farmers- Poor post-harvest technologies that make the end product less marketable- Lack of storage facilities in the farming areas to allow for bulking and storage- Fragment market system – no formalised market system with producers working as individuals more than asgroups- Limited organisational and managerial capacity of the representative entities (farmer groups andcooperatives) that intend to help with marketing- Lack of product and market information leading to perceived low quality rice. Low visibility and low qualitybrand perception of Zambian rice in the domestic market- Presence of unscrupulous players (especially the traders) in the market chain (buyers’ market)- Lack of finance throughout the chain to allow for flexibility in pricing and timing of marketing; farmers areforced to sell at low prices immediately after harvesting- Underutilized processing capacity in the SMEs existing with many of them opting to provide a milling servicebut under-capitalized to brand and package their rice for the retail market- Poor infrastructure limiting market access by processors and farmers alike- Resource ownership (land/finance)and participation of female farmers particularly in leadership positions infarmer associations is skewed although they form the majority of the farmers- Not much attention is paid to environmental issues leaving the farming regions being degraded.- Unfair competition form cheap imports from east AsiaOur entry point was thus to work with the existing markets (private sector processing companies) but focus ourattention on addressing issues that impede their profitability and growth. Figure 1 below indicates our focus areain the initial stages. In doing this, we focused our work at facilitating the rebuilding of market system in order toenable processors to have access to paddy at reduced costs. This involved working at strengthening producergroup so that they can undertake communal bulking in accessible areas for both traders and processors. Thisimmediately resulted in empowered producers that were able to negotiate better prices for the paddy supplied orbulked.Our support further facilitated increased inclusion of rural producers in the market system through encouragingformal out-grower arrangement between processors and producers. This was done to improve productionvolumes to increase processing capacity utilisation in many of the processing companies but also address issuesof quality that were affecting the profitability of many of the SMEs in the value chain. Other support includedbrokering resources for processing companies with inadequate trade finance and setting up local saving andcredit scheme to provide micro finance for production to small scale farmers who had no access to finance toexpand their production.14

Most private sector companies involved in this value chain used the traditional revenue model that charges amark-up on perceived cost of producing a product. Both smallholder producers and processors would thennegotiate and agree on prices based on computed cost of production plus a mark-up. This has resulted in 100%increases in prices the smallholder producers are able to obtain for their supplied paddy rice. The smallholderproducers are however yet to meet the required production quantities and these initiatives are still on-going.SNV´s initial support focusFigure 1. Production function map.3. Evolution of the initiativeIn the initial stages of supporting the rice value chain, SNV recognised that supporting the sector single handedwith few partners would be a mammoth task and results would be dismal. Thus SNV convened a national multistakeholdermeeting that brought together a diversity of stakeholders that included farmers’ associations, privatecompanies (input suppliers, buyers, retailers, wholesalers, processors, commodity brokers, warehouse certifyingagencies etc.), NGOs, financial institutions, Government, transporters, insurers and others to discuss issues inthe rice sector and get individual actors to take ownership in addressing issues that affect them. As a result ofextensive deliberation, stakeholders agreed on an action plan that individual stakeholders could work on andinfluence; focusing on three priority areas in the rice value chain:- better sector coordination for policy and advocacy- providing market information- Contribution to the development of rice strategy.This first process has resulted in stakeholder forums being developed at district and provincial level that sit todiscuss and address issues that affect the growth of the rice sector in Zambia. Subsequent national stake-holdermeetings have been held through the Government of Zambia and financed by different partners that have becomeinvolved in the rice sector as a result of the first meeting. Organisations such as JICA (financing the research partof the rice sector), Lumwana Mine (financing commercialisation of NERICA rice and improving extension supportto the smallholder producers), Finnish Embassy (supporting some rice initiatives, SIDA, Agri-pro Focus (a group ofDutch NGOs financing the holding of national rice stakeholder meeting) have all taken interest in the sector andare financing or playing some role in the development of the sector.Other organisations such as Zambia Agribusiness Technical Assistance centre have financed a number ofprocessors for trade finance and producers for organisational set up and strengthening. The NationalStakeholder Forum has now managed to link to regional grain and rice establishments such as East and SouthernAfrica Agricultural Network (ESAANet), Alliance for Green Revolution in Africa (AGRA), Africa Rice Centre, and EastAfrican Grain Council (EAGC). It is hoped that continued networking between Zambian producers with thesebodies provides opportunities for Zambian rice to be well known on the regional market.The national rice stakeholder forum resulted in the establishment of an organisation called the Zambia RiceFederation that has been instrumental in lobbying the government to provide a framework through which the rice15

sector can be developed and in October 2011, The Zambia National Rice Development Strategy was launchedand is being used to guide the sector.Despite these achievements, challenges in the sector still remain and these mainly deal with the quality of ricebeing produced and low productivity issues that continue to make the Zambian rice uncompetitive.Other challenges include:- increasing volumes of rice produced to meet local and regional demand- increasing business performance of many SMEs involved in the value chain- increasing investment in infrastructure and irrigation systems- increasing access by small holder producers to simple farm implements that reduces intensive labour usageThese challenges offer opportunities for up-scaling support to the rice value chain in Zambia.4. ImpactThere are several things that have changed in the rice sector in Zambia that we would attribute to SNV support.Production volumes of paddy rice have improved from the initial 18,000MT to 54, 000MT in 2010. However thisis still below the consumption rate estimated to be at 63, 000MT. The national average productivity hasincreased from 0.9MT to 1.2MT per hectare in 2010, although the majority of farmers still get as low as0.7MT/ha. In the areas where SNV works, farmers have been able to achieve as high as 4.5MT/ha, however suchfarmers are few.The productivity changes are largely as a result of changes in agronomical practices and yet many farmers stillresist the change due to increased demand on their labour. In terms of markets, most market systems in theseven district SNV works have been re-built with many farmers bulking and negotiating the prices at which theysell their produce. At the start of our support, many smallholder producers were being taken advantage of bytraders and sold their paddy at as low a price as ZMK20, 000 which is equivalent to €3.08 per 50Kg bag ofpaddy. This has since changed with strengthening of the producers. The prices they now sale their paddy rangesbetween ZMK60, 000 to 75, 000 which is equivalent to €9.23 to €11.54 per 50kg bag of paddy.The ability to bulk rice at smallholder level have reduced the cost of accessing the rice on the part of theprocessors thus increasing volumes of rice being processed and entering high end markets. In 2007 when SNVstarted supporting the rice value chain, there was no Zambian packaged rice on the Zambian retail shelves Todate, a number of local processing companies such as DMDC, Frontier milling, New Dawn milling, Yambeeji Riceproducts limited are now supplying such chain stores as Spar, Pick n’ Pay, Melissa and others with local packedrice which has a premium price because of its aroma. This has led to big milling companies like National Milling totake notice and also start contracting and buying rice from local smallholder producers thus creating the muchneeded competition in the sector.SNV have also mobilized more than US$500, 000 for various value chain actors in the form of trade finance andfunds to support organizational development and strengthening. This has helped to increase the capacity of theseactors to increase their performance. For smallholder producers, SNV has supported the development of localsavings and credit schemes that have so far been able to mobilize a total of US$12, 000 which they areproviding to their 254 members, 112 of whom are women.SNV´s work has also influenced the government to develop a national Rice development strategy that establishesthe Zambia Consortium for Accelerated Rice Development (ZCARD) which is the coordinating body dealing withrice development in Zambia. When it is all said and done, SNV capacity development services to the rice valuechain has contributed quite significantly to the rice stakeholders’ collective capabilities of committing andengaging, carrying out technical, service delivery and logistical tasks, and managing diversity and coherence,among others.16

5. What are the key implications for scaling inclusive business?In working in the rice sector in Zambia, we learn a number of things:- Targeting the middle of the chain – the processors – is a powerful means of developing a value chain and thusof promoting food security. Enhancing the capacity of the processors to penetrate lucrative markets resultsin a pull effect on the up-stream end of the chain – the producers, resulting in increased production andincomes, and thus increased food security for the producers.- That supporting a sector is best done with a number of other actors getting involved, thus results achieved isattributable to all others playing a role in the development. Indeed we learnt that if you want to go fast inachieving development results go alone but if you want to go far then go with others.- That inclusive business works best when there is a clear win-win situation between the processors and theproducers and that any signs of one party getting a raw deal results in side selling.- Getting the support of government is key in getting all stakeholders coordinated and their efforts channelledto the same cause although each playing a different role.17

4. Rice millers drive productivity and capacity in smallholder ricefarming in Lao PDRAuthor: Ranjan ShresthaOrganisation: SNV Lao PDRThis case is one of a series specifically prepared by SNV and local partners for the “Seas of Change” event,taking place in The Hague, 11-13 April 2012. The cases cover a range of commodities and approaches in valuechain development across Africa, Asia and Latin America. They usually include several of the following elements:strengthening of producer organisations, productivity improvement and value addition, business developmentservices, inclusive business ventures, contract farming, marketing arrangements and improved chain financing.The work has been done with local entrepreneurs, NGOs and government bodies. Among the internationalcollaborative partners are: IFAD, FAO, EU, USAID, DANIDA, Helvetas and IDB. The business partner involved in thecase is Institutional market/exporters .Key featuresThe Enhancing Milled Rice Production in Lao PDR (EMRIP) Project has been able to develop fair trading relationsbetween 21,361 small holder rice producers and 21 selected rice mills within 23 months of the project’sduration. The project proved a unique success due to the stimulation of co-operation between millers andfarmers; millers supported farmers with inputs, extension services and better prices. In return for investing theirtime and money in small farmers, millers received project support, funded by SNV, Helvetas and an EU grant, toimprove milling facilities and equipment. At the base of the success of the project lies a rigorous selectionprocess which chose the most promising millers for the project. Farmer crop yields increased by 30%; incomefrom rice increased by around 60% and millers saw improved profitability in addition to a 10 percent increase inthroughputs and supply of high quality, single variety rice. Elements of the programme are now spreading(including spontaneously), especially through “miller groups”.1. Context and backgroundImproved rice production is key to development and food security in the Lao PDR. While paddy rice productionhas increased in recent years, less attention has been paid to improving productivity both on-farm and in postharvesthandling, including milling. One kilo of paddy rice milled in the Lao PDR used to produce significantly lessedible rice than in neighbouring countries. Poor quality meant lower prices and reduced profits for both millersand farmers. Production of better quality paddy rice and improved milling practices can increase the supply ofrice in Lao PDR, open new distribution channels and improve the profits and livelihoods of both millers andsmallholder farmers.In 2009, due to high market potential and the possibility to increase the incomes of a large number of smallholder farmers, SNV Laos piloted a small programme to promote rice production for industrial processing inconjunction with three small scale rice millers in one of the country’s provinces. This specific variety of nonglutinousrice had good yields and a higher market price at that time compared to regular glutinous rice. Totaldemand among rice noodle factories and beer factories for non-glutinous rice was estimated at 20,000 metrictonnes (mt) per year from in Laos, which was mainly met by imports from neighbouring countries. If a substitutefor this imported product could be provided, more than 6,000 small holder farmers with average land holdings ofone hectare per family could benefit. Working in this value chain for about nine months, we were able to connectthree rice mills with about 1,000 small holder farming households with average land holding size of one hectareper family. The income of both the small holder farmers and the rice millers increased as a result of theprogramme. With the provision of good quality inputs (seeds and fertiliser), extension services and cash advancesfrom the millers, the farmers were able to significantly increase rice yields and incomes from rice production. Therice miller group formed during this period was able to jointly access institutional markets such as Beer Lao, theWorld Food Programme and large rice exporters.The European Union call for food facility in rapid response to soaring food prices in developing countriesprogramme in 2009 was a good opportunity to up-scale the rice programme. SNV being mainly an advisoryorganisation sought for a likeminded partner organisation with a similar experience in rice sector as well asproject management experience to apply for this funding. SNV decided to partner with Helvetas due to their past18

experience in working with private rice mills in promoting organic rice, and a good track record in projectmanagement. SNV in partnership with Helvetas successfully received funding from this facility. Helvetas is a leadapplicant managing the project and SNV provided joint technical assistance with Helvetas in implementing theprogramme. The Department of Agriculture is the key local implementing partner of the programme. The totalbudget of the project for 23 months duration (January 2010 to November 2011) was €2.3 million; 90 per cent ofwhich was funded by the EU Food Facility, with Helvetas and SNV providing the remaining 10 per cent. The riceprogramme has been expanded to six provinces with some new elements, most notably, a value chain coinvestmentfund for milling facility improvement and public policy dialogues to address constraints in the ricesector.2. Underlying business modelThe project activities mainly focused on improving the capacity of millers as an entry point in establishing andstrengthening fair trading linkages with the small holder farmers and improving post-harvest handling andprocessing. In addition, the project also facilitated the creation of an enabling policy environment through regularpublic-private dialogues. The following is a summary of the business model.Socially committed and capable millers were selected as engines of the project through a rigorous selectionprocess. Criteria used to aid the selection of millers were, among others, a substantial capacity to supportsmallholders, and a reputation as trusted and honest players.The selection of socially committed millers and the creation of competition between them were crucial to theproject’s successful implementation. Millers had to compete with each other in order to be selected by theprogramme, which stimulated millers to ‘put their best foot forward’, thereby improving the quality of theprogramme. One miller was underperforming according to the programme criteria, and was given an initialwarning about his performance. When his performance failed to improve, he was suspended from theprogramme. This miller was then replaced by two other rice millers. These new millers were selected toparticipate in the programme through an abbreviated selection process, while local government and project staffinvested their time to train them and get them on track.The project helped the selected millers to develop an Inclusive Business Plan, which described the necessarysteps to increase productivity, and supported farmers in producing high-quality paddy rice. Prior to the projectintervention, the farmers did not have proper access to quality seed and needed to negotiate prices for theirharvest individually with different traders due to the absence of farmer groups. In addition, extension serviceswere poor; these should have been provided by government extension officers, but they were underpaid and didnot have the means, including such basic shortages as petrol for their motorbikes, to visit the farmers. This iswhy the millers implemented the formation of farmer groups together with SNV.Millers received training and advice on forming and strengthening farmer groups, input provision, and businessmanagement skills. They also improved extension services by collaborating with the government extensionofficers, and paying officers a better day rate than the government did. This enabled them to expand theirtraditional trading role to incorporate the provision of seed, fertiliser and extension services based on productionagreements with their farmer groups. It has resulted in a steady supply of high-quality paddy rice, along withhigher revenues for farmers and millers.A co-investment fund helped millers to upgrade their equipment and improve rice production and post-harvesthandling, which contributed to increased recovery of milled rice. Regular consultation between millers andfarmers and flexible needs-based interventions enabled trust and fair trading relations. A small, but significant,intervention was millers helping to purchase communal weighing scales and facilitate their certification bygovernment authorities to foster transparency and avoid cheating by either traders or farmers.Each miller now has the capacity to support 1,000 smallholder farming households and to stimulate selforganisation.Farmer groups are better able to make informed decisions, share learning, and negotiate.The project works closely with provincial agriculture and forestry offices, the departments of industry andcommerce, and the private sector in improving policy and regulatory conditions in the rice sector. Governmentagencies have increasingly realised the value of alignment with the private sector in policy consultation. InBolikhamxay Province, for example, the government exempted fertilisers from import taxes as an additionalincentive for millers to work with smallholder farmers. The provincial authority has supported millers by officially19

approving miller groups in line with government policy. The Ministry of Agriculture and Forestry is receivingsupport from the World Bank and FAO to develop a national rice strategy utilising the successful experiencesderived from EMRIP.3. Evolution of the initiativeEMRIP recognised that the private sector and the public sector both have important roles to play in developingthe country’s rice sector. The major constraints in the rice sector in Laos were the use of low quality andinadequate inputs by the farmers; poor farming practices and poor post-harvest handling by both farmers andmillers. The local rice mills are the ones with highest leverage in the rice value chain. Their position in the valuechain is such that they are best in unblocking these key constraints to increase productivity. The project hasworked with 21 progressive and socially committed millers who have strong and mutually respectful relationshipswith small-holder rice farmers. Each participating miller provides quality inputs, credit and training toapproximately 1,000 producers, allowing them to increase productivity, unblocking the key constraints to riceproduction in Lao PDR. In return for investing their time and money in small farmers, millers received projectsupport to improve milling facilities and equipment. Improved milling efficiency and higher quality rice furtherincreased the amount of rice available in Laos while improving profitability for farmers and millers and greaterstability of supply of good quality rice for consumers.The rice mills participating in the project have taken a lead role in forming miller groups in their respectivedistricts and provinces following the Khammouane Development Rice Miller Group as a role model. There hasbeen almost a proliferation of miller groups, with a total of 14 miller groups with 261 mill members nowoperating across five of six target provinces. Most convincing are the five miller groups in KhammouaneProvince. All 85 members of these miller groups have already started applying the EMRIP approach in creatingand working with farmer networks. The number of farmers these millers are linked with and their trade volume isnot included in this case study.Government also has played an important role in facilitating and supporting the development of the rice sector.The role of government is mainly creating an enabling environment for the market actors in the rice value chain.Responsibility for rice production and milling is split between different government departments, and there is noforum to bring all stakeholders together to discuss policy issues facing the rice industry. The main governmentpartners at province level are the Department of Agriculture and Forestry and the Department of Industry andCommerce.A “bottom-up” approach to policy formulation has been implemented, starting with multi-stakeholder meetings inthe target provinces and which has then been followed by national level meetings.4. ImpactThe overall goal of the project was to rapidly increase the quantity and stability of supplies of good quality milledrice for domestic consumption and trade. The main outcome set by the project was to facilitate the production of20,000 metric tonnes of good quality milled rice through 20 rice mills via fair trading relations with 20,000farming households within 23 months of the project’s duration. We outline below whether these outcomes werereached, as well as some other outcomes and impacts of the project.The project was able during its entire 23 month duration to connect 21,361 smallholder rice producers with the21 rice mills. The producer network of each miller typically comprises 10 to 15 villages with about 1,000inhabitants.Improved Grain qualityMost of these farmers previously used a variety of seeds, which in some cases were over a decade old. Supplyof high yielding varieties of fresh seed by the millers to farmers resulted in (a) production and supply of singlevariety paddy rice being returned to the mills; and (b) intact, soft and aromatic grain. The final project evaluationcarried out by an independent external evaluator mentioned the following impact from increased grain quality:Mills shifted from a 100% mixed/general grade mix to an increased proportion of single variety grade grain,from at least 100% mixed variety to 20 to 70% single variety.Mills are obtaining 9 to 14% gains in prices for quality milled riceFarmers are receiving a 10% gain in terms of premium prices with those mills accessing quality markets20

