I admit ignorance - is this on the G8's table right now? Will eagerly await any guidance or shared vision! Thanks Simon.
Just finished a case study showing how Kenya's third largest insurance company has made a substantial impact on the food security and livelihoods of 75000 small holder farmers and is growing this base year on year.
To answer the 'Why' question...It is in their interest as this is a marginilised market with huge opportunity for top line growth. Competitor firms have not been bold enough to foray into this segment whereas established upper/middle income market spaces are saturated and highly competitive.
What makes it work is a collaborative approach between multiple firms, NGO's and government.So echoing Alison Griffiths sentiments below.
A simplified front end enabled by technology in the distribution and claims process with a complex back end which the farmers don't have to deal with are key innovations. This wholly owned Kenyan company is genuinely invested in the welfare of these farmers and have innovated an ecosystem around their farmer clients where improving yield and protecting the farmers against erratic weather patterns is all part and parcel of delivering their service.
Insurance firms protect against economic shock, banks offer capital and financial awareness, seed/fertiliser companies improve farming effeciencies, mobile operators push information to inform on farming methodology and one of these players takes on the role of aggregating output and accessing fair market prices on behalf of the farming units etc.
If these farmers are supported on multiple fronts by multiple firms and institutions the cost and risk of doing business in this space is reduced per stakeholder.
It is not so much helping from a corporate social responsibility point of view but economic necessity. Asias and global food demands will be supplied in the future by Africa where there is still arable land available for expansion. For companies to keep playing a role in global commodities they need to secure their supply by constructing long term win-win relationships with suppliers. However most african countries have limited commercial scale agriculture but do have many smallholders who are responsible for most of the agric production. How to scale extension and BMF by the companies is still a difficult question to answer. Currently in mozambique we work with outgrower promotion with several commodity companies but the structural challenges are enormous: difficuties in acessing finance, lack of commercial input companies, lack of public & private extension, limited infrastructure. Deep investments are needed to adress those. Companies with a long term perspective should be willing to invest in these structures.
Small farmers are key in a number of supply chains--coffee, tea, cocoa, and shrimp, pangaseus and tilapia aquaculture. But growers with less than 3 hectares produce half of the world's sugarcane. And the bulk of the world's soy producers are small farmers in India and China. Most of the farmers that grow rice and corn are also small holders in Asia and Afirca. Simply put, small holders dominate several supply chains and are important in many more. Companies cannot ignore them. Also, weather variability/climate change is forcing companies to look to multiple sources of supply to reduce the risk of shortages from traiditonal producing areas in any given year. However, if companies want small holder agriculture to continue to be important, than today's farm children need to see that farming is not only viable as a way of life, it is attractive as well. This is not currently the case in many areas which is why we have so much urbanization.
The biggest problems for companies are aggregation, quality and risk. There are huge aggregation costs so we need to find ways for small holders to work together to aggregate their product and maintain or ensure quality. The risk part is also interesting. Most of the poorest quality production often comes from small holders. And, small holders are as likely or often even more likely to bend labor laws and standards than even larger producers. These are all critical issues to address for companies--but they are more expensive with small farmers because it is as hard or harder to address these issues on a 1 hectare farm as it is on a 1,000 hectare farm. This is necessary but tough. It might be useful to look at ESOP or JV ownership models in processing and quality control aggregation systems to help farmers do this.
Even in the poorest countries, business opportunities exist. People have demand for goods and services, and they have the potential to supply them. All too often, though, markets in these countries fail.
In agricultural sectors, there are potential markets and buyers for products that meet certain standards of quality and volume. But local farmers or small companies lack the organization, knowledge, capital or incentives to provide these products. Other players in those value chains – seed and fertilizer suppliers, processors, traders – may face similar constraints. Financial institutions are often reluctant to lend within these sectors. Roads and other infrastructure are a perennial challenge.
These factors are red flags for larger private-sector businesses looking to develop new sources of supply. What’s needed in these sectors is coordination at multiple points along the supply chain to help the market function properly. But rarely will a single company invest the money on its own to make this happen. It doesnt meet their required investment hurdle rates. There are many externalities they dont benefit from. In Project Nurture the small farmers reap most benefits from increased sales on the fresh market not from selling to Coca Cola. And so, what we often see is a gap between potential suppliers and buyers, where neither side has the ability or incentives to connect to the other.
