Climate Conversations - Green value chains transform vulnerable farmers into entrepreneurs

By Naoufel Telahigue and Rami Abu Salman

Organic cocoa farmers in Sao Tome and Principe have benefited from
an IFAD scheme linking them with overseas buyers. PHOTO/IFAD

Next month, we will all gather again in Rio de Janeiro to work out what went wrong 20 years ago and consider solutions that we have dismissed.

Children who were 12 years old during the first Rio summit, in 1992, might now be quickly approaching the end of their life expectancy in some countries. But what if smallholder farmers had been at the centre of the debate 20 years ago?

At the International Fund for Agricultural Development (IFAD) – the United Nations’ agency focused on rural development – we believe there can be no green economy without “green” agriculture.

Agriculture is a key economic and development sector in all countries across the globe, recognised by world leaders for boosting gross domestic product (GDP). If done sustainably, agriculture can provide a significant opportunity for the 1.4 billion people living in extreme poverty to improve their lives, and cater to the food security needs of the world’s more than 925 million malnourished people.

In addition, climate-smart and simple technologies can help poor smallholder farmers to build their resilience and mitigate risks associated with climate change.

IFAD and its partners have been working to ensure that innovation and investment in agriculture -  and more importantly in the world’s 500 million small farms - lead to long-term sustainability.

Organic fair-trade Cocoa
In Sao Tome and Principe, for example, IFAD has helped turn around the dying smallholder cocoa sector after the collapse of world market prices in the late 1990s.

By setting up public-private partnerships with overseas buyers of organic fair-trade cocoa of high quality, the project helped small farmers establish export cooperatives and achieve stable and significantly improved incomes.

Smallholder families participating in the programme have seen their yearly income increase, on average, from a level 25 percent below the poverty line to 8 percent above it. One particularly successful producer used the profit from organic cocoa production to set up a small roadside shop that his wife runs, generating even greater profit.

This initiative was coupled with organising small farmer groups and training them in organic and conservation agriculture, solar drying, integrated pest management and other environmentally sustainable practices.

Growth potential
Smallholder farmers have untapped growth potential. The message IFAD will take to the upcoming conference in Rio is that we must explore this potential by transforming smallholder farmers into empowered business women and men.

This transformation requires adopting new approaches that are competitive, sustainable, sufficiently diversified and within the carrying capacity of natural ecosystems. By helping smallholders in integrating and developing “green value chains”, we offer them an opportunity to sustainably harvest not only food, but also economic, social and environmental benefits.

For instance, a new initiative in Sierra Leone is aiming to develop markets for high-quality organic, fair-trade cocoa. The project will rehabilitate a cocoa plantation abandoned during the war.

Prices for good-quality certified cocoa are less susceptible to market fluctuations, and this encourages further investment and assures sustainability. In addition to the extra income provided by intercropped plants, cocoa agroforestry systems will support greater biodiversity and avoid land degradation and erosion caused by slash-and-burn farming.

Smallholder farmers have immense potential to contribute to a green economy and to sustainable growth in general. To do that successfully, they need enabling environments and support such as improved access to land, water and markets, financial services, adequate technologies and technical assistance.

In this respect, promoting the role of women and youth as farm entrepreneurs is particularly crucial. We have the means, we have the knowledge, and now we need the collective will. If we don’t act now, we risk going back in another 20 years to acknowledge the failure of choices.

Originally posted on AlertNet blog

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Naoufel Telahigue and Rami Abu Salman are Regional Environment and Climate Specialists at the IFAD. IFAD is co-organising Agriculture and Rural Development Day on June 18 ahead of the Rio+20 Summit in Rio de Janeiro.

Why the farmer should be put first

by Kanayo F Nwanze, IFAD President

Sustainable investment in agriculture is the most effective way to reduce rural poverty, improve food security and stimulate economic growth

Planting maize seeds in Mswagini village,
Arusha Region, Tanzania.

In recent years, agriculture has gone from obscurity to having a central spot on the G8 agenda. For those  working in rural development, this revival of international attention is very welcome, as is the recognition of an increased role for private sector investment.

Private investment in agriculture usually suggests the involvement of large organisations. But, cumulatively, smallholders are significant investors in this sector. There are around 500 million small farms in the world. More than 95 per cent of agricultural holdings in developing countries are less than 10 hectares. In Asia and
sub-Saharan Africa, about 80 per cent of farmland belongs to, or is cultivated by, smallholders. Around two billion people depend on these farms for their livelihood.