One of the 21 mills has started marketing Grade A quality rice in branded bags and another mill is consideringsomething similar. This should place these millers in a more confident marketing position. They have becomeprice makers rather than price takers, i.e. the miller guarantees the quality of the rice through branding, meaningthe miller can set their own price in terms of a competitive market. They no longer have to follow general marketprices for non-branded loose rice.Farmer crop yields and incomesThe crop yields of small holder farmers have significantly increased based on anecdotal evidence on typical yieldsprior to receiving support from mills in recent seasons. The increases have varied from 20% to 100% but weretypically between 30-50% as per the final project evaluation report. This increased income is due to both higherprices and increased yields, amounting to €224 gain over the €367 normally obtained, equivalent to a 60%increase in income. 6The main factors delivering increased crop yields were; fresh high yield variety seed; improved practices andmodest increases in the application of fertiliser. There were three elements that contributed to this success;contracts with millers provided a more reliable market for farmers, inputs were made available via the miller andtechnical advice was co-ordinated and provided through the millers in an effective manner.Mill throughput and efficiencyMill throughput for all 21 mills increased from 12,400 mt of paddy rice in 2009 to a projected 36,523 mt ofpaddy rice in 2011. Throughput doubled in the first year, and for 2011 is projected to triple 2009’s figures.These increases have been made possible through improved mill equipment, with a measured capacityfrom of 3.8 mt/day increased to 8.7 mt/day, an increase of over 200%. In addition, rate of milled rice recoveryincreased from the measured baseline of 57.7% to 63%, representing a 9% gain. The increase in milled ricerecovery rates directly contributes in increased revenue and profits for the millers.Improved policy environmentThe project also contributed to an improved framework for rice production and trade. Key results from theorganisation of series of public-private policy dialogues at a provincial and national level were; the opening of riceexports to neighbouring countries, which had been closed by provincial governments and a substantial reductionon import taxes on agricultural inputs. In addition, the national policy dialogue also contributed in the formation ofa team at the Department of Agriculture to work on drafting a national rice strategy for the country.5. What are the key implications for scaling inclusive business?The following important lessons were learned through the implementation of the project: The idea to use millers to organise producers effectively and efficiently is basically sound and seems to beable to deliver results better than traditional methods in the context of the Lao lowland paddy rice sector.Rice millers are a very powerful tool to link producer groups to services, inputs and new ideas. Openness and transparency during the miller selection process was vital to the success of the project. Millsthat were selected using a competitive process performed substantially better than mills selected due torecommendations from local informants such as district government officials. This finding has a number ofimplications for the future planning and implementation of agricultural value chain projects in the Lao PDR. Inparticular it would be good to pre-select a few extra millers and then remove the worst performing millersbefore providing full investment support. Working through the private sector through the application of smart subsidies gives the project much morefreedom to reward good performance and punish poor performance than is the case in traditional projectsproviding direct support to farmers through government department or NGOs. This dramatically reduced thepotential for conflict over resource allocation and has allowed for fast and effective decision making. Investment by EMRIP has had a major stimulating effect on private investment by millers participating in theproject. Many millers decided to conduct additional equipment and upgrades including the purchase of newmilling machines and the construction of new mill buildings in many areas. At a government level, there was a strong acknowledgement of the importance of agricultural developmentat all levels. Rice production was seen as a key factor in addressing domestic food security. There was thusstrong momentum to work together with SNV-Helvetas in addressing issues in the rice value chain and to6This calculation is based on rough estimation by taking a lower-end increase of a farmer in Huaphou Village with a yield that increasedfrom 2,000 kg (50 bags) to 2,800 kg (70 bags). The calculation does not include other fixed costs regarding land preparation, labouretc. and therefore is not a full indication of income from rice production. See annex 01 for calculation.21

commercialise rice production through a policy dialogue. This led for instance to the streamlining of tradeprocedures, reduction of import taxes on agricultural inputs, and the retraction of trade bans.Overall the rice value chain is far more integrated, the actors collaborate more closely and are better able to planand make informed decisions. Farmers have greater confidence in marketing their crop and are more heavilycommitted to it as a commercial crop. The millers have become proactive in seeking new markets. Through itssupport for policy dialogue, EMRIP has seen specific outcomes with a streamlining in trade procedures; reductionin import taxes on agricultural inputs; and retraction of trade bans. This process has opened the door to theinclusion of millers in constructive dialogue with provincial authorities which should continue to inform decisions atthis level.These results are exceptional and of great significance for development strategies related to rice productionnationally. The EMRIP project is essentially an Inclusive Business model and succeeded in gaining substantial yieldincreases both at a farm and macro level.A mechanism that could scale-out this Inclusive Business model for rice production is the establishment andstrengthening of miller groups. This provides the opportunity for core members experienced in the mechanism tointroduce support to farmers as ‘standard practice’ to new mills joining a group. The replication of the EMRIPapproach by the millers not participating in the project has already started in some of the target provincesthrough miller groups. Several actors are interested in scaling up the programme further; for instance SNVreceives funding from the Rabobank Foundation to strengthen the farmer groups and in partnership with Helvetasother options to upscale the programme are being explored.Annex 01Gross Income per hectare before and after miller supportItems Unit Quantity Rate in Total amount in EurosEurosGross income before supportTotal value of harvest – mixed grad Kg 2000 0.2 400Variable costsLocal seed Kg 60 0.2 12Fertiliser Bag 1 21 21Total variable cost 33Gross margin before support 367Gross income after supportTotal value of harvest – single variety with Kg 2800 0.24 672higher yield with premium priceVariable costsFresh HYV seed Kg 60 0.48 29Fertiliser Bag 2 21 42Total variable costs 81Gross margin after support 59122

5. Promotion of the rice value chain in Benin: Cooperation betweenBeninese farmers’ organisations, the Belgian retailer Colruyt and theNGOAuthors and organisation: VECO/VredeseilandenThis case is one of a series specifically prepared by VECO/Vredeseilanden and local partners for the “Seas ofChange” event. The business partner involved in the case is Colruyt (retailer).Why is the case an interesting example?Investment by VECO has led to increased self-sufficiency for Beninese farmers through scaling production andstimulating improved quality of rice. The success of this project lies, amongst other reasons, in the cooperationwith local farmer groups and a Belgian supermarket.1. Context and backgroundVECO is a leading sustainable agricultural development organisation with a long history of working in the field withfarmers to improve livelihoods. Over the last five years we have come to recognize the importance of investing infarmers in ways that directly support their connection to markets. We have found that partnering with the privatesector is an excellent way to optimize our impact and increase the likely sustainability of farmers’ gains.The objective of this programme is to reinforce the capacities of rice farmers and their organisations so that theycan produce quality rice that is able to compete with imported Asian rice that looks attractive and appeals inBenin. The intention is also to increase farmers’ income through improved access to modern, dynamic markets.Stimulating local production and the introduction of an effective local value chain helps to anticipate future foodcrises and contribute to poverty reduction.The VECO programme is about improving production methods, improving access to agricultural inputs andinvesting in processing, quality enhancement and marketing. The programme started in 2002 in the centraldépartement of Collines, in Benin. Ninety per cent of the population in this area is active in agriculture on smallscalefamily farms, with plots that are between 0.5 ha and 1.5 ha per family. These families earn an average ofless than one dollar a day. In this area, rice farmers have traditionally delivered their produce individually to localtraders. Wholesale traders from the markets of Togo travelled from village to village to collect the stocks ofpaddy rice and dictated the selling price. Farmers had little negotiating power. There was little market incentivefor investment in improving the quality of the crop.In the first 2 years of the project VECO focused on improving product quality and establishing an internal qualitycontrol system. Challenges in this period led VECO to requesting funding and technical support from the Belgiansupermarket, Colruyt. In 2003, the first steps were taken to improve the quality of the rice with farmers’ groupsin the Municipality of Savalou. They began by doing visual quality checks and establishing a simple traceabilitysystem by writing the producer’s name on each bag of rice. The Tchetti farmers’ groups’ quality improvement andmarketing experiments with rice had an initially difficult start-up. This improved when VECO and Colruyt investedmore funding to improve the implementation of the action plan with the Tchetti farmers’ group.In 2004-2005, the programme accelerated, and expanded into three other municipalities. Cooperation was alsoinitiated between the various farmers’ groups within the municipalities. Between 2005 and 2009, the number ofrice farmers involved in the program grew from 5,000 rice farmers to 8,500. And the total hectares owned grewfrom 832 ha of rice land in 2005 to 9,500 ha. In 2009. The rice programme includes improving productiontechniques, improving the quality of the rice and the installation of two local rice-hulling facilities. Rice farmersimprove their income by storing bags of rice from harvest time in December until the following April, when theprice is substantially higher.23

2. Underlying business modelAs a result of the collapse of cotton sales, farmers in the Collines département tried to increase their income byselling rice to their neighbouring countries in Niger and Nigeria. The border town of Malanville, 600 km away, is atransit market for sales to these countries. Local farmers’ groups organize the collection of the bags of riceamong their members and transport and sales in Malanville. The added value that farmers get there isinsignificant compared with local market prices, particularly once the transport and organisational costs havebeen taken into account. Sales were organized in Malanville for the years 2004 and 2005, but were no longersuccessful from 2006 onwards because the rice from the previous year remained unsold. To gain more insightinto the quality references in the Nigerian region, farmers conducted surveys with salesmen, with larger retailersand customers at the market. They discovered that their rice variety, Beris, did not meet the requirements forpreparing the traditional rice paste. Following this visit, the farmers’ groups started thinking more systematicallyabout consumer preference in the region and the subsequent impact on the choice of rice variety andprocessing.Hulling, the main rice processing operation in the area, is performed both manually and mechanically. For manualhulling, producers use a mortar and pestle. This activity is carried out by women, primarily on the rice destinedfor their own consumption. But following the installation of several hulling units in, mechanical hulling (afterparboiling) has become well established in the producers’ habits and has taken precedence over the manualprocess. To reduce the rate of breakage, processors parboil the rice before hulling. Some women havespecialized in this activity to make rice available at the local markets.Arrangements were made to ensure that all rice farmers would be able to hull their rice using these machines.Lessons learnt from using the two machines were that rice hulling should take the humidity of the rice grains intoaccount, and the timing of the harvest was therefore very important. Rice that is either too dry or too moistproduces excessive percentages of broken grains. Also, the high percentage of broken rice is due tosimultaneous hulling of different rice varieties with different grain size. And the sales price for bags of rice withhomogenous grain size is higher.In 2007, a new rice hulling company was started up in the municipality of Savalou by ESOP (Enterprise Serviceaux Organisations des Producteurs). ESOP is a commercial business that processes and sells hulled rice. ESOPensures the transport of the paddy stocks bought in each village to their plant. The producers are onlyresponsible for the transport of paddy from field to village. It supports producers ensuring a supply of rawmaterials at competitive prices, training them in rice-production techniques and facilitating access to seeds andfertilizers. In order to ensure their supply of paddy rice from the producers, ESOP introduced contractualcommitments in its partnership with producers. This contract covers the quantity of paddy to be delivered byeach producer, the sales’ price, the supply of inputs (seed and fertilizer) and production standards. The generalapproach of the ESOP programme is to modernise family farming operations by securing market access,targeting local urban markets, and establishing lasting cooperation between producers’ organisations and servicecompanies.The positive impacts of the programme for farmers up to 2008 are significant: better prices to farmers andbetter access to inputs for farmers, lower percentages of broken rice and fewer impurities. But more needs to bedone to compete with imported Asian rice. The percentage of broken rice of the local ESOP milling installations isstill relatively high, and volumes that ESOP can process are limited. This is why the Beninese governmentinvested in two large, modern rice processing plants that were built in 2010, of which one in the Collinesdépartement. This provides important new perspectives for meeting the quality requirements of modern markets.3. Evolution of the initiativeIn order to meet European quality requirements, a study was organized to clarify what needed to be improved,and how that could be achieved. Also, the feasibility of a Fair Trade label was examined. Another study examinedthe quality preferences of consumers in Benin and Niger. On the basis of the results of these studies, twotechnical field trials were set up. These tests provided greater clarity on the timing of planting and harvesting inorder to achieve the desired moisture content. Techniques were also developed for soil erosion control, andappropriate amounts of fertilizer and pesticides established. From the results of the field trials, productionstandards were established to meet all quality criteria.24

According to VECO, the contents of the Fair Trade label offer the most far-reaching guarantees for the farmers’organisations, i.e. guarantees of a minimum price for farmers and strengthening of organizational capacities ofthe farmers’ organisations. In 2008, representatives of the Tchetti and Kpataba groups participated in anexchange programme with an organization of Pineapple Producers in Benin that had been coached by VECO, andhad already achieved a Fair Trade label. After their visit, the participants, together with a VECO employee listed arange of issues and action points. This formed the basis of a training programme that was designed to raiseawareness on the opportunities provided by the Fair Trade label, to learn how the label can be achieved, and toraise the entrepreneurial capacity of farmers’ organisations. VECO made contact with the international Fair TradeLabelling Organization (FLO) so that they could establish a minimum price for rice. Farmers’ organisations couldonly apply for the Fair Trade label once this minimum price had been set.The food crisis of 2008 briefly put the project on hold, as the government of Benin limited the export of foodcrops. Colruyt and VECO were concerned that the symbolic nature of the small volume of rice to be exportedmight be misunderstood as taking food from hungry mouths. In 2009, a comprehensive system for internalcontrol and traceability was set up with the two farmers’ organisations to follow up on FLO requirements. VECOalso organized training for the other farmers’ groups so that the internal control system could be more widelyimplemented.At the end of the 2009 production campaign, a collection system for paddy rice was introduced. At the beginningof the season, the quantities of paddy rice required were determined for each production group and for everyproducer. Meetings were held at each FO to discuss this issue. Between 2008 and 2010, VECO made severalsmall investments in both farmers’ organisations that also contributed to achieving the required quality for exportand for FLO (e.g. a storage room, small steam engines, a moisture gauge, scales, palettes).In June 2010, hulling of the rice for export to Belgium began. In August, a long list of official formalities for riceexport was declared in order, and 24 tonnes of rice shipped to Belgium. Upon arrival, the Fair Trade label hadstill not been granted. There was an obvious need for commercial knowledge to troubleshoot when the inevitabledifferent types of problems occurred. The slow process of certification cannot always match entrepreneurialmarket development. This is a risk to growers and must be carefully mitigated.4. ImpactThe average productivity for the farmers in this region involved in the VECO programme has risen steeply sincethe start of the programme: from 2.0 tonnes/ha to 3.3 tonnes/ha. With the current performance and cost ofhulling, little or no additional income will be obtained if the processed rice is sold on the local market. Additionalincome should either come from increased processing efficiency, reducing the percentage of broken rice in thelong grain rice or from obtaining higher prices for processed rice. The revenue per hectare for Fair Trade rice istheoretically 147% higher than the same rice, sold on the local market. This percentage is theoretical becauseonly 24 tons was sold at that price, and therefore relatively few farmers have benefited, and on a relatively smallquantity. These figures do prove however that it is worthwhile continuing on the track of negotiating a higher pricefor a better quality productIn relation to technical innovation, producers have mastered the requirements of Fair Trade certification andinternational quality and food safety standards. The producers use good practices for rice growing. These includetraceability of the rice produced is guaranteed by the producers and the internal control system, the exclusiveuse of certified seeds to grow rice for Fair Trade, site selection for production (The Fair Trade experiencerequires the producers to collectively choose the sites according to established criteria. The individual plots aregrouped on shared sites specifically for the production of rice grown for Fair Trade.), the use of chemicalfertilizers by farmers has been limited, and the creation of added value in paddy rice by including the hulling,grading and packaging of the long grain rice prior to export.5. What are the key implications for scaling inclusive business?Work in Benin in relation to this project is not finished. There are still numerous areas in which progress can bemade to benefit the up scaling of rice production. The main issues are choices that need to be made tostrengthen the production process, marketing needs to improve in order to sell a larger portion of produce athigher prices by raising the quality of rice. However, up scaling has already resulted in increased food securitywithin the Collines district.25