This is where catalyst, honest-broker organizations like TechnoServe can play a role. As a bridge-builder, we help provide the training, knowledge, incentives and coordination to jumpstart market activities and assist smallholder farmers and small businesses to become competitive market players. By facilitating connections between these groups and other participants in the value chain, including banks, input and equipment suppliers and major local, regional and global buyers, we can stimulate commercial activity and economic growth that lifts people out of poverty. This work can lower the risk and increase the returns for all of the players in the industry, including multinational or larger local companies that want to do good while doing well. This encourages additional investments and fosters a virtuous cycle.
Having painted that rosy picture of potential - it isnt easy. Examples of improving practice are growing but there is much still to be tried, tested and learned from.
If you think about it, risk is one of the biggest issues that small farmers in developing countries have that their counterparts have various insurance tools to help with. It may be very hard for regular insurance companies to work with small farmers (though Rabo did develop a tool in East Africa a decade ago that successfully helped coffee farmers through their cooperatives address price risks). Maybe this should be something govts or multi-lateral agencies address this.
Today big companies and NGOs talk a lot about sustainable agriculture and food security in the same context - working to feed the world while also protecting the planet involves working with farmers at all levels. In many emerging economies such as Cote d’Ivoire, Ghana, India, Indonesis, Vietnam, and even China and Brazil, we have been working with virtually thousands of smallholder framers, across key commodity crops, to help small holder farmers improve their productivity and incomes, through training and dissemination about the use of improve techniques, using new approaches to help establish basic compliance standards to meet customer requirements better, and overall helping them adopt better and more sustainable practices. -- Better crops, better quality, lead to improved yields, and more opportunities for us to help expand the markets available for their crops, and to improve the price they are paid. In some cases, we have seen benefits from an average income improvement of 30 percentor more as a result of a better quality crop and higher yields. this is how we are seeing pathways for improving livelihoods, while also seeing the means to improve yields, improve crop storage, conserve water,and help reduce potential environmental impacts.
Our experience shows that the private sector – including the 450 million smallholder farmers and entrepreneurs in the global food chain – can be the engine to alleviate hunger and poverty. But there are preconditions for lasting success. Among the most critical are policy frameworks that enable smallholder farmers to evolve into commercially viable businesses – policies in areas including property rights, markets and trade, infrastructure and investment and risk management. There is ample and compelling evidence that investing in agriculture is among the most effective means to reduce global poverty and hunger. Doing it right requires the public and private sectors to work together to implement policies and make investments that motivate farmers at every level to increase production responsibly and that enable food to move from areas of surplus to areas of deficit.
In case you haven't seen this yet - a great blog today by Geoffrey Dennis, CEO of Care International UK, and Chair, The Hunger Alliance, on the importance of investing in small-scale women farmers: http://snipbfp.org/16M0XSP - important in the context of today's discussion
Not clear to me either - put it in the "should" category!
That brings us to the end of the live discussion. Thank you so much to everyone for tuning in! Thanks especially to our panel and to all the Business Fights Poverty members who posted comments. It's been a rich and fascinating discussion. We will leave this discussion open - so please do continue to post your comments!
For more background on the issues raised in this discussion, take a look at our Sustainable Food Production Series with WWF, which included blogs by Jason Clay (WWF), Simon Winter (TechnoServe) and Mike Fernandez (Cargill).
A final thanks to our co-host, WWF. Follow them on Twitter (@BalanceWWF) and check out their blog, On Balance.
Beth / Simon - at least this is what the G8 New Alliance on Food Security and Nutrition is aiming for through PPPs. Lets see what the discussion in the UK this saturday throws up!
Thanks Mark. Fully agreed. The coordination challenge is significant however. Pre-competitive interventions like the Cocoa Livelihoods Program in West Africa have had good impact but have faced challenges in working out what should be in the domain of individual business' interests and what should be truly done through collaborative energies. We need to keep trying and making sure we are learning from our efforts to be more effective and impactful - and critically making sure we are investing in documenting and sharing research, evaluations and learnings so that we dont keep repeating the same things. A critical need to organizations like TechnoServe to be able to do this - is the resources to be able to participate as a full partner in not just executing interventions - but also building and sharing this knowledge.