Smallholders invest not only their own money, but also their time and labour in their farms. Therefore, it is fair to say that they are the primary on-farm investors in agriculture in developing countries. New investments in agriculture must be sensitive to the requirements of smallholders if they are to achieve the desired result of improving global food security and reducing poverty.

The power of smallholdersInvesting in agriculture in developing countries is the single most effective method of improving food security for the world’s poorest people, while also stimulating economic growth. Growth generated by agriculture is at least twice as effective in reducing poverty as growth in other sectors. Experience repeatedly shows – in countries such as Burkina Faso, China, Ghana, India, Thailand, Vietnam and elsewhere – that smallholders can lead agricultural growth.

Successful small farms can transform destitute rural landscapes into vibrant economies, resulting in local demand for locally produced goods and services that also spur non-farm employment in services, agro-processing and small-scale manufacturing. This demand, in turn, leads to a dynamic flow of economic benefits between rural and urban areas so that countries have balanced and sustained growth.

There are sound economic reasons for supporting smallholder farming. Farming production systems have few economies of scale. Small farms are often more productive, per hectare, than large farms when agro-ecological conditions and access to technology are comparable. In India, for example, smallholders contribute more than 50 per cent of total farm output, even though they cultivate only 44 per cent of the land.

New investments must be sustainable – economically, environmentally and socially

One reason for this high productivity rate is that small farmers have a strong personal incentive to get the most out of their land and from their own family labour. Another reason is that family farms have
very low management costs and are labour intensive, while larger farms are often heavily
mechanised or have high costs involved in managing the workforce.

Nevertheless, in many developing countries, particularly in sub-Saharan Africa and parts of Asia, poor farmers do not produce enough to feed themselves and their families. Instead, they are net buyers of food
and, with incomes of less than $1.25 per day, they cannot afford to buy much.


If the goals in investing in agriculture are to improve the food security of those who are hungry and to improve the economies of developing countries, then the aim should be to transform smallholder agriculture into successful businesses that are profitable and generate surpluses, and that can help provide
career opportunities and a potential pathway out of poverty and hunger.

Targeting the investment
When one talks about farmers in developing countries, one is often talking about women. On average, women make up 43 per cent of the agricultural labour force in developing countries. In East and Southeast Asia and in sub-Saharan Africa, this figure rises to almost 50 per cent. In investing in rural areas, the capacity of women farmers to invest more effectively and with less risk must be supported, given that women in rural societies face greater constraints. Rural women usually have more limited land tenure, less access to credit and equipment, and fewer market opportunities than have men.

New investments must also be sustainable – economically, environmentally and socially – so that the benefits last, through the years and the generations. Anyone who has travelled into the rural areas of developing countries will have seen the aftermath of unsustainable development: broken tractors abandoned in fields, withered and untended trees, forsaken hillside terraces. This is the residue of development efforts that did not respect and respond to local conditions, whether cultural or environmental, and that did not work with the local community from the start.

Similarly, the Green Revolution that transformed Asian agriculture in the 1970s focused on reducing the number of crops and increasing reliance on improved seeds, fertilisers and better irrigation. It produced
remarkable short-term gains, but came at a cost to the environment and to local species.

In the years since the Asian Green Revolution it has become clear that agricultural growth must be ecologically sustainable and that a diverse range of species, genetic variation and ecosystems is necessary
in order for the land to be able to provide for future generations of farmers.

Indeed, in many developing countries, simply optimising conventional approaches, such as the simple use of fertilisers and micro-irrigation, could yield dramatic results. Only about six per cent of the total cultivated
land in Africa is irrigated, compared to 37 per cent in Asia. Irrigation alone could increase output by up to 50 per cent in Africa. Small increases in fertiliser use could also yield dramatic improvements in yields
without risk to the environment, since farmers in sub-Saharan Africa use, on average, less than 13kg of fertiliser per hectare. This compares with 73kg in the Middle East and North Africa, and 190kg in East Asia and the Pacific.

There is also a critical need to develop national and regional markets, to ensure that productivity gains from new investments have the intended economic impact on developing-country economies. Similarly, there is an urgent need to invest in basic rural infrastructure. Today, about 30 per cent of the food produced is wasted, largely as a result of the absence of such basic necessities as markets, warehouses and paved roads.