Self-sufficiency in rice is now a reality at the level of the local population of the Collines department. Good qualityrice is available at local markets throughout the year. Today, all producers’ households have access to qualityrice for their own consumption for several months following the harvest. Rice has become a daily dish for theserural populations. It is present at local markets all year round, and is gradually replacing imported rice.The experience of exporting Fair Trade rice has also demonstrated that small-scale producers are able to meetthe stringent requirements of a very demanding market. The fact that the farmers’ organisations of Kpataba andTchetti obtained the FLO certification illustrates the capacity of family farmers to develop transparent, efficientorganisations and meet consumer demands. It is now urgent to expand the size of the market, especially atnational level, to reduce the food dependency of Benin, and to increase producers’ other industry actors’incomes. A rice import duty policy is needed to promote local production. Indeed, competition from imported ricedisrupts the markets to the detriment of local rice. It is urgent to increase import duties in order to secure amarket share for the local production.26

6. Oil seeds in Uganda: Combining business-led development andmulti-stakeholder dynamics in boosting a diverse national sub-sectorAuthors and organisation:Bernard Conilh Beyssac and Edward Kamoga – SNV UgandaDavid Luseesa – Mukwano IndustriesThis case is one of a series specifically prepared by SNV and local partners for the “Seas of Change” event,taking place in The Hague, 11-13 April 2012. The cases cover a range of commodities and approaches in valuechain development across Africa, Asia and Latin America. They usually include several of the following elements:strengthening of producer organisations, productivity improvement and value addition, business developmentservices, inclusive business ventures, contract farming, marketing arrangements and improved chain financing.The work has been done with local entrepreneurs, NGOs and government bodies. Among the internationalcollaborative partners are: IFAD, FAO, EU, USAID, DANIDA, Helvetas and IDB. The business partner involved in thecase is Mukwano Industries.Key featuresThe case sketches a rapid development in Uganda’s oil seed sector; with increases in production of over 400%from 2005 to 2009. It focuses on a combination of two interventions; a) a collaboration between the leadingUganda processing firm Mukwano and SNV, to develop a contract farming scheme for more than 50,000farmers; and b) the facilitation of multi-stakeholder platforms at both national and regional levels to facilitate jointagenda setting. The emerging collaboration between various actors led to improvements in general farmingpractices, business relations and input provision. Jointly they also influenced government policies and financingstreams. The combination of these two interventions was particularly powerful and eventually helped to improvethe incomes of more than 100,000 farmers. A strong focus was put on improving farmer capacity to deal withmarkets and vibrancy of the farmers-market interface. It led to major productivity increases and an increase inprice of oilseeds of 350% with a corresponding rise in farmers’ incomes, and significant substitution of nationalimports.1. Context and backgroundTowards the end of 2008, SNV Uganda and the Mukwano Group of companies signed a partnership agreement toimplement an Inclusive Business model aimed at expanding capacity among rural farmers in order for them to beable to participate in the oil seed value chain. The oil seed industry ranked high on the government agenda due toits poverty reduction potential. In particular, sunflower, the main oil seed produced in north-eastern Uganda (apost-conflict zone), had the potential to transform the lives of some 12 million people 7 . However, this richpotential was yet to be realised due to challenges including inadequate access to good quality seed, lack ofmarket information, poor input supply systems, weak producer groups, poor bulking and post-harvest handlingfacilities and technologies, and limited access to affordable finance. For farmers to participate in the sunflowervalue chain and realise their economic potential these constraints had to be addressed. This was the subject ofthe SNV-Mukwano partnership.This partnership came about through a scoping mission of the sub-sector in 2005, which was a turning point forthe oil seed value chain. The mission was supported by SNV, which triggered a series of multi-stakeholderactions. Key among these actions were the Weaving the Oilseed Web stakeholder conference (2006), wherevarious main actors in the value chain, such as Mukwano, appreciated the business case in the oil seed subsector;the launch of the Oil Seed Sub-Sector Platform (OSSUP, 2007), marking the start of multi-stakeholderactivity in the value chain, as well as the start-up of regional Multi-Stakeholder Platforms (2008). The RegionalMSPs negotiated with Mukwano to release hybrid seeds to small-scale farmers. This was also the point ofinteraction with SNV.Mukwano Industries (U) Limited is a privately owned enterprise registered in Uganda. Mukwano Industriescommenced operations in 1986 with a single laundry soap production line and has since expanded to becomethe pre-eminent supplier of edible vegetable oil in Uganda. Mukwano largely operates in mid-northern Uganda,7According to the Poverty Eradication Action Plan of the Uganda Government (1997).27

where peace was recently restored after some 20 years of insurgency. With the return of peace, Mukwano sawthe opportunity to promote business and investment by developing a local oilseed market, providing analternative to imported palm oil. Apart from Mukwano, 36 other smaller processing mills exist in NorthernUganda. Until 2010, when Mt. Meru millers entered the market, Mukwano enjoyed up to 70% of market share,while the small millers who operate under an umbrella organisation, NUOMA (Northern Uganda Oilseed MillersAssociation) accounted for the remaining 30%.In the past, Mukwano worked with the Ugandan Oilseed Producers and Processors Association (UOSPA) to secureuptake of Sunfola, an open-pollinated sunflower variety. Unfortunately, the oil content and farm yield of this varietywas relatively low and inhibited farmer production and expansion. Following the introduction of the new sunflowerhybrid PAN 7351 variety in 2003, which provided better yields than the open pollinated varieties, Mukwanopromoted sunflower production through field demonstrations, which stimulated demand for improved productiontechniques. The company increased its grain uptake from less than 5,000 metric tonnes (mt) in 2004 to over40,000 mt in 2008, with a value of US$11 million from an out-grower scheme involving about 45,000smallholder farmers.Currently, Mukwano supports an out-grower scheme of approximately 54,000 smallholder farmers in the districtsof Masindi, Oyam, Apac, Lira, Dokolo, Kaberamaido and Amolatar, making it a lead firm in the sunflower valuechain in Uganda. There is interest and potential among farmers in this region to increase sunflower production toexceed 100,000 mt per annum.2. Underlying business modelThis case focuses on the contract farming model which Mukwano developed, together with SNV, with out-growerschemes for 54,000 farmers, 35% of which are women. However, this contract farming model was facilitated bythe processes initiated by the Oil Seeds Sub-Sector Platform (OSSUP). The platform was initiated by UOSPA, as an experiment to promote more co-ordinatedaction in the oil seeds subsector. UOSPA, representing oil seed farmers and small oil processors, had alreadyworked with several donors in the past, but these actions had never proved to be sustainable. Without thisintervention, actions such as the contract farming model developed by Mukwano, would have been much moredifficult. This was because OSSUP is a multi-stakeholder platform in which the main actors in the oil seed sector,such as Mukwano and UOSPA, came to set a prioritised agenda, which was shared with other parties who had thecapacities and the resources to facilitate change. It was possible to set this prioritsed agenda due to certainconditions such as the growing trust between actors and a more nuanced view of each other roles. Thisappreciation of each other’s diversity accommodated a system in which deals could be made and solutions couldbe found. One of the actions facilitated by the platform was this setting-up of an out-grower scheme by Mukwano.Before 2009, Mukwano Industries dealt with about 40,000 individual farmers for its supply of hybrid sunflowerseeds. This model was costly; it did not guarantee supply of oil seeds for Mukwano and disadvantaged farmersby limiting their ability to participate in chain activities, sharing of margins, bargaining power and sustainability ofincomes. Mukwano developed a contract farming model with out-grower schemes for 54,000 farmers, 35% ofwhich were women. With support from SNV, the farmers were organised into 1,860 functional ProducerOrganisations (POs) of around 30 farmers each. SNV Uganda worked with Mukwano to enable producers withmarket access, since interacting with markets is an important aspect of the livelihood strategies of many ruralpoor producers. This was done by addressing three core issues:(i) Physical access to markets is most often limited by longdistances and lack of roads and/or impassable roads.Difficulties in accessing markets reduce opportunities forrural farmers, limiting their ability to buy improved inputs(seeds) and sell their farm output profitably. To resolve thissituation, Mukwano established input sales and procurementcentres at a parish level all over the out-grower scheme. Thisimproved the incentives for producers to engage in moreprofitable sunflower production.(ii) Market structure – characterised by extreme asymmetryof relations between the large numbers of rural poor farmersand the few market outlets. Such markets are usually28

uncompetitive, unpredictable and highly inequitable. To overcome this hurdle, Mukwano operated an out-growerscheme including functional contract farming. The establishment of this commercial relationship with a largeprivate sector agribusiness raised farmer confidence, enabling greater seed production.(iii) Producer skills, information and organisation – Farmers were offered extension services, inputs andproduction technologies. In addition, they were given information on what markets are, how they work and whyprices fluctuate. To allow critical numbers of farmers to interact with markets, SNV and Mukwano piloted theemergence of High Level Producer organisations (HLPOs), comprising 5 to 10 POs. The pilot demonstrates thatprovision of market and price information assists farmers to make production decisions. Such information givesfarmers a clear understanding of market processes and enables them to develop strategies on how to achievebetter margins from their agricultural output.In this way, the sub-sector was transformed from isolated individuals to a network of economically empoweredgroups and co-operatives. To form and strengthen the POs and improve the quality of service delivery to poorrural farmers, SNV Uganda and local capacity builders offered training to Mukwano agricultural extensionpersonnel and group executives on producer organisation and leadership development, enterprise management,group governance, and farming as a business. Thus, 1,861 POs were organised, of which 480 POs (30%) havesince had their executive management capacity enhanced. As a result of this support, PO members were able todemand and access improved production technologies and inputs such as hybrid PAN 7351 seed, Codal Goldpre-emergence herbicide and Diammoniam Phosphate and UREA fertiliser use through Technology ObservationPlots (TOPs).3. Evolution of the initiativeThis intervention increased company revenue through the reduced cost of extension services and increasedamounts of grain for processing, improving production and supply of crushing material from 5,000 mt to 40,000mt/year. However, the economic empowerment of farmers as legitimate, credible and viable economic partnersin the oilseed value chains was not complete and farmer groups were still dependent on Mukwano’s extensionservices, which represented a significant investment for the company.In 2010-11, the SNV/Mukwano objective of strengthening farmer groups evolved to organising farmers intoproduction and marketing co-operatives as a second level of farmer organisation. The aim was to furtherconsolidate the legitimacy, credibility and viability of farmer organisations as value chain partners. Through apilot, four farmer co-operatives – Angetta, Oculukori,Abukamora and Omarali – were formed representing a total ofsome 2,000 farmers. These farmer co-operativesdemonstrated a better response to market incentives than themuch smaller farmer groups did. They specifically guaranteedseed supply and extension services and they made bulking formarketing and strong collective bargaining easier.2010–2011: from donor dependent solutions toendogenous market-based systemic solutionsWhile partnering with Mukwano Industries in the consolidationand aggregation of its supply chain, SNV was also very activein facilitating local and national multi-stakeholder dialogues toFigure 1: Producer organisation attending apromote co-ordination and co-operation among value chainactors and service providers. This was aimed at sustainingmeetingthese local-level business relationships, enhancing healthy business relationships and catalysing the growth of thesub-sector. 8 In addition, through OSSUP, increased interaction took place between several actors in the valuechain. These dynamics led to all kinds of initiatives within the value chain, from which farmers eventually profited:several input suppliers collaborated to make better seed varieties available to farmers; better harvest collectionpractices brought efficiency gains to both farmers and processors; a network of rural market information8For further reading see for instance ‘Working with Value Chains’ by Duncan Mwesige; Chapter 14 of ‘Capacity Development inPractice’ edited by Ubels, J., N. Acquaye-Baddoo and A. Fowler (2010); ‘Uganda – Using-multi-stakeholder processes for capacitydevelopment in an agricultural value chain’ in ‘Capacity result – case stories on Capacity development and sustainable results’ editedby Woodhatch, T. et al (2011).29

systems empowered farmers, while better price arrangements benefited both farmers and traders and moreeffective practices were extended.The potential of the vegetable oil seed sub-sector has been realised by the value chain actors themselves withlimited impulses and facilitation from others. These actors generated further interest in the sector’s developmentamong donors and other development organisations, researchers, public institutions, NGOs, and local andinternational financial institutions in the following their methodology.Donor contributions increased, OSSUP, the national multi-stakeholder platform, negotiated a guarantee schemefrom DANIDA for the Uganda National Agro Dealers Association to access imported hybrid seeds from MukwanoIndustries in order to distribute them to farmers. USAID and DANIDA support helped to set up practicaldemonstrations of how to improve agronomy practices. IFAD and the Ugandan government committedthemselves to supporting the production of local hybrid varieties.Banks created new financial products for small farmers. An agricultural loan guarantee scheme with StanbicCommercial Bank was negotiated for oil seed farmers to access loans for ploughing implements, with a 50%guarantee from donors, which benefited 50,000 producers. The Centenary Bank developed an Animal TractionLoan (leasing), secured by business contracts between farmers and processors, using farmer savings and creditfrom co-operative organisations.A number of actors joined together to successfully advocate for more conducive government policies andfinancing for the sub-sector. Government policies on liberalisation and privatisation were conducive to the sector’sdevelopment, creating an enabling environment for investment.Lastly, several contextual factors were conducive for the further development of the sub-sector: Restored peaceprovided political stability, which, in turn, contributed to the return of farming families. Production was alsoboosted by rising global food prices, high national population growth and ensuing demand for food, includingcooking oils. An expanding domestic market and the wider East African market have contributed to making thesector more dynamic.4. ImpactImproving poor farmer access to marketsIn the post-conflict areas of eastern, northern, and north-western Uganda, the sunflower industry was revived andannual production rose steadily from 70,000 mt in 2005 to over 300,000 mt in 2009. The price of oilseeds alsogrew from some USh 200/kg (€0.05) in 2007 to USh 700/kg (€0.18) in 2010, with a corresponding rise infarmer incomes. This increase in prices was partly due to an increase in global market prices; however theOSSUP platform also created more stability in prices through more co-ordination between members of theplatform. Poor households also benefited from more stable conditions for marketing their product. At least100,000 farmers now produce oilseed, benefiting more than 500,000 people. It is estimated that in the longterm, some 400,000 9 farmers and their families could benefit.SNV Uganda worked with Mukwano to enable producer market access by addressing physical access to markets,the structure of the markets, and producer skills. Interacting with markets is an important aspect of the livelihoodstrategies of many rural poor producers. This was seen as a critical element for producers to increase theirhousehold incomes while enhancing their food security.As a clear indication of empowerment, the more farmers learnt about governing themselves as a co-operative,the more they realised the gaps in their knowledge and practice, providing incentives for further improvements intheir farming and business practices. In addition, small producers enlarged their influence through theirrepresentation in Producers Organisations and in regional and national MSPs. This increased their engagement inmicro-macro linkages and allowed them to become more directly involved in broader VC management andgovernance.9These impact figures are deemed conservative by some of the researchers who looked into the processes and actions that evolvedfrom initiating the platform. The figures may actually be higher, but are very difficult to measure due to several reasons, which involvethe variety of oil seeds crops (not only sunflower but also sesame, soya, cotton etc) grown in different agro-ecological zones. Inaddition, these regions involve a variety of processing-market chains.30

The key growth in capacity has been the development of multi-stakeholder relations, which have beensubstantially improved through active dialogue, resulting in increased trust among the value chain actors. Anexternal evaluation, using the ‘five capabilities’ framework, showed that the farmer ‘capability to relate’ both withinthe value chain and with external actors has grown strongly (IOB evaluation, 2010)5. What are the key implications for scaling inclusive business?While it is important to facilitate farmers to respond to market opportunities, it is at the same time important thatthey are able to confront and are supported to overcome the challenges that hinder them from accessing thebenefits of these market opportunities. This is a prerequisite for the up-scaling of inclusive value chaindevelopment. Farmer ability to confront challenges must be improved not only in physical terms, but also inpsychological terms, through improvement of their confidence and ability to interact without fear or prejudice.Farmer organisations have been key in building farmer confidence, but it is only if they are governed well thatthey are able to be true representatives of farmer voices, and show clear economic benefits for members.Production and business services are critical starting points for farmers to negotiate the primary hurdle ofengaging in value chain development. Companies that are able to provide these services in flexible businessterms engage farmers into their supply chains. However, it is useful that such services are also available throughother market mechanisms. In the end this makes the companies more responsive to the needs of farmers, sinceit minimises monopolistic behaviour.Further support in sub-sector development and improvement of the business enabling environment is key tosustaining the gains made under such programmes and creates incentives for more firms to participate. Themore firms that participate, the greater the competition and the more options there are for farmers. This vibrancyin the value chain creates sustained confidence for farmers.Further support should be directed towards assisting farmers to understand how to gear their production todiverse potential markets, how to access these markets and gain a better understanding of how markets work.The link with private sector actors like Mukwano is an excellent opportunity for farmers to learn more aboutmarkets and market requirements. However, structured learning on market requirements has been madepossible through intermediary agencies like SNV and not through companies or market mechanisms, which see itas an extra cost. For up-scaling, an important point is to improve farmer knowledge of the market in a sustainableway.31