Micro-isurance is an upcoming field of innovation. Sygenta foundatin, FAO and others have set up weather risk insurances, but I do not know of any experience with default insurance for contract farming to cover side-selling. This makes investment with pre-financed input packages a risk for companies. In Zimbabwe SNV facilitated wholesalers and seed fertiliser companies to do business with 800 rural shops and provide 2-5000 of inputs on credit basis or consignment stock. This was covered by an innovative insurance costing a fraction of the amount leveraged in inputs and delivered to farmers doorstep. Some shopkeepers gave inputs on credit to farmers but most of smallholders were seen as too risky. Insurance claims from companies (for non -repyament, recall of inputs/transport costs, fire, burglary) was over the years less then 3%. Price insurances, as mentioned by jason, to buffer against volatile prices for small farmers should surely be someting more common. What are the barriers, I guess good aggregate organisations/coops.
Hi Simon, please read about our sustainable & innovative irrigation solution for smallholder farmers- Bhungroo in my earlier post in this forum, which can work wonders if your company plays the role of an honest broker, as you say!
Hi Ged, your post is enlightening about the Body Shop's bountiful gains through a superior brand image but duping thousands of poor farmer suppliers in the process! Being a development professional, I represent a few agriculture based upcoming social enterprises, wherein I want to do something similar to Equitrade. How can I access more information on this model and how can we collaborate, if at all?
Hi there. I work part time in Ghana and have lived and worked in Cameroon for two years as an Agric-Forestry Value Chain advisor. I represent some committed social entrepreneurs in India, about one of whom I have written in an earlier post Mr. Biplab paul, an Ashoka fellow with innovative irrigation technology which can change the landscape for vulnerable african farmers. How can we collaborate to spread this and other innovations across African continent? I can be reached at rkjani@gmail.com. Regards.
Very interesting work with regard to nutrition security. Together with my 'Nutrients for All' venture, we can contribute significantly in advancing this mandate of yours. Pls. write to rkjani@gmail.com, if interested to explore further. Thanks!
Nick Coger has stimulated very important discussions. I would wish to get to one dimension of the discussions that focuses on the negotiation tools farmers need in order to compete in the 21st Century. I would like to present my discussion by use of the power cube that was developed by John Gaventa of the Institute of Development Studies, Sussex. It has 3 dimensions; spaces, places and the faces of power and offers a way to examine participatory action in development and changes in power relations by and/or on behalf of poor and marginalized people.
The Power Cube Framework (PCF) looks at power in relation to how spaces for engagement are created, the levels of power (from local to global), as well as different forms of power across them. It enables strategic assessments of the possibilities for transformative action by citizens, and how to make them more effective. It does this by distinguishing participatory action along 3 dimensions- places, space and faces of power. I will concentrate on visible, invisible as well as hidden power to effectively bring out my views.
Visible power: In the first form of power (visible power), contests over interests are assumed to be visible in public places, which in turn are presumed to be relatively open. This level includes the visible and definable aspects of political power- the formal rules, structures, authorities, institutions and procedures of decision-making.
Hidden power: Is where entry of certain interests and actors into public spaces is privileged over others through a prevailing mobilization of bias rules of the game like Bilateral trade agreements or Economic Partnership Agreements (EPAs) and Export bans; The packaging requirement, Trade-Related International Patent/Copy rights (TRIPs), Rules of Origin (RoO) and Trade-Related Investment Measures (TRIM) by supranational states. Certain powerful people and institutions maintain their influence by controlling who gets to the decision-making table and what gets on the agenda. These power dynamics operate at many levels to exclude and devalue concerns and representation of the less powerful groups who happen to be the developing countries.
Invisible power: Thismanifests itself where conflict is more invisible, through internalization of powerlessness, or through dominating ideologies, values and forms of behaviors in line with Washington-backed free-trade that is informed by the neo-liberal paradigm. The market information we all need to effectively participate in the commodity production and marketing negotiations in form of history, data or knowledge has been used selectively (skewed) in favor of the powerful supranational states. Invisible power shapes the psychological and ideological boundaries of participation: significant issues such as increment of development assistance to sub-Saharan Africa and the need to subsidize agriculture are kept away from the decision-making table.
The minds and consciousness of the various actors in developing world are kept away from the decision-making table. By influencing how individuals think (in terms of free-market economics) about their place in the world, this level shapes peoples’ beliefs, sense of self and acceptance of the status quo – even their own superiority or inferiority. This perpetuates exclusion and inequality by defining what is normal, acceptable and safe.