Community-driven development
At IFAD, we see time and time again the transformation that occurs when development is sustainable and when local people are involved from the start. Last year, I visited Zongbega, a village in a drought-prone region of Burkina Faso, where smallholders are using simple water-harvesting techniques such as planting pits and permeable rock dams, along with crop-livestock integration. As a result, they have restored land that was once degraded and have increased their productivity. In Niger, a water-harvesting project in the Illela department is still going, more than 15 years after the funding ended – a fine example of the benefits of community-driven development.

In recent years, we have been scaling up what we know works, strengthening value chains, extending rural finance and creating new market opportunities for smallholders and other poor rural people. This year, as
world leaders meet for the G8 in May and the G20 and the United Nations Conference on Sustainable Development in Rio in June, there is an unprecedented opportunity to solidify the role of public-private partnerships in support of agriculture. I hope their deliberations will take into account the biggest on-farm agriculture investors in developing countries: smallholder farmers.

Originally published by Munk School of Global Affairs

The Private Sector Development Strategy back story

From Mylene Kherallah of IFAD's Policy and Technical Advisory Division:

“Oh no, not again” was my first reaction when asked to lead the preparation and write-up of IFAD’s new Private Sector Development Strategy. I had already been through that experience in 2005 for the old strategy, and it was not exactly a pleasant memory.

A programme in Sri Lanka links smallholder farmers with
private-sector partners. © IFAD/G.M.B. Akash

The purpose of the strategy was clear enough: to help create new markets and opportunities for poor rural people by deepening IFAD’s engagement with the private sector. And it was not the writing that I minded. It was trying to obtain the consensus across the house through the various committees and getting the approval from the Executive Board that was the most daunting task.

Having to go through endless revisions, and incorporating comments that often contradicted each other, was an agonizing process – especially since the word “private sector” was interpreted differently by various people involved.

But how can you say “no” when a senior manager asks you to do something? So, building on my previous experience, I decided that the best way to handle this was to (a) take it one step at a time; (b) seek help and lots of it; and (c) use this occasion to improve my ability to listen, tolerate different views and develop my sense of humour under duress. Not sure I succeeded in applying point (c) at all times, but at least I tried.

Despite my apprehensions, I have to say that it was not as painful as I thought it would be. Despite a contentious informal seminar, a pre-feasibility study that was conducted in an extremely rushed timeframe, and a failed, long-winded attempt to circumvent official procurement procedures for the study (shame on me), the strategy was approved at its first submission to the EB in December 2011. My worst fear was that they would ask us to revise and come back again at another EB meeting, which is what happened for the previous strategy. But not this time!

In retrospect, I think several things made it work:

• enough lead time – we started work early in January 2011 and therefore had enough time to “take it one step at a time” between organizing a Policy Reference Group, writing various drafts and PowerPoints, getting feedback, seeking consensus in-house and obtaining the various approvals;
• a Policy Reference Group made up of a diverse mix of committed IFAD staff, which really made it happen – aside from the technical and strategic guidance, it was a fantastic moral support group;
• communication and consultations with other staff and external stakeholders, which improved our knowledge in this area; and
• the Senior Manager’s (Kevin Cleaver’s, in this case) constant guidance and support, quick responsiveness and his great sense of humour, which helped keep everything in perspective.

#sfrome Challenges and Opportunities of engaging in a private-public partnership: The Oil Palm experience (69)

By Marieclaire Colaiacomo

The Vegetable Oil Palm Project in Uganda is now in its second phase and it is always fascinating to get a feel for just how far IFAD has stretched to touch the rural poor. This is the largest public-private partnership IFAD has ever seen and the most successful to date. Marian Bradley, CPM for UGANDA at IFAD guided us through a visual presentation today which was nothing short of spectacular.

Once importers of palm oil from Malaysia over 8000 km away, Uganda with the aid of BIDCO (private oil company) and the brokerage of IFAD who provided the financing, introduced oil palm on the island of Bugala through a unique public private partnership. IFAD acted as facilitator and mediator to ensure that the interests of the Borrower and smallholders were protected in this tripartite agreement between the Government, the private sector and farmers. It wasn’t easy Marian tells us. And the first phase was very challenging, the results have enticed smallholders who have seen their incomes increased threefold since starting to cultivate oil palm and now for the second phase farmers are anxious to join the project.

An international effort. Seedlings are imported from Costa Rica, expertise from Malaysia with financing from the private sector and IFAD – a perfect combination based on a technically solid and economically safe investment.