7. Agro-dealers in Zimbabwe: Scaling input provision as key forsuccessful small farmer engagementAuthor: Sithembile MaunzeOrganisation: SNV ZimbabweThis case is one of a series specifically prepared by SNV and local partners for the “Seas of Change” event,taking place in The Hague, 11-13 April 2012. The cases cover a range of commodities and approaches in valuechain development across Africa, Asia and Latin America. They usually include several of the following elements:strengthening of producer organisations, productivity improvement and value addition, business developmentservices, inclusive business ventures, contract farming, marketing arrangements and improved chain financing.The work has been done with local entrepreneurs, NGOs and government bodies. Among the internationalcollaborative partners are: IFAD, FAO, EU, USAID, DANIDA, Helvetas and IDB. The business partner involved in thecase is Rural Agro-dealers.Key featuresSNV coordinates The Rural Agro-dealers Restocking Programme (RARP) in Zimbabwe, a market-led approach torevitalizing agricultural production. The programme, now in its third phase, addresses systemic issues inagriculture with a focus on restocking of agro-dealers with agricultural inputs. In this way key needs and risks ofsmall holder farmers are addressed, allowing them to obtain sustainable returns to their agricultural enterprises.To achieve this, SNV partnered with wholesalers, agro-dealers, and development agencies DANIDA, FAO, andHELP (Germany) as well as local capacity builders to improve the performance of dealers and others.RARP contributed significantly to farmer access to agricultural inputs. Through a relatively simple and smallinvestment (a total amount of US$112,000) in assurance of financial risks, in total 659 agro-dealers were linkedto wholesalers to receive agricultural inputs. Some 500 agro-dealers were also trained in retail businessmanagement. The agro-dealers distributed inputs worth over 9 million USD through voucher and cash sales. Anestimated 113,800 farmers accessed inputs in this way. In the third phase a further link is made to outputmarketing (i.e. agricultural produce) as well, assuring markets for farmers who saw increased productivity due tothe programme.1. Context and backgroundZimbabwe’s agro-inputs supply chains collapsed during a decade long economic recession that started in 2000.The worst affected group were smallholder farmers 10 in rural areas who did not have access to the right agroinputslocally at competitive prices and at the right time. Government and development agencies sought to solvethe problem. However, their agro-inputs programmes were mainly donations which lacked sustainability.In 2007, the FAO invited SNV to develop innovative ways of re-establishing rural input value chains. FAO preferredSNV because of its market-based approach. SNV’s initiative was to revive rural agro-input shops (commonlyknown as agro-dealers) for the delivery of affordable agro-inputs to rural farmers. The Rural Agro-dealerRestocking Project (RARP) was first implemented in 2009 as a pilot project designed to test the appropriatenessof market-driven input distribution methods in an emerging economic environment. It was funded by Cordaid(insurance) and FAO (capacity building) and implemented by SNV Zimbabwe. It was hoped that the programmewould provide useful information for re-shaping rural inputs assistance for 2010/11.In the pilot project, rural agro-dealers played an important role in the chain by selling the inputs of their choice tosmallholder farmers and by buying their produce as agricultural commodity traders (output marketing). Theimportance of agro-dealers was recognised by other actors in the development community as well, and aidorganisations shifted to implement open voucher systems in order to provide farmer beneficiaries with the inputsof their choice. In the pilot, a total of 71 rural agro-dealer shops (selling seeds, fertilisers, chemicals, and farmingimplements) participated and 700 metric tonnes of seed and fertilisers respectively with a total value of overUS$545,000 were sold.10Smallholder farmers are living in rural areas, with landholding of between 0.5ha and 3ha on average and are mostly subsistenceoriented.32

2. Underlying business modelAt the onset of the RARP pilot, the following features of the main actors, agro-dealers, suppliers and farmerswere recognised:- Rural agro-dealers lack the financial capacity to stock their stores- Suppliers, firstly, would have low financial capacity to support agro-dealers; and secondly, would beadverse to agro-dealer financing in the absence of guarantees.- Farmers did not receive agricultural extension support at the store.RARP provided a business model which is based on the need to mitigate risks for wholesalers and other chainactors through developing various innovations that isolate and address specific risk categories. In this way, amechanism is provided through which key risks to small holder farmers are addressed, in order to allow them toobtain sustainable returns to their agricultural enterprises.The main strategies include assisting several actors. Wholesalers are assisted to develop viable business modelsand train their staff on dealing with small business actors. Agro-dealers received training and mentoring on properretail business management systems and on putting up an insurance arrangement that they did not know aboutyet 11 . The strategy is thus based on the provision of a package anchored in the private sector, involving riskmitigation (through insurance and training for all actors) and value chain financing.RARP - the pilot assisted in the development of rural retail networks for three wholesalers by paying insurancepremiums to cover agricultural inputs to be sold on a cash basis placed in stores. The total cost of insuring thethree companies, each with four policies (fire, fidelity, money and recall, goods in transit), for a total stock valueof US$545,000 was US$12,532 for a six month period, or 2.8% of the value of the inputs (this initial insurancewas paid for by Cordaid). This resulted in the restocking of 71 rural shops in three provinces by March 31, 2010.The relatively small investment of US$12,500 thus mobilised resources for nearly US$545,000 in the pilot. Theresult was a major success in terms of volumes of inputs sold and the zero default on the part of agro-dealers.3. Evolution of the initiativeIn the 2010/11 season, the pilot programme was scaled up to cover all eight rural provinces, with 708 shopsparticipating under a programme that came to be known as RARP II. RARP II was developed with further supportfrom donors such as DANIDA, FAO and a German NGO called HELP. In addition, other donors like Cordaid, theRoyal Netherlands Embassy (RNE), GRM International (GRM), and the development management agent for theUK’s Department for International Development (DfID) lent their support. At this stage, all these differentdevelopment organisations started talking of this market based input provision model as being more sustainablein the long run than the free input hand-outs promoted by donors and government departments. Together, theydecided to incorporate the lessons learnt during the piloting of RARP into a nationwide programme for the 2010-2011 agricultural season, later dubbed RARP II.RARP II started on October 1, 2010 with two main objectives. Firstly, enhancing access to agro-inputs by ruralfarmers through reviving the link between rural agro-dealers and wholesalers, and secondly by the establishmentof a revolving credit facility for the agricultural value chain players. RARP II aimed at achieving household foodsecurity and contributed to national food security. To achieve these objectives, the following partners supportedthe programme:DANIDA: DANIDA bought into the concept of RARP and decided to contribute to the up-scaling of theprogramme, thereby attaining national coverage. They provide a total budget of DKK 90 million, of which abudget of around DKK 6 million (US$1,100,000) was earmarked for capacity building for the first year,starting in October 2010. In addition, they provided DKK25 million (US$4,580,000) to start a revolving fund.The rest of the funds were to be provided in the second year, starting in October 2011, with 20% forcapacity building and the rest for the revolving fund.11Wholesalers are the ones who are insured so that they can place consignment stock with agrodealers who are considered to be highrisk business partners. To avoid the risk of moral hazard, agrodealers were not told about the existence of the insurance.33

FAO: FAO provided the initial US$50,000 and invited SNV to develop innovative ways of re-establishing ruralinput value chains. They went on to support the up-scaling through providing US$75,000 for the first phaseof agro-dealer business training.HELP (Germany): A partner providing vouchers for the most vulnerable households through selectedwholesalers participating in RARP II and the agro-dealers. In addition, HELP provided the insurance for theprogramme of around US$100,000.SNV: SNV led the implementation of the programme and the co-ordination between various partners.Already at the beginning of the pilot programme, SNV facilitated dialogue with wholesalers and manufacturers inidentifying the challenges and perceived opportunities if they were to supply rural agro-dealers with storagestock. Various risks were identified, notably fire, fidelity, money and recall. Corresponding risk mitigationstrategies were explored with various wholesalers and insurers. SNV consolidated the views and developedgeneric concepts for both insurance and wholesaling. Partners included: Ten agro-input wholesalers 12 operated agro-dealer networks with 708 registered and insured agrodealersand two insurance companies provided the insurance. DANIDA is the main donor partnerproviding an initial contribution of US$1.2 million for capacity building for a three year period 13 . Capacitybuilding of wholesalers by SNV starts with helping each wholesaler develop a profitable agro-dealermodel through developing proposals. This capacity building extends to reviewing and installing moreviable systems. 14 Agro-dealers also receive technical training to equip them with the extension information required toproperly store agro-inputs and advise farmers on the correct use of agro-inputs. Farmers receive basic business management training covering issues such as contract management,group formation, leadership selection, enterprise budgeting etc. US$4.2 million was mobilised to set up a revolving fund targeting input and output value chains in ruralagriculture. SNV has since established the Zimbabwe Agricultural Development Trust (ZADT) to managethe revolving fund on a commercial basis, in partnership with commercial banks The objective of theFund is to make credit available to intermediaries in the agricultural and food value chains to enable ruralagro-dealers to stock inputs, small holder farmers to produce and rural marketing agents to purchasefarm outputs for the overall benefit of farmers. The target intermediaries include wholesalers, agrodealers,contracting companies, food processors, traders and value adding SMEs in the chains. FAO provided funding for capacity building – FAO plays a co-ordinating role in agro-inputs in Zimbabweand will provide funds for preparation and early stage capacity building German NGO HELP 15 , is running a free and subsidised voucher programme alongside the RARPprogramme targeting the poorest households. These households each receive a voucher worth US$60and it is expected that they will add to it so that they are able to purchase adequate inputs. On average,a household requires inputs with a value of US$400 to plant one hectare of land. HELP also provided thebulk of the insurance. Wholesalers were invited to tender to implement these voucher programmes andwere requested to utilise rural agro-dealers as distribution points. The vouchers were meant to assist themost vulnerable households, whilst at the same time acting as a catalyst to revive the rural shops, ascash was injected to the rural economy leading to more sales by the rural shops. Before, NGOs used todistribute seed/input packages to the vulnerable households, who also had no say on the composition ofthe packages.In total, in RARP II wholesalers were provided with insurance covering US$5,000 worth of inputs per shop. Intotal, US$112,000 worth of insurance was provided (paid by the German NGO HELP), which mobilised salesworth US$9.3 million (a leverage factor of 85 times).RARP II has evolved quite fast and is now developing other components that acknowledge that rural farmers haveneeds beyond agro-inputs. It has therefore been renamed as the Rural Agriculture Revitalisation Programme(RARP III). RARP III will test the hypothesis that supporting intermediaries benefits farmers. RARP III’s objective willbe to improve incomes for farmers by improving the functioning of rural input and output value chains.12Wholesalers are distributors who stock various types of agro-inputs for sale to retailers13These amounts differ from the amounts mentioned above, as these are for the total of the three years.14Some examples of the modules for wholesalers include: Strategy development, viability of distribution networks, accountingsystems, trade terms with suppliers, and preparation of business plans to access finance. For agro-dealers, training in retail businessmanagement covers the following: relationship management, working capital management, record keeping, marketing and sales,costing & pricing, shrinkage management, store lay out and warehousing and merchandising.15HELP and FAO are both funded by the European Commission.34

The approach of RARP III is based on facilitating agri-business intermediaries (wholesalers, manufacturers, ruralagro-dealers, contract farming companies, processors, traders, transporters) to deliver products and services tosmallholder farmers more efficiently and cost-effectively through the expansion of the revolving credit facility tosupport both input and output marketing. The revolving credit facility was established during RARP II with a capitalof US$4,580,000. At the moment, total funds committed to the facility stand at US$15 million (committed byDANIDA and DFID). The fund started disbursements in February 2012 in partnership with a commercial bank. Theidea is to develop market based solutions with an exit strategy for non-commercial players (developmentagencies and government) out of the input and output value chains.This approach leads to the following choices made in the programme:Agro-dealer Restocking: RARP III seeks to expand the outreach of RARP II, including reaching the marginalprovinces of Matabeleland North and South, Masvingo and Manicaland, where there was low coverage. Theprogramme develops innovation to allow access to farmers in remote places, where it would not be profitable forwholesalers to deliver or access is difficult. One option is to use credit insurance with agro-dealers making theirown arrangements to collect inputs from a central location. The programme targets reaching 750 agro-dealersand at least six wholesalers and two insurance companies. It will benefit at least 150,000 households (includingthe previous 113,800).Contract Farming: The agriculture processing industry has previously relied on commercial farmers for their rawmaterial supply. With the demise of the commercial farming sector, companies are increasingly looking atsmallholder communal farmers. There are smallholder farmers whose productivity has increased and are ready tobecome small-scale commercial farmers. These are going to be linked to contracting companies who provideinputs (through the agro-dealer network), extension support and ready markets. The target is to reach 10,000farmers through at least 10 contracting companies.Agri-business Support: In the rural areas, farmers require a number of products and services to fully participate invalue chains. The Small Medium Enterprises (SMEs) who provide these services require capacity building for themto provide sustainable services. RARP III is going to identify the SMEs and provide them with training. These wouldinclude other input providers like nurseries for horticulture, traders, transporters, processors, etc. The target isto support at least 96 SMEs to reach 12,000 households in 24 districts, an average of three districts per ruralprovince.Output Marketing Component: Once farmers buy and apply the right inputs, productivity has been proven toimprove. The next challenge is to find markets for their surplus produce. Through RARP III, rural farmers will beable to access agricultural inputs locally and those players in the VC who purchase produce from the farmers arenow able to access bridging finance for working capital from the revolving facility so that they can easilypurchase produce from the farmers. Without this assistance of linking farmers to wholesalers, farmers in the ruralareas would have to travel to big cities to sell their produce, incurring major additional expenses. The target is tolink at least 20,000 households to output markets. The combination of input/output marketing is an excitingmodel which offers farmers a solution to their age-old marketing challenges. Three companies were alreadyengaged in output marketing arrangements in RARP II. In the period February 2010-March 2011, they purchasedUS$5.7 million worth of grain in rural areas.Zimbabwe Agriculture Development Trust (ZADT) Banks Capacity Building: One of the major lessons learnt inRARP II was that wholesalers could get consignment stock from input manufacturers or their own cash resources,but this significantly limits the amount of stock that they can give out. For a countrywide programme, a loanfacility would go a long way in expanding the programme. To compliment RARP III, the Zimbabwe AgriculturalDevelopment Trust (ZADT) was established early 2011. ZADT runs a revolving fund set up to provide value chaincatalyst finance targeted to agro-input and output value chain intermediaries. These include wholesalers, agrodealers,contracting companies, commodity brokers and SMEs in the four components above. ZADT funds aredisbursed through commercial banks.4. ImpactRARP - the pilot contributed significantly to farmer access to agricultural inputs. It is estimated that inputs with avalue of US$100 are required to sustain an average farming household of six persons and to provide sufficientincome to purchase agricultural inputs the following season. Based at a value of inputs sold of US$387,899 it35

can be concluded that over 3,800 households were supported by the first pilot phase of RARP. There isanecdotal evidence that the pilot has contributed to increases in yields of maize and verification through anindependent study is planned. According to FAO, a farmer with adequate inputs achieves a minimum 1.3 metrictonne/ha while those without inputs harvest anything from 0 to 700 kg/ha.At the end of the main agricultural season in May 2011, RARP II achieved the following results: 659 agro-dealers were linked to wholesalers and received agricultural inputs at consignment base in the2010/2011 season. Nationwide 469 agro-dealers were trained in retail business management, including 104 female agrodealers(22.2%). 560 agro-dealers received mentoring and coaching sessions delivered through 12 Local CapacityBuilders. Crop product guides for maize, groundnuts and sorghum and inputs product promotion information weredistributed through agro-dealer shops. Inputs worth over US$9 million were distributed through vouchers and cash sales. The inputs wereleveraged by US$112,500 worth of insurance. An estimated 113,800 smallholder farmers accessed inputs from the programme. 165. What are the key implications for scaling inclusive business?Zimbabwe, prior to the economic collapse, had a vibrant market for agro-inputs. The collapse of that marketmeant that rural shops had no access to inputs. Wholesalers and manufacturers would not stock rural shops for avariety of reasons, including but not limited to violence, theft, low volume of business and infidelity. RARP,through the insurance, made it possible for the wholesalers and the manufacturers to place consignment stockwith the agro-dealers again.Insurance played a crucial role in catalysing the inclusive business relationships. Due to this risk sharingmechanism (with donors who provided insurance and facilitated capacity building especially for the rural shopowners), wholesalers were encouraged to place consignment stock with the rural shops. The low claims on theinsurance provided confirmed that the rural shop owners could indeed be reliable business partners.Risk associated with rural shop owners was lowered by the business training that was facilitated by SNV.Wholesalers are now more comfortable doing business with them as they feel that they now understand thebusiness. SNV established a framework that ensured that agro-dealers are monitored and mentored throughoutthe programme. Local Capacity Builders were appointed in each of the eight provinces to visit agro-dealers atleast once every six weeks to mentor them on their store-specific needs. Agro-dealer Associations will be formedat a district and provincial level, with potential to form national agro-dealer associations to lobby for nationalissues.By the establishment of trust and lowering risks, a win-win situation was created for wholesalers, agro-dealersand rural farmers. Total sales of US$9.3 million recorded by the rural shops under RARP II proved beyond doubtthat both wholesalers and agro-dealers could make meaningful profits from the business relationships. Above all,it proved that rural farmers do have the capacity to purchase inputs.The availability of the right inputs in time led to increased productivity among farmers, which eventually led tofurther strengthening of business relationships between companies and rural farmers. Many companies haveshown interest in applying for bridging finance through ZADT for entering into contractual relationships with thefarmers for the supply of produce. While farmers can realise increased productivity with improved access toinputs and good agricultural practices, from SNV experience, the problem has been that it is farmers have notalways got a contracting company to access markets. The majority of farmers have to rely on spot trade ortaking their produce to markets. With this lack of organisation, this has tended to be very onerous and the returnsvery low. Someone who can identify markets and buy from a pool of farmers in a region will lower transactioncosts for everyone, helping farmers to access better prices for their produce. This acts as an incentive forfarmers to produce more and get better incomes. The establishment of ZADT will enable the scaling-up of therelationships. Contracting companies will be in a position to access funds and thereby contract many smallerholder farmers, whilst wholesalers will use funds to stock more rural shops and processing companies, includingSMEs and traders will be able to get loans to purchase produce from the farmers.16These figures are based on an estimated 200 clients served by each of the 659 agro-dealer shops.36