Based on the above analysis, we can be able to come up with the tools needed by our farmers to compete favorably in this century;
· The need to enhance equitable participation in multilateral trade negotiations (such as WTO);
· The need to enhance the advocacy approaches by NGOs such as Oxfam in form of public debate, informed research and engagement of the “movers and shakers” in Geneva, Paris Brussels and Washington for a “level playing field”;
· The market information we all need to effectively participate in the multilateral trade negotiations in form of history, data or knowledge has been used selectively (skewed) in favor of the powerful supranational states. With the most sophisticated and up-to-date ICT tools, data base requirements, statistics and technology as visible forms of power, the powerless can hardly beat the chief negotiators (with power) at their own game. Even simple requests for information are denied. This has to be challenged if we are to compete favorably in this century;
· Many decision-making spaces are closed to poor farmers in Africa; decisions are made by a set of actors behind closed doors, without any broadening of boundaries for inclusion. This should be changed to include us;
· A power form that is invisible or in which conflict is invisible is exhibited through the dominating ideologies or values of free trade that is informed by the Washington-born neoliberal paradigm that influences the outcome of the negotiations as propounded by Gaventa’s PCF. This perpetuates exclusion and inequality by defining what is normal, acceptable and safe. It should be revised if we are to accrue equitable outcomes with the big brothers; and,
·The Western Media is a visible form of power backed by invisible power actors who spread the gospel according to the neoliberal paradigm through avenues such as BBC, VOA, CNN, Digest, Gemini, Sky News, Daily mail and blogs. This tool has to be skewed away from the poor. If the poor are to compete favorably in the 21st Century, the media should have a balanced way of viewing issues to include the needs and concerns of the poor farmers in sub-Saharan Africa.
Hi Mark, I tend to slightly differ in my opinion about what and how businesses should play its role. Take for example a large private sector bank in India is the biggest lender for the Dairy sector across its value chain i.e. starting from cattle loan to funding productive investments and finally helping improve productivity with Gap CSR funds. This on one hand has met the needs of small farmers to traders of milk while on the other it has set a benchmark for other banks and private players to imitate/replicate the success model. Even though Govt. of India through its nodal ministry and the nodal agro-lending bank (NABARD) has got a huge influence on dairy sector especially through offering subsidies for varied business components, it is still the business-like approach like the above example ('Milk to Money' program of HDFC Bank) which has helped thousands of small-holders to enter into this lucrative business of milk and the dairy sector rather than the Govt.'s incentives. My point is that today the drivers for many of the Agro-VCs are private businesses who have the financial muscle and capabilities to make a win-all impact rather than the good intentioned Governments and donors, though the latter's support to expand the private/community businesses and widen the depth of the sector can not be undermined.
mark murphy said:
Today big companies and NGOs talk a lot about sustainable agriculture and food security in the same context - working to feed the world while also protecting the planet involves working with farmers at all levels. In many emerging economies such as Cote d’Ivoire, Ghana, India, Indonesis, Vietnam, and even China and Brazil, we have been working with virtually thousands of smallholder framers, across key commodity crops, to help small holder farmers improve their productivity and incomes, through training and dissemination about the use of improve techniques, using new approaches to help establish basic compliance standards to meet customer requirements better, and overall helping them adopt better and more sustainable practices. -- Better crops, better quality, lead to improved yields, and more opportunities for us to help expand the markets available for their crops, and to improve the price they are paid. In some cases, we have seen benefits from an average income improvement of 30 percentor more as a result of a better quality crop and higher yields. this is how we are seeing pathways for improving livelihoods, while also seeing the means to improve yields, improve crop storage, conserve water,and help reduce potential environmental impacts.
Our experience shows that the private sector – including the 450 million smallholder farmers and entrepreneurs in the global food chain – can be the engine to alleviate hunger and poverty. But there are preconditions for lasting success. Among the most critical are policy frameworks that enable smallholder farmers to evolve into commercially viable businesses – policies in areas including property rights, markets and trade, infrastructure and investment and risk management. There is ample and compelling evidence that investing in agriculture is among the most effective means to reduce global poverty and hunger. Doing it right requires the public and private sectors to work together to implement policies and make investments that motivate farmers at every level to increase production responsibly and that enable food to move from areas of surplus to areas of deficit.