8. Enhancing onion seed production in NigerAuthor: Monika Sopov, Rachid BenlafquihOrganization: AgriterraThis case has been prepared by CDI for the ‘Seas of Change’ event with the help of Agriterra and that of Hansvan Leeuwen, De Groot en Sloot company.Why is the case an interesting example?De Groot en Slot, Netherlands based company, has decided to engage in capacity building of onion farmers inNiger and help enhance their production by transferring the knowledge the company had gained in onion seedproduction. The company had no plans to source onion seeds from Niger neither to engage in any commercialrelationship with the local stakeholders. Through cooperating with the local umbrella organization of farmers(FCMN – Federation of the Horticultural Cooperatives in Niger) and with Agriterra, the target of the project was toreach more than 7000 farmers producing onion seeds by 2015, out of which 2800 farmers were alreadyinvolved in the production of onion seeds by 2010 with increased market access and increased income.1. Context and backgroundIn January 2006, at the moment of the its 50th year anniversary, members of De Groot en Slot company decidedto contribute to a rural development project through transfer of expertise and technology and not by financialsupport. However, for De Groot en Slot, the idea of only providing seeds was insufficient. When Agriterra offeredto contribute to the professionalization of the onion seed production sector in Niger, the company decided torelease a financing of € 10 000 per year in order to fund technical support missions through the FCMN. Thus,the company was able to realize its wishes, which are based predominantly on altruistic values. Agriterra hasbeen contributing to the project up between 2006-2011 with about € 93 000. Agriterra also supports FCMN withthe finance of other activities, organizational cost like salaries, training in financial management, monitoring etc.FCMN-NIYA is an umbrella organization of farmers created in 1996 for horticulture farmers to be organized incooperatives. FCMN comprises nowadays 123 cooperatives and unions of cooperatives throughout the countrywith a total of 30,000 members, all heads of horticultural farms. In its early stages, FCMN had 18 000 members.The goal of FCMN-NIYA is to identify and implement sustainable solutions for production issues, input suppliesproblems, accessing markets and strengthening the organization's members through the following areas:supporting farmers initiatives for economic activities (agricultural inputs supply, marketing)technical assistance - advise (technical flyers, training, studies, field visits, sharing experiences.)funding research through sustainable partnerships with financing institutions.In Niger, irrigated crops, including horticultural crops, have grown in importance for the last 30 years in view ofits significant contribution to socio-economic living conditions and improvement of livelihoods.Onion is among the most important vegetable crops, and it mobilizes the highest number of producers becauseof its economic importance. The estimated average onion production is about 500 000 t/year with a value of 50billion FCFA francs.One of the main issues in onion production was lack of a stable supply of good quality seeds.Producers purchased seeds from their neighbours without sufficient control regarding production conditions andwithout guarantee of quality seeds. This situation led to a progressive degeneration of the "Violet de Galmi" onionvariety which represents the hope of producers. The quality of seeds was very poor, 90 % of it had to be thrownaway. The reason for the poor quality was threefold: inappropriate selection of local varieties, variety propagationwas carried out from bulbs with poor genetic quality, and high post-harvest loss due to bad storage condition. Asresult, the income of producers was very low.In addition, producers were forced to deal with middlemen, which further reduced prices they received for theonion.37

FCMN-NIYA, as representative of the horticultural producers at national level, initiated a partnership withAGRITERRA, and with the technical and organizational support of De Groot en Slot company, and it embarked onthe road in January 2006 to upscale onion seeds' production in an area of 300 000 square km in South West ofthe country to address the above mentioned challenges .For the duration of the project, originally 10 years was foreseen: 2006-2015 with the target being 1000kg onionseed produced in 2010 and 7,5 tons for 2015.2. Underlying business modelThe objective of the project is to support small holders in producing high quality onion seeds thereby increasingthe income of seed producers well as that of those small holders, who buy and sow the onion seeds, throughincreasing yield for onion production.It was very challenging to organize the chain. At the beginning, only a few growers produced onion seed, and30% of the produced seed was kept by the small holders, 70% was sold through the cooperative. Currently 100%of the of onion seed production must be sold to cooperative, who will sell the produce to the members and toother interested parties.Slowly, a traceability system was introduced. After a few years, farmers were able to finance their own cash flow.Nowadays, only if the cooperative would like to get access to funds for investment purposes does it turn to donoragencies for help.Technical support is arranged, and is provided not only for the members of the cooperative but also for othergrowers. The technical support is financed partly by donors, partly by members of the cooperativeRecently, Nestle has approached FCMN whether they would be willing to supply onion for the factory they plan toset up for the production of dried onions.One of the biggest risks for the project is the volatility of the political situation in the country, which limits thepossibility of movements of experts in the onion producing regions and hinders the production as well.3. Evolution of the initiativeAt the beginning of the project, farmers already had a long experience, 20 years in certain cases, in seedproduction but without any structure and without integration of seed production into the value chain. As result,there was a lack of quantity, quality and regular production of onion seed. There was also lack of technicalsupport as well as knowledge in marketing. Due to these deficiencies, the value chain was not operatingefficiently.After four production campaigns, the FCMN managed to stabilize the production of the cooperatives regardingonion seed production; producers took on a more commercially oriented attitude.During the project ( 2006 – 2011) De Groot en Slot company supported the FCMN in the following areas: Technical level:o assessment and up-grading of the storage conditions (in certain cooperatives the loss wasabout 50 % ; now it is about 5%),o performance assessment of pilot stores in the RESEDA type, built in three areas of the country,o selection of bulbs for seed production,o seeds production plano selection of field for onion seeds production,o setting up field experiments and sharing experiences,o comparison of two techniques of onion's conservation during the storage : with leaves andwithout leaves,o planting techniques,o fertilization and crop protection techniquesOrganisational and market level:o setting up a contract system at the individual and collective level ( producers and cooperative ;FCMN and cooperatives) based on quality criteria,o certification,38

Onion seeds productionoooocalculation of the selling price and reaching an agreement,evaluation of the cooperatives and producers commitment,setting up a trading centre (“The House of Seeds”)evaluation of the potential stakeholders to be involve in the project ( ICRISAT, SNV, FAO, DSQL,INRAN)Thanks to this project, the farmers upgraded their technical expertise in onion's seed production and managed toorganize the market. The quality of the onion's seed has improved and it's now available in the market; there is alot of potential for further growth.When started in 2006, this project was initiated with three cooperatives only in the regions of Dosso, Tahoua andTillaberi. This number increased to ten cooperatives during the 2009 – 2010 season. A lot of producers werewilling to be involved in the project. The production has increased from 100 kg for the 2007-2008 season, to427 kg for 2008-2009 campaign, and 2700 kg in 2010 compared to the initial forecast of 1000 kg for the2009-2010 campaign.Thus, in 2010, the progress of seed production suggests that the production estimated for 2015 will be 27 tonswhich is more than three times the original estimation made in 2006, at start of the project. According to theestimation 7000 farmers produce onion in within the umbrella organization. On average, each producer uses 1kg seeds, so 7000 kg onion seed had to be produced with high quality according to the experts estimation at thebeginning of the project, and that would take 10 about years. As project way surpassed the expectations, thetime needed to meet the target of 7000 kg onion seed will be much shorter.300002500027250200001500010000111507500Initial target (kg)First forecast(kg) (2009)Actual production (kg)Second forecast (kg) (2010)500027000214 0404270 0 0 0 0 0 0 002006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017YearsFrom project funding, the FCMN provides mother bulbs, fertilizers, pesticides and fuel. Cooperatives provide inreturn labour and make fields available.The production cost is generally based on the inputs cost, which varies from 10 000 to 15 000 FCFA per kg ofseed produced. The average sale price was between 15000 to 30000 CFA francs per kg.For the 2008-2009 season, the 420 kg harvest generated a profit of net 6.6 million CFAF, 2.2 million CFA forFCMN and 4,200,000 FCFA for cooperatives. These funds helped increase production quantities of seeds on oldsites and support new site development. Thanks to the quality improvement, seeds could be sold now at 40 € /kg as compared to the 15 – 20 € / kg in the past.39

In the 2010-2011 campaign, the FCMN started a large scale production phase by establishing a contract systemon individual level, based on seed quality criteria. In addition, in 2012, FCMN, supported by De Groot en Slotcompany, plans to set up “The House of Seeds” (cooperative seed enterprise) in order to structure the market,to combine marketing strategies (packing, packaging, labelling, individual contract) to facilitate market access,market linkages and access to market information. Thus, producers in 10 areas of the country will be involved inthis contract system through “The House of Seeds”.However, there are still issues to be solved. In 2010, in order to minimize the loss of storage, the mission experts recommended that thecooperatives should put in place a plastic box storage technique. In addition, with this technique it ispossible to double or triple the storage capacity vis-a-vis the storage in bulk. Concerning marketing aspects, the FCMN should reflect on how to upgrade conditioning and packagingin order to secure production. There are already many producers all over the country selling seedsunder the FCMN label while they are not officially involved in the project (network). Moreover, the experts of the company recommended to the FCMN to implement trials (experiments ofonions' seeds production) in order to upgrade and control the quality of bulbs and also to giveconfidence to their stakeholders (cooperatives, producers, NGOs, technical services, researchers,associations) organize field visits and open days. The experiments are also aimed at contributing to newvariety seed development programs. It's necessary for cooperatives to put a traceability system in place and get certification, It's necessary for the FCMN to properly set a suitable sale price for the onion's seed based on theprices of the last ten years and on the production cost. Afterwards it's necessary to get a collectiveagreement on it. The availability of land remains a problem. Land is often used for subsistence production. Lack of transparency and organization for few cooperatives Lack of peace in the country and political volatility.Other stakeholders in the project:ICRISAT is a research institute focusing on supporting producers for their seed production such astomato, lettuce, okra, pepper/pepper and onion special for de Sahel. ICRISAT organizes technicaltraining for the FCMN technicians and farmers as well on crop protection, seed multiplication andgermination tests. The FCMN is involved in ICRISAT activities such as trainings, open days, exchangevisits and sharing of experiences.INRAN is National Agronomic Research Institute in Niger. This Institute provides technical support qualitycontrol, crop protection.) and information. In return, in certain case, FCMN could buy its stock seeds.FAO provides considerable support to FCMN with the supply of vegetable seeds. In return, FCMN couldprovide FAO with good quality onion seeds for its emergency programs for supporting vulnerable groupspopulations.DSLQ (seeds division, legislation and quality) is under the supervision of the General Directorate ofAgriculture through the Directorate for the Promotion of Value Chains and quality. This institution is incharge of control and certification of onion seeds. This service has a mechanism at national and regionallevels to conduct inspection and control in order to issues certificates allowing the seed producers tosell their seeds. During a production cycle, this institution, if requested, may carry out between 3 to 4inspections: at the time of sawing, at an advanced stage of cultivation, harvest and during storage/warehousing. DSLQ can also carry out germination tests if needed. The costs related to theseoperations are paid by the seed production organizations. FCMN can receive further help from DSLQ toachieve certification and labelling of seeds produced.The biggest challenges in the project proved to be changing mentality of producers regarding commercialorientation, and transferring ownership over project to producers.4. ImpactThe forecast for 2010-2011 and 2011-2012 campaigns were estimated between 3000 and 6500 kg, and 27tonnes in 2015. This trend is clearly higher than the originally set target of producing 7.5 tons by 2015.40

In addition there are many impacts on different levels:Production The quality of seeds has improved and secured (thanks to a propagation by good quality parent linesquality control, variety selection, use of new variety not only locals ones) better and regular access to seeds for the producers storage conditions have improved ( from 50 % loss to 5%), higher production capacity: 1 farmer can produce 5 – 20 kg; but a lot of them produce only 2 kg. adaptation of farming techniques and harvest methods: planting onions are no longer cut but planted inwhole, planting time is earlier: it has been moved from November to September to get an early floweringin order to increase the yield of seeds the extension service to farmers has been highly improvedMarketing better marketing (collection, cleaning, packaging, distribution) and better access to markets professional attitude of the producers (traceability, certification, field experiments, integrated cropprotection, field selection based on the proper agronomic criteria) the individual profit is higher which allows to buy motor pumps, for exampleBusiness management small holders plough back money into the business not taking it out small holders slowly realize that it is better to produce mainly onion seed, and buy other produce on themarketInstitutional improvements the cooperative organization is stronger the relationship with other stakeholders has improved because of the success of the project a lot of money is now coming from different donors organizationLivelihood there is still hunger from time to time among onion seed producer small holders do have now horses and donkeysChanged attitude small holders realized that with higher profit they could buy e.g. motor pump. There was no need to askany donor agency to pay for it.School gardens, FCMN, Agriterra, ZLTO and De Groot en Slot jointly decided to launch a project to promote growingvegetables in schools to enable balanced meals that pupils could benefit from. The project also aims atspreading and improving a professional horticulture business model in the regions.For the medium and long term view, FCMN is considering to set up large scale seed business production andmarketing of onion. To be able to do that, FCMN needs the expertise of De Groot en Slot for technical aspects inproduction, business management and entrepreneurship.5. What are the key implications for scaling inclusive business?Even if the reason for the company to engage in small holder support is altruistic, and even if the money investedby the company is minimal, in this case it was EUR 10 000 / year for technical support, large scale developmentis possible in partnerships with key stakeholders such as local cooperative, international donor agencies andNGOs.Reducing the loss from 90% to below 10%, increasing yield from 2 t/ha to 3.3 t/ha and almost doubling the pricefor onion seed was possible only with collaboration of different stakeholders and based on the desire of farmersto engage in commercially oriented production.Based on the experience from the project, there are already thought of adapting the initiative to potatoes, garlicand different vegetables.41

9. Pastoralist livestock markets in Kenya: Establishing thriving andreliable livestock markets through an innovative public-privatearrangementAuthor: Obiero Thomas WereOrganisation: SNV – Netherlands Development OrganisationThis case is one of a series specifically prepared by SNV and local partners for the “Seas of Change” event,taking place in The Hague, 11-13 April 2012. The cases cover a range of commodities and approaches in valuechain development across Africa, Asia and Latin America. They usually include several of the following elements:strengthening of producer organisations, productivity improvement and value addition, business developmentservices, inclusive business ventures, contract farming, marketing arrangements and improved chain financing.The work has been done with local entrepreneurs, NGOs and government bodies. Among the internationalcollaborative partners are: IFAD, FAO, EU, USAID, DANIDA, Helvetas and IDB. The business partner involved in thecase is Livestock Marketing Association.Key featuresLocal Kenyan county councils, with aid from SNV, have been able to facilitate the co-management of livestockmarkets together with livestock farming communities. Livestock Management Associations from thesecommunities have been empowered to effectively manage the market places and operate a number of functionsthat were previously done by government staff. This has resulted in the development of increasingly vibrantmarkets for livestock and livestock products as well as other transactions. The model has rapidly spread to over20 markets in seven counties, benefiting more than 80,000 households with increases in livestock prices of 20to 30%. The markets are similarly attractive to buyers who find assured supply, increase efficiencies in transportand other benefits. Diverse enterprises have also sprouted up at these markets providing alternative livelihoodsfor especially women and young people all year round; hence enhancing their resilience to cyclical droughts. Themarkets have also gained importance as an interface with farming communities for government programmes andthe activities of international development agencies.1. Context and backgroundLivestock farmers have continuously relied on herds of goats and camels as their single most important sourceof livelihood. Besides providing food directly in the form of meat and milk, they were able to trade livestock tomeet urgent cash needs such as school fees and staple foods. The government of Kenya supported livestockmarketing from these regions through the livestock marketing division that enabled livestock farmingcommunities to achieve competitive prices.However, the government discontinued its direct role in livestock marketing during the introduction of theStructural Adjustment Programmes that aimed to implement "free market" programmes and policies in the1990s. This led to the degradation of the once well-established market. The consequences since then have beensignificant inefficiencies including ineffective market places, high transaction costs, unstable prices, andinsecurity.These high transaction costs emanate from, among other factors, the ‘lengthy channels’ created by longdistances to markets. The long distances involved in trekking animals to the market led to increased livestockmortality, reduced animal/carcass value and exorbitant charges en-route, high transport costs, and loss throughtheft of stock. The only opportunity to avoid these long distances is by selling livestock to middle men for lowprices. Other issues that hamper the effective participation of producers in distant markets include their limitededucation and poor knowledge of the national language. This is particularly true for poorer livestock farmers,such as smaller herders, women and young people, who are forced to rely on several middle men, resulting inreduced profit margins.In 2007 and 2008, SNV, in partnership with the Samburu Integrated Development Programme (SIDEP), KenyaLivestock Marketing Council (KLMC) and Samburu County Council (SCC) explored the potential of interior (primary)markets as a business model to address these challenges.42

2. Underlying business modelThe interior markets are based on a new business model, which applied a new form of market organisation,including their physical organisation and co-management of the markets by councils together with communities.The physical organisation of the livestock markets have improved, since markets are established within areaswith wider catchments and closer proximity to producers, meaning individual producers can walk in, sell theiranimals, and conveniently buy food and other input supplies at competitive prices.The markets are governed and managed within a co-management arrangement in which the roles between thecounty council and the communities in managing the markets have been re-established. The co-managementworks as follows: The local council, which by law is responsible for the development of a market infrastructureand subsequently liable to collect revenues, co-operates with the local community in managing market activities.The community is represented by the Livestock Marketing Association, (LMA), which oversees market activities,and also handles all trade relationships. The LMA are made responsible for collecting the taxes on livestocktransactions. This revenue is subsequently shared with the council on a 50-50 basis 17 . The implementation of thisapproach involved brokering discussions on linkages, roles and responsibilities between the community and thecounty councils in regards to the establishment of an interior market. Thereafter, SIDEP, together with SNV,facilitated the formation and strengthening of the LMA. LMAs are community based organisations through whichthe partnership with the county council is actualised.The first market was set up in Lolguniani, in Samburu District, and from there the market model initially spread tofour other markets within the district. Later it spread further to some 21 locations at present and the spreadingstill continues. An average 4.5 million Kenya Shillings (about 54,000 dollars) circulates during market days thatare held once a week. The thriving markets have attracted all other kinds of economic activities such as hotels,butchers, shops, etc.3. Evolution of the initiativeBefore the programme started, the livestock farmers and the councils were arguing with each other, sincecouncils needed to collect their revenues. This was however impossible in the system that existed, where mosttransactions were handled between middle men, and were not on official market grounds. Since SIDEP beganworking together with the communities, they were able to represent the communities and, together with SNV,worked out a model in which a win-win situation was found: the councils received their revenues, and for thecommunities, the market became a safe and reliable institution to trade livestock again. After establishing thefirst markets, several elements of up-scaling can be identified.In 2009, the Ministry of local Government came on board during the consolidation and up-scaling process of theco-management model from one to seven counties within Arid and Semi-Arid Lands (ASAL) areas. The interestfrom other councils arose from the fact that most of their livestock markets were barren, when compared tothose that were practicing the PPP model, this sparked their interest in promoting sustainable markets.Within the process, the Ministry encouraged the councils within the ASAL areas to review their by-laws to adoptthis grassroots Public Private Partnership (PPP) model. In this way, the model was strengthened, as well as givencredibility in further up-scaling of the model to other councils. Up-scaling the model across county councils wasfurther assisted through knowledge development and brokering. This was achieved through developing andsharing materials such as DVDs and brochures, facilitating national workshops and exchange visits amongst thecounties.The Ministry of Local Government is now investing over €2 Million from the 2011-2012 Budget to developmodern markets in six counties. The ministry is building upon and integrating the co-management approach as asustainable model to managing infrastructure.At the markets themselves, up-scaling of the local economy as a whole took place. Members of the LMAs havebeen remunerated, and the vibrant market context enables young people and women to engage in diverseincome generating activities, including food kiosks, hawking of groceries and other wares, agro-vet services,hotels and butchers. In addition, transport systems have been set up by young people through the use of17This 50-50 agreement was the initial agreement for the first market set-up. However, when the initiative evolved, other arrangementsevolved, in which more revenue went to the council (including 60-40, or 70-30 agreements).43

motorcycles. There are over 120 such small scale businesses around the market which officially pay taxes to thecounty council while there are about 300 businesses that operate in total; of which three quarters are involved inagri-business on any market day.Lastly, market information systems have been greatly improved. Previously, government officers used to travel tomarkets to report on market information, such as the number of livestock sold, at which prices etc. This was atime consuming process, as officers had to travel from market to market. This system is now run by youngpeople at the markets, who report the information by phone to a general system which collects data for all themarkets. Market information is thus much more accurate, and is more easily accessible. Data collection costsare just a fraction of the former collection process.The vibrancy of these markets has also ensured an all year round availability and access to food stuffs for thecommunity; with goods often transported to the market by the trucks that go to buy cattle or other animals.These trucks are now coming more often due to the fact that the markets are much more vibrant; subsequentlyaccess to food stuffs and food security has been greatly improved. This attracted the attention of the UN’s Foodand Agricultural Organization (FAO) in 2008/09, as it fitted in their approach to address food security issues, notthrough emergence aid but much more sustainably through market based actions. The FAO provided resourcesto five Non Government Organisations (NGOs) and local capacity builders to up-scale the model to other ASALcounties and further develop linkages between livestock BDS service providers and producers through thesemarkets. The services include the supply of fodder, water, financial services, agro-veterinary services andlivestock insurance.4. ImpactThe co-management model had spread to 21 locations by the end of 2011, benefiting about 80,000 householdsin seven counties. Based on the detailed data of four markets that can be considered as more or lessrepresentative of all 21, the following figures can be extrapolated a total 504,000 people are benefiting from themarkets 18 , with each market seeing around US$54,000 in turnover on a market day (i.e. for animals sold, and ofbusiness around the markets). Herders are selling their animals at prices 20-30% higher than before. The directincome gains for livestock owners are even higher, since there is also fewer losses and theft of animals. Inaddition, women and young people are gaining incomes as well.The councils, after sharing with the community, have been able to get almost similar amounts as before, but theircosts have reduced by more than 90 percent since the LMAs do all the work. Hence what the council gets is anet average of about US$18,750 per annum. 19 The LMAs have a similar income, due to the 50/50 division. Theyhowever have to cover operational expenses including market management and operations.The impact of the model illustrated by the example of Lolkuniani Market in Samburu County“Despites the inability of my husband to provide for the family due to age, I have been able to ensure my fourchildren go to school from this small business that has bloomed because of the vibrant livestock market”Mpanyoi Lenges, a local woman trader boasting of her success.The weekly market serves the entire population of Lolguniani which has an estimated 800 households. Thistranslates to a population of about 4,000 people with a monthly average of 10% (400) of the population activelyengaged with livestock trade on each market day. At its peak, an average of 2,000 goats worthy approximately€27,500 and cows worth €10,000 are sold per market day that is held once a week. This is in addition to thecamels and donkeys sold during market days. Prior to the project, people had to travel long distances to disposetheir animals, or they sold their cattle to middlemen at almost half their current prices.The following outcomes and impacts can be ascribed to the model:At community level: Most producers can now access the buyers directly without using brokers, who used to waylay themwhile they travelled to markets up to 200kms away. This has led to producers increasing their grossmargins by between 30-40% per cow/bull. Market information systems facilitate better negotiatingpositions for livestock owners, as they now have access to the prices of livestock all over the country byphone.18Based on the average support of a market of 4,000 households, with an average six people per household, times 21 markets.19About Kshs 30,000 x 50 market days a year = 150,000 Kshs.44

The resources accumulated from the sharing of revenue between the county council and the communitythrough the LMA has been used for the benefit of the communities such as providing bursaries todisadvantaged children in the community, and medical expenses for the poor in the community.Generally, there is gender imbalance within the pastoralist communities and the livestock value chainowing to women’s cultural position in terms of property ownership and trade. However, the vibrancy ofthe co-managed markets enables women to demonstrate their capacity to participate in market placeactivities by bringing their merchandise and equally selling it in a highly patriarchal society. The majorityof food vendors are local women who have proved capable of taking advantage of market days to makesufficient profits, thus the new markets have enabled rural women to increase incomes and have abetter quality life.The vibrancy of these markets has also attracted the local youth to be involved in livestock as well aspetty trade. Youth involvement has led to reduced levels of cattle raids and petty theft.On average, these one a week market days experience turnover of 4.5 million Kenya shillings(US$54,000). This has led to emergence of subsidiary businesses such as hotels, butchers, shops,hawking of house wares etc, most of which done by women.At the county council Levels: The (average) 50-50 share of revenue from livestock taxes has increased community confidence in thecounty councils and communities are therefore willing to collaborate, partner and support the councils inother development initiatives. The county councils have been able to increase the amount of revenue collected from the markets by50%. This coupled with the savings arising from the use of community members instead of council staffto manage the market and collect livestock trade taxes 20 has further increased the revenue collected toabout 70%. This revenue is invested in other sectors, such as roads, schools, etc.At regional level and its interface with the national economy: The direct exposure between producers and terminal buyers has reconfigured the profit margins alongthe chains. The producers obtain on average a higher price for their livestock than previously. Theirprofit margin increased by an average of 30-40%. The involvement of the rural poor men, women andyoung people in the economic activities around the livestock markets has contributed to increasedhousehold incomes. Markets have become a node for all kinds of products, including food stuffs, which is positively affectingfood security in the region. In addition, the programme has become a vehicle for the outreach ofgovernment programmes, livestock health services, financial services etc. by which not only livestocktraders are benefiting, but the whole community.5. What are the key implications for scaling inclusive business?The model leads to many improvements in the value chain: increased economic efficiency, soundness andreliability of trading; increased quality and quantity of supply, increased trust and collaboration between actors,and improved financing and government backing.Upon analysis, the underlying observations that contributed to the success of the model and that were essentialin up-scaling inclusive business, especially within the rural setting, include the following:A. The arrangement has direct (financial) gains for various local actors: Firstly, the arrangement is financiallyattractive to both buyers and sellers, and made the chain as a whole function better. In addition, communities haddirect financial benefits out of co-managing the markets together with the councils.It also had the direct interests of councillors and council clerks in increasing council income, servingtheir community and thereby strengthening their profile (with implications for elections). It shows the strength ofthe model that it had the potential for acceptance even among highly bureaucratic institutions such as councils.Around the markets, women, youth and (new) local entrepreneurs found additional economic interestsand gains by setting up small enterprises and transport systems. This emergence of a large number of othereconomic activities which are not directly related to the livestock value chain around the livestock market affirmsthat a successful intervention on a value chain contributes to local economic development (LED).B. The arrangement empowers local communities, which drives its operations and sustainability. In addition todirect financial benefits, communities were also provided with a considerable degree of influence and control over20Tax on the sale of animals45

the market space and arrangements through the LMAs. The market space provides a secure trading place withintheir sphere of control and influence. Building the intervention upon such a structure co-owned by the community,with clearly defined roles, responsibilities and mandate made the intervention easily acceptable and workable.This meant livestock owners targeted by the intervention can easily relate to them.Secondly, the better market arrangements provided the community with improved levels of information andknowledge, and negotiating power that result from the market dynamics themselves and its management.C. The arrangement provides a system of mutual checks and balances. Operations and sustainability arereinforced by a set of in-built mutual dependencies and accountability in the model between different actors, suchas 1) the co-management between the council and the LMA; 2) the mutual dependency of buyers and sellers in aneffective and the attractive exchange; 3) the establishment of conducive regulations and government interest inlocal management success; 4) the involvement of women in the local economy creating a level of stability sincewomen play a critical role in rural householdsIn conclusion, we might say that commercial orientations to initiatives that support rural livelihoods are bound tosucceed if the benefits sufficiently accrue to the community members. This market arrangement is giving farmersand community organisations direct influence and increased control (both physically and in terms oforganisational arrangement) over their economic and social transactions.46

10. São Tome and Principe Participatory Smallholder Agricultureand Artisanal Fisheries Development Programme (PAPAFPA)Author and organization: IFADThis case is one of a series specifically prepared by IFAD and local partners for the “Seas of Change” event. Thebusiness partner involved in the case is Kaoka.Total cost:USD 13.4 millionFinancierIFADIFAD loan:USD 10.0 millionStart-End dates: 2003-2015Value chain approach: Relational chain, buyer-driven1. Context and backgroundBackground. São Tome and Principe was once one of the largest producers of cocoa in the world. Productionand export levels declined dramatically in the 1920s. In 1975 the country gained independence from Portugal,and the Portuguese plantation managers left the country. The cocoa industry was hit further by the first postindependencecocoa price collapse in 1979, which left the country unable to import vital inputs. Further attemptswere made by East Germany in 1982 and by the World Bank in the mid-1980s to support the industry, but bothfailed. By 1990 all of the country’s cocoa enterprises were bankrupt. In 1998 falling global prices for cocoacaused many farmers in São Tome and Príncipe to abandon cocoa plantations and to cut down cocoa trees toclear land for other crops.2. Underlying business modelIntervention. An organic cocoa scheme that guaranteed a minimum price for high quality cocoa had been set upin Togo by Kaoka, a French chocolate company. In 2000 IFAD commissioned the same company to conduct ananalysis of the country’s cocoa sector, which concluded that the rich genetic origin of São Tome cocoa varietiescould produce superior aromatic cocoa beans and that the traditional farming methods could be adapted easilyto organic production. With these findings, IFAD launched a three-year pilot project that involved 500 farmers in11 communities. Kaoka was contracted by IFAD to supervise the project and agreed to purchase the certifiedorganic cocoa produced.Given the pilot programme’s success, IFAD decided to scale-up organic aromatic cocoa farming under theParticipatory Smallholder Agriculture and Artisanal Fisheries Development Programme (PAPAFPA). Theprogramme was designed with the objective of continuing the organic cocoa and developing other agriculturalvalue chains. The programme is now a multi-stakeholder partnership led by the government and supported byIFAD. A local research station certified the cocoa’s aromatic qualities and an international organization began athree-year process to certify that the cocoa was organic.Smallholder cocoa producers were encouraged to organize community associations to manage the collectionand drying of the cocoa beans. The representatives of these associations were assisted in forming theCooperative for Export and Market of Organic Cocoa (CECAB), to coordinate commercial activities. In 2005,CECAB signed a five-year contract with Kaoka to supply organic cocoa. Under the partnership, Kaoka guaranteesthe purchase of the whole crop, two fixed premiums above the market price (one organic and one fair-trade) anda minimum guaranteed price in the event of international price collapse below a certain level. One of theinteresting features of CECAB consists in the two-payment system, through which producers receive an advanceon fresh beans from the local association and receive the balance on sale of the product.In each community, infrastructure development enabled producers to collect, weigh, ferment and dry the beansfor export. The introduction of a solar cocoa dryer storage facility reduced spoilage. Local NGOs and Kaokaprovide technical advice and assistance on quality control and organic cocoa regulations and techniques, andhelp conduct research and access planting materials.47

3. Impact and Evolution of the initiativeImpact on target group. Before 2004, about 700 farmers were producing 50 tons of cocoa; by 2007 nearly1,200 farmers (42% of them women) were producing 200 tons of organic cocoa. By the end of the pilot project,the certified organic cocoa was selling at 2.5 times the price of common cocoa. On average, yearly incomes ofbeneficiaries’ households increased from 25% below the poverty line to 8% above the poverty line. A cost-benefitanalysis of the project found that the internal rate of return of the investment was between 12 and 17%,depending on rainfall levels. The project is among the few development projects currently engaging withcommunities in the remote island of Príncipe, where it has been working since in 2007. In 2008, anotherpartnership was signed with the British company Cafedirect UK, involving the co-financing of processinginfrastructure as well as agricultural machinery and equipment.4. What are the key implications for scaling inclusive business?Key featuresEffective governance. The programme is a multi-stakeholder partnership led by the government and supportedby IFAD.Coordinated delivery of services. The project provides a coordinated package of services that includetechnology transfer, training, extension and market linkages.Value added/Vertical integration. In each community, infrastructure development enables producers tocollect, weigh, ferment and dry the beans for export. The project funded post-harvest infrastructure, fermentationbins and solar driers.Information flow. Farmers have been exposed to new technologies and market information.Trust. The private companies have developed farmers’ confidence and trust by offering an assured market fortheir products and a guaranteed minimum price.Horizontal integration. Producers’ communities have been encouraged to form associations to improveharvesting and processing, as well as to benefit from economies of scale for post-harvest handling. Theassociations would manage the post-harvest processing and aggregate the cocoa beans.Policy/Enabling measures. The initial study on the country’s cocoa sector commissioned by IFAD in 2000,concluded that the rich genetic origin of São Tome cocoa varieties could produce superior aromatic cocoa beansand that the traditional farming methods could be adapted easily to organic production. These findings awakenedactive Government interest in pursuing the opportunity.PPP. The partnership was established to develop and improve the production of organic cocoa, and to sellinternationally under the organic fair trade label. Under the agreement with the French cocoa company, Kaoka,the Government shouldered the largest part of the financial risks. In the partnership arrangement with CafedirectUK, the agreement involved the co-financing of processing infrastructure and agricultural machinery andequipment.The PAPAFPA experience clearly shows that there are private sector companies eager to pursue more ethicaltrade relations with the producers of the commodities they specialize in (“sourcing” of commodities). Rather thanacting as mere buyers interested in the immediate purchase of these commodities, these companies understandthat the pro-poor development of commodity and value chains takes several years. If supported by public funding,they are willing to commit themselves to take a longer term view to ensure that the producers also benefit. PPParrangements offer them the opportunity to do so, given that initially commodity and value chain developmentactivities, if they are to benefit the rural poor, may need to be subsidized. Such subsidies are justified if it is clearthat they are to finance pilot activities, and that they will be phased out completely as the chains becomesustainable.48

Provision of credit. Producers complain that they cannot develop their activities because they still have noaccess to credit 21 .Diversification. The intervention has encouraged the production of superior aromatic cocoa beans varieties, andadaptation of traditional farming methods to organic production.Capacity building. Organic agriculture is knowledge intensive, and requires knowledge inputs in the form oftraining, extension and demonstrations. Under the project producers have received training in post-harvestprocessing.Environment. Promotion of organic agriculture could be considered as beneficial to the environment.Chain efficiency/Competitiveness. The intervention has allowed the produce to shift from medium-qualityunprocessed cocoa beans to high-quality processed beans in demand in the international markets.Inputs. Problems have been identified with the supply of valuable inputs, including copper, sulphate, tools, bagsand irrigation water.Technology transfer. Local NGOs and Kaoka provide technical advice and assistance on quality control,organic cocoa regulations and techniques.Market linkages. CECAB, which was created in 2004 by the farmers’ association, handles the commercial andexport agreements, such as the ones with Kaoka and Cafedirect UK.Sustainability. It is still premature to judge whether this intervention will be sustainable. However, through thevalue chain approach a sustainable link to the market for poor smallholders has been developed and the firstfarmers who were supported by the programme no longer need the programme’s support. Kaoka is nowinvesting its own money in CECAB and is also paying for ECOCERT, the organic certification that was formerlypaid by the project.Sources:• Cocoa farmers find a market, IFAD, Newsletter, Issue no.2, February 2006.• Democratic Republic of São Tome and Principe, Implementation of the second cycle of the Participatory SmallholderAgriculture and Artisanal Fisheries Development Programme, IFAD, December 2009.• Organic and fair trade production revitalize cocoa industry in São Tome and Príncipe, Stories from the field, IFAD,September 2008.• Fair Trade Organic Cocoa in São Tome and Principe – A Case Study in Effective Private-Public Engagement, C.Sparacino, N. Messer, Guy Manners.• Organic Cocoa Production Increases Despite Pest Invasions in the Small State of São Tomé and Príncipe, Africaorganic news, Vol. 2, No. 1, January 2007.• Jedrzej George Frynas, Geoffrey Wood and Ricardo M. S. Soares de Oliveira, ‘Business Politics in São Tomé andPríncipe: From Cocoa Monoculture to Petro-State’, African Affairs, 2003.21Fair Trade Organic Cocoa in São Tome and Principe – A Case Study in Effective Private-Public Engagement, C. Sparacino, N.Messer, Guy Manners.49

11. El Salvador, Rural Development Project for the Central Region(PRODAP-II)Author and organization: IFADThis case is one of a series specifically prepared by IFAD and local partners for the “Seas of Change” event. Thebusiness partner involved in the case is Local Farmers.Total cost:USD 20.0 millionFinancierIFADIFAD loan:USD 13.0 millionStart-End dates: 2001-2008Value chain approach: Relational Chain, Producer-driven1. Context and backgroundBackground. The Rural Development Project for the Central Region (PRODAP II) had as its main objective that ofincreasing incomes and improving living conditions of the rural poor by strengthening their grassrootsorganizations, increasing beneficiaries’ participation and gradually transferring responsibilities for servicesdelivery to beneficiary organisations. The project aimed at generating local capacity to ensure the long-termsustainability of services delivery.The project had the following specific objectives: i) boost revenues by increasing productivity and production,improving marketing and through micro-enterprise development; ii) strengthen community-based producers’organizations both to facilitate their participation (and demand generation) in the implementation andmanagement of project activities, and to promote the gradual transfer of services; iii) implement an efficient ruralfinance system and a system for financial intermediation; iv) strengthen gender mainstreaming and reduceinequalities between men and women in the project area; and v) improve environmental conditions in the areas ofwater, soil and forest resources.2. Underlying business modelIntervention. The support to market access and micro-enterprise development was based on facilitating accessby farmers' organizations to local and regional markets for the sale of their products, by providing information onprices, trends and market opportunities. The project promoted the development of micro finance for the hiring oftechnical assistance and training (management and commercial). Through the Productive Investments Fund(FISP), potential entrepreneurs (especially women) were helped to identify and fund new business opportunities.The implementation of the strategy of this sub-component was part of the overall strategy of gradual transfer ofresponsibility for services delivery to local organizations.The project gave priority to working with small groups of micro entrepreneurs; it facilitated the formation of 18groups of producers, with a total of 276 farmers (33% women), involved in a range of commodities: fish (7groups), granulated sugar (1 group, ACOPANELA: see box below), vegetables and fruits (10 groups). Theirrelationships with firms and dynamic markets were fostered as being essential for the marketing of theirproducts.Some of the organizations moved quickly in terms of organizational consolidation and improvement of theirproduction systems. For example, ACOPANELA, dedicated to the marketing of sugar, was established as a legallyconstituted association in 2007, and received funds to hire specialized technical assistance and improve productquality. APPES, which focuses on the growing and processing of pineapple, was also legally constituted: throughits own efforts, it has managed to win support from other international organizations for the installation of anorange juice factory. The establishing of linkages with cooperating agencies, government institutions andemployers, either with support from PRODAP-II or through self-management, has been very important in the life ofAPPES and this has contributed to the sustainability of its activities.50

PRODAP-II has supported the participation of producers and organizations in 30 trade fairs organized across thecountry and it has also facilitated the development and dissemination of monthly bulletins on prices and markets.About 80 newsletters have been delivered monthly to the organizations for the dissemination of informationamong members.3. Impact and Evolution of the initiativeImpact on target group. The producers have gained access to dynamic markets for selling their products atcompetitive prices, also thanks to the construction and rehabilitation of roads and to the support provided by theproject in marketing.The case of ACOPANELA.ACOPANELA is a cooperative of producers of dulce de panela, that makes and sells brown and granulated(refined) sugar. It provides services to its members in terms of agro-industrial production, supply, marketing,savings and credit. It began operating in 2004, with 17 members with the goal of developing productsdistinguished for their ethnic characteristics and high quality. With the support of the Ministry of Agriculture andPRODAP ACOPANELA has managed to reach a nostalgic market in U.S. cities with high immigration from ElSalvador. This involved improving the product in several ways: standardization of size and weight, colour andconsistency, quality of wrapping, and safety to health (hygiene, etc.). Technical assistance from PRODAP II onthe technical aspects of production (organic farming practices), processing and management of marketingoperations, was decisive for ACOPANELA to learn, inter alia, how to conduct market research, design andconduct surveys, develop a directory of potential buyers and improve its bargaining power. ACOPANELA isselling its products to the export market under the “La Molienda” brand.4. What are the key implications for scaling inclusive business?Key featuresEffective governance. The project has adopted a participatory approach, whereby farmers’ organizationsplayed a lead role in requesting specific investments and provision of technical assistance services (provided byEmpresas Prestadoras de Servicios).Coordinated delivery of services. The intervention provided financial services, technology transfer, technicalassistance and capacity building.Value added/Vertical integration. The producers’ organizations were involved in the whole process ofdesigning strategies and plans for improving market access. PRODAP-II financed the construction of 939warehouses with a view to reducing post-harvest losses and at the same time allow product aggregation, therebyincreasing the value of production. ACOPANELA is selling its products in the U.S. market under a brand (‘LaMolienda’).Information flow. PRODAP-II facilitated the development and dissemination of 80 bulletins on prices andmarkets, on a monthly basis.Trust. The organization of workshops and the dissemination of price and market information have contributed toincrease the level of trust and transparency among stakeholders.Horizontal integration. The project has supported the formation and strengthening of producers’ associationsand organizations. Producers' organizations have improved their managerial skills, allowing them to takeresponsibility for providing technical assistance to their members, partners and other organizations, to managetheir collaborations with other entities and to venture into more complex production initiatives (i.e. the orangejuice factory in the case of APPES and granulated sugar in the case of ACOPANELA).Provision of credit. 5,363 loans were disbursed to finance agricultural diversification, agro-industrial activitiesand off-farm activities; these loans have benefited 3,398 producers, 24% of them women.51

Diversification. Agricultural diversification was encouraged, through the provision of specific lines of credit andfocussed (demand-driven) technical assistance. This has promoted diversification into other activities (i.e. grains,horticulture, fruits, fisheries and livestock). Thanks to the provision of seeds, farmer households are growing newcrops like pineapple, tomato, watermelon.Capacity building. The provision of capacity building was included in response to direct demand by thebeneficiaries. Training of farmers’ organizations in how to enhance managerial skills and planning capabilitieshave resulted in the formulation of sound investment plans.Environment. PRODAP-II made provisions for promoting the sustainable management of natural resources.Environmental initiatives including soil conservation were promoted and incorporated into the trainingprogrammes for farmers, in schools and at municipal level. The project co-financed, through FISP, specificactivities related to the sustainable management of natural resources; and it has supported the establishment of91 greenhouses.Infrastructure. The project has facilitated the purchase of 33 irrigation systems benefiting 403 households.Chain efficiency/Competitiveness. Producers are placing their products at competitive prices in marketswhere the demand was once unsatisfied (as in the case of ACOPANELA).Inputs. Seeds are provided free of charge to the most vulnerable households to improve productivity. Seedswere also provided to encourage households to diversify production.Technology transfer. The project provided training aimed at improving farming techniques.Market linkages. Participation at fairs and workshops were supported, allowing beneficiaries to establishmarket linkages.Sustainability. Establishment of linkages with cooperating agencies, government institutions and employersfrom the private sector, together with support from the project or through self-management, has been veryimportant and has contributed to the activities’ sustainability.Sources:• República de El Salvador, Proyecto de Desarrollo Rural en la Región Central/PRODAP II (no. 508-sv), Informe deTerminación del Proyecto, IFAD 2009.• Diaz, O., Escobar, G., “Productores Rurales. La busqueda de mercados formales”, RIMISP 2010.52

12. Initiative for promoting rural entrepreneurship inRwandaAuthor: Espérance MukarugwizaOrganisation: Agri-Pro FocusThis case is one of specifically prepared by Agri-Pro Focus for the “Seas of Change” event, taking place in TheHague, 11-13 April 2012.Why is the case an interesting example?The IPER Program is a joint initiative of NGO, Private Sector, Government, Research institutions and farmerorganisations who strive to develop entrepreneurship of those who will be feeding the world in 2050.1. Context and backgroundAgriculture in Rwanda is for more than 90% smallholder agriculture with average acreage of less than 0,5 ha perfamily. To boost agricultural development and food production, developing entrepreneurship of successfulsmallholders is key. It is from this perspective that ICCO, Agriterra and Terrafina in 2008 decided to join forces inRwanda to make value chains more competitive, sustainable and inclusive. They developed a joined program andnamed it IPER (Initiative pour la Promotion de l’Entrepreneuriat Rural). When Agri-ProFocus late 2008 began withestablishing Agri-Hubs other Agri-ProFocus members (SNV, IFDC, Oxfam/Novib, WUR, KIT, VHL) joined theinitiative and IPER became the major activity of Agri-Hub Rwanda. All partners committed a certain amount of timeand/or money for a 4 year period (2009-2012). In the division of labor, the idea was that APF members, throughtheir existing partner relations and activities, would cater for the facilitation and coaching of commodity-orientedAgri-Business Clusters. All Agri-Business Clusters would be facilitated in the same way and also would get theopportunity to draw upon a small basket-fund for activities to resolve “burning issues” hampering the developmentof the respective Agri-Business Cluster. In 2009 IPER started with 15 Agri-Business Clusters in 6 Value Chains. Atthe end of 2011 the number of Agri-Business Clusters had increased up to 30, involving about 250 cooperativeswith an impact on more than 7,000 households.Within 3 years IPER has developed a successful model for boosting farmer entrepreneurship. Although theprogram as such will end in 2012, Agri-Business Cluster Leaders already have indicated that they will continuepulling together chain actors to find solutions for “burning issues” in the Cluster.2. Underlying business modelThe IPER program is a way to help organized farmers develop their business. At the heart is the idea offacilitating all actors along a specific value chain in a specific area to come together and discuss how to improvethe functioning of the value chain for the gain of all (win-win solutions). The model is inspired by CASE(Competitive agricultural systems and enterprises), developed by IFDC in West Africa.In general the programme has the following elements:1) Training of local Agri-Business Cluster facilitators, mostly working for local NGO’s2) Put in place a small ‘basket-fund’ to finance quick actions (consultancies, study-trips, etc.) to resolveburning–issues.The Cluster facilitators facilitate the process-cycle of Agri-Business Cluster development:1) Identifying “Cluster Leaders” (mostly leaders of farmers-organisations) and help them to organise a multistakeholderworkshop with representatives of all actors along the chosen value chains in their respectiveareas2) During the workshop define business targets and “burning issues” which should be resolved to improvethe functioning of the chain and reduce risks and/or increase profits for all actors,3) Make action-plans, find funding ( quick actions – basket fund; investments – banks) and implementimprovements4) Evaluate results and define new targets and “burning issues”, etc.53

InvestmentFundGuaranteeFund €Basket fund€ExpertsEconomic objectivesIndependent broker(agribusiness coach)Financial and humanresourcesNavigatingbusinessPOABC1Burningissues2Proposal forfacilitation andcapacitystrengthening31 5Serviceprovision4Demand-driven -- Basket funding3. Evolution of the initiativeThe IPER Programme is unique in its concept of collaboration of Agri-ProFocus member organisations and theirlocal partners. By June 2009, the commitments and contributions of the Agri-ProFocus coalition members werematerialized in a Country Collaboration Agreement. As from that moment, process facilitation started, mainlythrough the regular organization of workshops, training sessions and coaching missions. The countrycollaboration agreement clearly defined the roles of the signatories. Almost all participating APF membersaccepted to play a specific role. Five organizations would act as focal point for a certain commodity. Sixorganisations agreed to take the lead for cross-cutting thematic priorities. The commodities and thematicpriorities are indicated in the figure below.Facilitation learning bydoing process (WUR, KIT,ICCO, IFDC, SNV)Cross-cutting thematicpriorities and leadsIFDC Input supply &agriculturalintensificationTerrafinaOxfam Gender andNovib social inclusionAgriterraPO capacitydevelopmentWUR- AR, agriservices,CDI &KIT innovation &capitalizationOverall coordination(ICCO, WUR-KIT and Agri-ProFocus support office)Focal points for commodities and value chainsSNV ICCO OxfamNovibAgriterra Agriterra IFDC“Facilitators”Access to finance Honey Rice Maize Potatoes Cassava WheatHoneyclusters(3)Riceclusters(3)Agribusiness clustersMaizeclusters(4)Potatoclusters(1)Cassavaclusters(2)Ownership of IPER is shifting gradually to Rwandese organizations. In 2010, a provisional steering committee wasput in place, with the idea to involve Rwandan resource persons in the strategic orientation of IPER. In February2012, Agri-Hub members suggested to sustain the IPER program by setting up a diverse steering committee,54Wheatclusters(2)

where the private sector and farmers will play an important role. Since 2011, IPER’s approach attracted anumber of stakeholders who want to learn about value chain development and cluster approach. The Ministry ofAgriculture sees the approach as revolutionary. The Ministry of Commerce and Industry is planning to use thecluster approach to allow cooperative to access to market and finance. Thus, the IPER is now becoming areference for the Government of Rwanda in farmer entrepreneurship. The Agri-business cluster approach is alsoattracting RAB (Rwanda Agriculture Board) to be used in agriculture extension and innovation in the country.However, in taking up the IPER at the national level, some risks might be limited financial resources and the lessinvolvement of the private sector, with a predominant role of the Government.4. Impact on farmer entrepreneurshipOne key achievement of the IPER program is a remarkable increase of entrepreneurship among farmers. Theynavigate businesses as other entrepreneurs by:- Formulating objectives related to their farm businesses, in terms of production increase, improvingquality of productions/ seeds, starting processing the production, storage, turnover, market share, etc.- In solving burning questions, farmers work with other stakeholders to get more access to market, aregetting linked to financial institutions, get access to seeds and other extension services.- Entrepreneurship skills increase as the farmers strive to achieve their objectives. They innovate, seeknew market opportunities, take risks, etc.The impact of the basket fund on entrepreneurship development is very important. With a € 300,000,30 agri-business clusters have achieved a lot:- 10 clusters got new markets, and their margins increased by 20%. Contract farming is used in 3clusters and exports to Congo and Uganda are opportunities explored during the last two years.- 8 enterprises have improved quality of seeds- Production increased in all clusters- 2 Financial institutions developed new financial products to needs expressed by farmers- 5 cooperatives have developed new products,- 20 producer organizations have accessed to loan after coaching in business plan prepa ration. Theamount of loan is about € 1,000,000- 3 farmer organizations initiated their processing companies. One rice cooperative managed to getother chain operators as co- shares in a new rice processing miller.5. What are the key implications for scaling inclusive business?What are the lessons learnt regarding large-scale inclusive business development?- Have several pilots at the same time and organize cross learning between them,- Organize cooperation between all stakeholders, especially between donors and the government- Assure local ownership, avoiding donors with “spending pressure”.- NGO’s and people used to be helped by NGO’s, need time to realize what “entrepreneurship” is about.This paradigm shift needs ample attention at the level of information and training. Once people ‘get it’,the effect can be tremendous.What aspects of your approach might be usefully adapted to other large-scale initiatives? What arethe lessons that could be transferred to other upscaling initiatives? (adaptable innovations)- Define clusters of real-life actors who are interdependent to achieve results.- Put them together in a multi-actor workshop to discuss targets and “burning issues” to improvefunctioning of their value chain and increase profits for all ( win-win solutions)- Train and coach a pool of neutral facilitators who can be “hired” by a group of cluster-actors to facilitatethese value-chain improvement processes.- Put in place a demand driven basket-fund from which necessary actions can be financed easily with alight and quick procedure.55

13. Pathways towards sustainability: Farmer Organisations in thedriver’s seatAuthor and organisation: VECO/VredeseilandenThis case is one of a series specifically prepared by VECO/Vredeseilanden and local partners for the “Seas ofChange” event. The business partner involved in the case is FAPECAFES.Why is the case an interesting example?The case is interesting because FAPECAFES looks for chain improvements (with the help of Ethiquable) forplantains grown as shade trees for coffee. It is also interesting since not much research has been done onbenefits for farmers on intercropping coffee and plantain.1. Context and backgroundCoffee and plantain sub-sectors in EcuadorWhile Ecuador was the world’s 10 th biggest coffee exporter in 1990, 10 years later export figures plummeted toless than half of their 1990 peak. Ecuador continued to produce coffee with old technologies, resulting in thelowest yields in the world and reducing Ecuador’s competitive strength on the international market –impoverishing tens of thousands of small farmer families (COFENAC 2011). The coffee sector has been selectedby the Ecuadorian Government as a ‘strategic commodity’, and the Agricultural Ministry has started a 10 yearprogram (with 38 million US$) to reactivate the coffee sector.Despite the absence of structural investments in the production of coffee, Ecuador has invested a lot in thecoffee processing industry, boosting the most modern installations to process coffee into instant coffee. As aresult, Ecuador started importing a lot of coffee for the processing industry to have sufficient supply. In responseto this problematic situation, a coffee law was approved – leading to the National Coffee Council COFENAC(1995) and CORECAF, (1998) a syndicate of the coffee sector. Yet, during the first 5 years since COFENAC,results were not that good, and also CORECAF was not functioning as it should.Plantains (cooking bananas)Ecuador is the world’s biggest exporter of bananas and the third biggest of plantain. Plantain is a staple food withhigh nutritional value, and constitutes an essential element of Ecuador’s diet (used as cooked banana orprocessed products as flour, chips, and pancakes). Currently, the plantain sector employs approximately142,500 people on a yearly basis, supplying both the domestic and international markets with 550,000 tons ofplantain in 2009. Although the demand for plantain and its derivatives comes mainly from the internal market,international markets demand is increasing.Plantain cultivation is a very inclusive agricultural activity, with women participating in all activities, yet notreceiving a fair enumeration for their work. Main concerns for plantain cultivation is the use of chemical productsand the vast quantity of waste, with organic alternatives begin in an incipient stage of development. Both nationaland regional organisations exist that represent plantain producers, f.e. FENAPROPE and FAPECAFES, which seekto influence policies to improve the development of plantain chains for small scale farmers. However, limitedorganisational capacities and issues with representation impede major changes in the field. In response to thissituation, more local initiatives have surged, although they remain somewhat isolated initiatives.2. Underlying business modelIntercropping coffee and plantainIntercropping coffee in the shadow of banana or plantain plants is a common agricultural technique, mainly usedby small scale farmers, to make optimal use of limited land. Moreover, it gives farmers the benefits of spreadingtheir risks, both in terms of price shocks on the international market and failed harvests of one crop. Despitewidespread practice by farmers across Latin America and Central and East Africa, very little research has beenconducted towards the effect of intercropping coffee with banana/plantain.56

First findings of research of the International Institute of Tropical Agriculture in Uganda are very encouraging.Results show that intercropping coffee and banana appears to be more profitable than coffee mono-cropping.Since smallholders in sub-Saharan Africa are often resource-constrained the intercropping systems like coffeebananamay provide an opportunity to optimize resource-sue efficiency, allow farmers to spread risks, and strikea balance between food and cash generation. 22Case set-upThe plantain chain of coffee farmers supported by VECO is situated in the province of Zamora Chinchipe, locatedin the Amazon region.Chain related dataPlantain production: 2,962 to 3,360 tons of plantains per year, of which 1,163 tons by APEOSAE, APECAP andACRIM. To produce 1 ton of chips, 4 tons of plantains are required.Plantain demand: 2,240 tons of plantains per year, of which Ethiquable demands 5%, local mar-kets some23%, regional markets 38%, domestic consumption 4% and animal consumption 6%. There is no demand forthe remaining 24% at this moment in time.Production cost: USD 0.13 per kilogram (national average USD 0.10 per kilogram).(López and Choez, 2009)Average farm size:28% of banana producers have up to 1 ha of crops, 18% of producers have between 1 to 3hectares of banana crops (Flores, 2011).3. Problem analysisMain problems/bottlenecks faced by coffee farmers in the plantain chainA problem arose when family farmers discovered that their production capacity (coffee) was insufficient tosupport their families, particularly in times of crises, be it because of bad climatologic conditions or low marketprices. Hence, FAPECAFES looked for chain improvements with the help of Ethiquable, a French importer of fairtrade products. Together they looked into the coffee cultivation process and they explored the option ofcommercialising plantains, which were growing in between the coffee plants.A general problem that FAPECAFES faces at the moment is the uncertainty in demand for plantains and chips. Ifproduction and storage capacity would increase as planned, the supply for which there is no demand would riseeven further. FAPECAFES is working on these capacities, it has made projections for the coming years on theselling possibilities, and is executing a feasibility study for building a chip processing plant of their own.Another impediment to the sector’s growth is the high cost of processing plantains into chips and the completeabsence of organically produced chips. Although the chips produced from Zamora Chinchipe’s plantains alreadybear the fair trade label, the origin of the chips is insufficiently traceable to give it any organic label. The problemat the processing level is the difficulty in obtaining the appropriate oil (which is organically certified).A third element to afflict the plantain’s sector is the absence of a government sanctioned framework to streamlineproduction processes and market chains. Efforts have stalled to implement an initiative that would stimulate andcontrol production and marketing processes of the plantain and feed policies to increase the plantain’scompetitiveness on the market.A fourth impediment for the plantain farmers (and others) is the bad condition of regional and local roads in theregion, complicating the movement of goods, especially under bad weather conditions. Collection and storagefacilities in the region are insufficient, causing delays in the primary processing, under-optimal use of labour andloss of produce. A last important hindrance concerning infrastructure is the absence of a factory that couldprocess plantain into organic chips, charging lower processing costs.4. Evolution of the initiativeFarmer organisation and its pathway towards sustainabilityUnderlying motives of FAPECAFES for investing in plantain chipsThe coffee farmers of Zamora Chinchipe have traditionally, since colonial times, been growing plantains, but forthe sole purpose of providing shadow to the coffee plants and for auto-consumption. The plantains from the22Similar findings have been found in studies conducted in Nigeria, Ghana, Nicaragua and East Africa.57

coffee plantations were sold at dump prices on the local markets. This situation changed when the coffeeproduction did not result in sufficient income for the farmers and their families, in part due to plummetinginternational coffee prices.Hence, FAPECAFES looked for chain improvements with the help of Ethiquable. Together they looked into thecoffee cultivation process and they explored the option of commercialising plantain, which grows in between thecoffee plants. ETHIQUABLE identified the plantain chips first, because of market demand. Afterwards, theystudied the production’s conditions.This commercialisation started both on the domestic and international markets. Especially for the internationalmarkets, the organisations aim to meet the growing demand for fair trade and ecological products, such aschips.Approach and actions of FAPECAFESTo answer the many challenges for plantain producing coffee farmers, FAPECAFES has sought support of outsideactors to improve its institutional capacity in developing the plantain chain. These are, among others, Ethiquable(which has focused on the wholesale and retail of plantain chips from the processing plant to consumers) andVECO Andino (which collaborates with FAPECAFES on the value chain from cultivation to processing).For the period of 2010-2013, FAPECAFES has planned actions to improve the plantain production chain’ssustainability (economic, environmental, socio-cultural and institutional).Since the initiative is still running, there is no impact measured, nor can we conclude on key implications forscaling inclusive business. The following section therefore sums up the actions of FAPECAFES to contribute todifferent forms of sustainability.5. Actions of FAPECAFES contributing to sustainabilityActions of FAPECAFES contributing to Economic SustainabilityIncrease farmers’ incomeThe main objective of the interventions is to consolidate the plantain value chain and improve the income of thefarmer families associated with FAPECAFES. This includes developing technical and commercial strategies toincrease storage and processing capacity, improve the product’s quality and boost sales on the domestic andinternational markets. There is a big focus on capacity development of the grassroots organizations andFAPECAFES, be it via workshops, consultancies or technical assistance to improve the plantain chain, fromcultivation to commercialisation. The production of chips provides coffee farmers with an extra income, althougha considerable part of their production goes to low price channels. Finding new markets for their products will bekey in sustaining an increase in the farmers’ income.Develop long term relationships in organic and fair trade marketsFurthermore, technical, administrative and commercial capacities of the grassroots organisations and ofFAPECAFES need to be strengthened, to ensure long term organisational and financial sustainability. Specialattention will be devoted to develop long term commercial relationships in the markets of organic and fair tradeproducts. Therefore, with the facilitation of VECO Andino, the organisation works on the creation and functioningof a Plantain Management Committee for the southern part of the Ecuadorian Amazon region, to create inter- andintra-regional partnerships and strengthen the bargaining position of plantain producers on a commercial andpolitical level.Actions of FAPECAFES contributing to Environmental SustainabilityPromotion of organic farmingFAPECAFES seeks to promote a sustainable agriculture chain for plantain through diversification in productionand cultivation of crops according to the standards of organic farming. In this respect, a proposal will bedeveloped for technical assistance and technology transfers for sustainable plantain farming. FAPECAFES isexploring options for a technical service (consultancies of private companies) supporting farmers in theproduction of plantain using a sustainable agriculture approach.58

Reduce negative environmental impact of plantain chainSpecial attention will be devoted to best practices in processing plantain and the treatment of waste generatedduring the storage and peeling stages of the production chain, to reduce the negative impact of these processeson the environment. FAPECAFES will be supported to develop environmental mitigation strategies.Actions of FAPECAPES contributing to Social/cultural SustainabilityPossible improved education and health care through higher incomeAlthough no direct external support will be given to education and health care, families will spend part of theirincreased budgets on these areas.Promote gender equalityAlthough women are generally well represented throughout the production chain, the gender equality will bepromoted in all aspects of the chain development. Bananas are a typical crop where women are more involvedwith, instead of coffee, which is a crop managed primarily by men. So the increased attention towards bananasand the production of high qualitative bananas and the processing into chips all lead to a greater income forwomen in the region. Besides the extra income, the voice and the value of women also improved because theyare now involved in an important crop and cash inflow source.Increased resilience to effects of climate change, economic shocksAugmenting the group of coffee farmers involved in the plantain cultivation will make them more resilient foradverse effects of climate change, as a diversification of their crop portfolio spreads their risks, improves soilfertility and reduces exposure for the failure of a particular crop.Actions of FAPECAPES contributing to Institutional sustainabilityRepresenting farmers towards government/ sub-sector institutions etc.- Strengthening the plantain production chain- It seeks to strengthen the capacities of the Plantain Management Committee, a body within FAPECAFES,as to create better access to and influence decision making processes and strengthen the plantainproduction chain in collaboration with local authorities and other entities involved in it.- The whole intervention is geared towards boosting the capacity of the local farmers organisations,member organisations of FAPECAFES, in terms of market reconnaissance, cultivation techniques andcommercialisation of their products, as well as improving their representation at higher levels (regionaland national).Contributing to an enabling environment for inclusiveness of small scale farmers- Improving storage and processing- Improved information access in information technology- Governmental support- A more unified representational among the plantain farmers, will result in more effective lobbying atgovernmental level and stimulate the creation of government sanctioned frameworks to promote theplantain production chain. The experiences of FAPECAFES with intercropping have attracted the attentionof the government and resulted in the support of a 10 year program (see also Chain sup-porters .MAGAP).Improving the position of farmers in the chain- By boosting the organisational capacity of the farmers organisations, they will be able to offer bettersupport services, as credit, technical assistance and com-mercial management for their members andimprove their own sustainability.- Improved business capacities and marketing abilities of the farmers. FAPECAFES has planned to make abusiness plan for local market and export including profile of the national and international consumers- FAPECAFES aims to bring the processing part of the production chain closer to the farmers as toincrease their control over this part of the process and reduce transportation costs. The interventionseeks to incorporate all relevant production actors into this move. FAPECAFES is exploring an alternativefor the actual processing plant to reduces transportation costs and boost the processing of plantainchips.59

Appendix 1: Overview chain actorsProducersThe members of FAPECAFES are identified as small organised farmers of Zamora Chinchipe, which producemostly coffee and plantain. A study of VECO Andino showed that:- 52% of the farmers’ income comes from coffee sales and 22% from the selling of plantains (by farmersthemselves) and chips (through FAPECAFES);- the access to food is not that difficult in this region. Most of the farmers have a guaranteed access tobasic products;- respectively 70 and 60% of the male and female farmers went to primary school, whereas none of thefemale respondents finished secondary school.- both men and women participate in the cultivation of plantains- there is a low level of participation of the youth in production activities.Organisations of the producersThe organised family farmers of Zamora Chinchipe that produce coffee are all member of 1 of the 3 farmers’organisations of that province: APECAP, APEOSAE and ACRIM. Of the 721 farmers that were member of thesethree organisations in 2010, 140 are directly involved in the program with VECO.FAPECAFES, a federation of coffee farmers in the south of Ecuador, was established in 2001 and quicklygathered some 1,500 farmers from 3 provinces, with the aim of producing on a yearly basis some 500 tons ofcoffee and exporting it to Europe and the United States. Currently, 7 grass roots organisations (such as APECAP,APEOSAE and ACRIM) are member of FAPECAFES, with a membership at present of over 2000 coffee farmers, ofwhich 600 also cultivate plantain.CollectorsThe bananas are collected in storage facilities (owned by the farmer’s associations) before being transported toprocessing plants. The collection and storage facilities are inadequate to meet the supply of the farmers, causingdelays that affect the quality of the plantains (often going to waste).ProcessorsThe main processing actors in Ecuador involved in the export of plantains or its derivatives are in order ofrelevance: Banchis, Exotic blends, ECOFRUT S.A., Frito Lays and Inalproces. There is also NutriCorp SA and SanLucas International Ltd. FAPECAFES has a trade agreement with ECOFRUT S.A. for processing the plantain fruit.Once the process is finished, FAPECAFES is responsible for transporting the chips to the seaport, from where itsend to the final market: France .Wholesalers and RetailNational and International marketsEthiquable is the biggest importer of fair trade products in France, including bananas, coffee and chips.Local marketsUnder the APECAP umbrella there are 15 small distributors of plantain for local market, where-as APEOSAE has27 small and 5 big distributors among its bases. FAPECAFES establishes the commercial agreements betweencompanies (like ECOFRUT) and the harbour of Guayaquil.ConsumersWhile domestic consumers do not attach any further rationale behind their consumption, interna-tional consumersseek to buy quality products to support fair trade farmers. The end-markets where they buy their food productsare increasingly developing traceability standards to make sure that the food they sell complies with food safetystandards. As such, FAPECAFES does not have any market-related research to the profile of consumers ofplantain chips or the international demand for it.Chain supportersThere are several bodies involved in the support of the chain, be it with technical assistance and research (e.g.COFENAC, GTZ), financing and credit mechanisms (e.g. VECO Andino, BNF (National Bank of Procurement) orenvironmental protection (Ministry of Environment). The main ones are:« VECO Andino, a Belgian NGO that seeks to improve farmers living conditions through the improvement ofproduction chains, provides financial support for chain studies, among others.60

« FACES, an Ecuadorian Foundation for Social and Community Support, has provided since 2008 credits andcapacity building workshops to small scale farmers.« MAGAP, the Ministry of Agriculture, Livestock, Aquaculture and Fishing, has been providing technical support,vaccinations and subsidies for farmers. Intercropping coffee and plantain has showed to be so adequate thatright now, the Ecuadorian Government through the Agricultural Ministry is starting a 10 year program forrenovating 50.000 Ha of coffee (both Arabica and Robusta) intercropped with plantain.« MAE, the Ministry of Environment, has been responsible for environmental monitoring and management of thearea, e.g. by granting forest exploitation rights and sanctioning infractions.« BNF, the National Bank of Public Works, has been offering credits to farmers, as well as insurance and savingsservices. (Lopez and Choez, 2009)« GIZ (the current GTZ), who has (co-)financed the local collection and processing cen-tres for plantain bananas.« Regional Government (GPZCH), Zamora Chinchipe provincial government intended to strengthen issues of thebanana production chain, coffee, cocoa and other agricultural chains« ACSUR: Spanish NGO who supports the chains of cacao, coffee and plantain via the Re-gional GovernmentChain influencersMAGAP and a whole gamut of subsidiary bodies (including COFENAC), have issued general decrees and lawsregulating the agricultural sector. Producers of plantain obviously operate within this legal framework, but so farno specific legislation has been devoted to them. The same goes for all other ministries involved and theirsubsidiaries. Worth mentioning in this regard are the trade agreements with the USA and the EU, which lift tariffson bananas. Most farmers in the province of Zamora Chinchipe are not aware of the legal framework to whichthey are bound. Also, there is little to no representation of the plantain farmers in the legislative bodies, furtherwidening the gap between the two actors and causing farmers to lose out on opportunities in the legalframework. (Lopez and Choez, 2009)In Ecuador the intercropping system is traditional and never has been changed. In other regions (like Costa Ricafor example) there has been a promotion of mono-cropping of coffee, in Ecuador this never took place, morebecause of lack of clear policies, but it is an important fact in the history of coffee and plantain.61