Establishing of the farmers trust has taken time, and there have been many field level technical challenges, like termite hills, poor soil fertility and micro-nutrient deficiencies and fertilizer scarcity at times!

How did IFAD manage? Through the establishment of a Trust that guaranteed smallholders the required protection and calculation of a fair market price for their produce. Farmers now have bank accounts, can cover their medical expenses and send their children to school!

IFAD and the way forward. To create opportunities for smallholders we need to create trust and linkages with Governments and private sector and we can only achieve this if we understand the industry we wish to operate in and the specific socio-economic and political context we find country-by-country.

#sfrome: Demystify public-private partnership - thoughts on the keynote by Mark Davies

Written by Anna Spiteri

Wednesday's keynote continued to enlighten us on what is happening out there in the real world of entrepreneurship. Mark Davies talk was direct and dynamic and for me he certainly did “Demystify public-private partnership” with his honest approach! His description of the whole journey ...from geeks, suits and angels to sex and marriage...gave a concise view how the whole field evolved over the years. And by the time he set up his company esoke in Ghana, and 16 other countries in Africa since, he poured not just his energy and time , but a lifetime of experience into it as well, to make it the success it is today. Times have changes, he said, it is no longer the crazy expectation, that if you build something, demand will follow. His team, that grew from 2 to 30, all young local whizz kids are learning to respond to the field as there is constant change, which he admitted, it s exciting but also confusing. Amongst his successes he counts that he was the first to publish a commodities price index in Ghana, which puts a context into his trade. His business is to send farmers commodity prices through smses, which is a trend that is empowering the farmers as it enables them to negotiate with the traders. And thus marriages are saved as no longer the wife or husband quarrel whether the selling price should have been higher! Farmers say they have made 40% increase in savings, across the board, but esoke is only made up of hundreds of farmers, not the required hundreds of thousands to make the business viable.

He openly advocated that “we need to experiment and make mistakes”, but we need also to go out there, meet the farmers face to face, and ask them what they want, and start building a farmer profile, very much the same what Su was saying the day before with icow! It is a fact that technologies are emerging in Africa, and there is growing interest from operaters such as airtel, orangel and Vodafone as cities are saturated and the potential growth is in rural areas.

For the entrepreneurs he advises that it takes time to develop markets and takes money to incubate projects, and advocacy to attract innovators, and not forgetting experience! For the public sector he mentioned credibility, evaluation and of course the money! And for both...public and private he said the partnership will not work unless there is a clear and articulated institutional strategy with a legal and operational framework that binds them together.

His clear message was that angels are very important too as investment funds will launch the business, and large organisations should put aside 5% of their budgets for private partnerships .

Taking innovations to the market to benefit the rural poor – The Villgro experience - India

How can innovative products with rural benefits be brought to the markets and thus impact the daily lives of the rural poor? How can the gap between rural innovators and entrepreneurs be bridged?

The Office of the Chief Development Strategist invited Mr. Rathin Roy, a consultant who has often collaborated with IFAD, to present the experience of VillGro, an India-based NGO that aims at taking rural innovations to the market.

VillGro has endeavoured to find and support the home-grown geniuses who, when confronted to the problems faced by small-scale farmers on a daily basis, have come up with simple but useful solutions, be it a fuel-efficient stove, a coconut dehusking machine, or an insect-trap.

Over its ten years of existence, VillGro has known failures and success stories, and it has built on this experience to develop a unique model of “incubating” innovations, a process through which an innovation is tested, improved, marketed, and progressively connected to entrepreneurs and investors through the design of a business plan and VillGro’s extensive networks. If this experience is of any value, we should admit that “Innovators are not Entrepreneurs !” said Rathin Roy.

Of course, not all innovations, useful though they might be, can pass the test of the market, and VillGro therefore applies a rigorous screening process that allows a mere two percent of all submitted applications to reach the incubation stage. In spite of this screening process the failure rate remains close to 50%, making innovations incubation a “Risky business” as Rathin described it. The test of the market remains the only and main guarantee of sustainability of an idea or solution. Hence the importance of creating what Rathin calls an “innovation incubation ecosystem” that consist of a number of support services around the incubation function that help increase the likeliness of success. Investors are critical to bringing ideas to scale. Venture capital tend however to exit too quickly as compared to what rural innovations would require and there might be a role for agencies like IFAD in providing what Acumen Fund calls “patient capital” while ensuring that we do not bypass the market test.

This presentation of VillGro’s experience was particularly interesting from an IFAD standpoint, as the organization is now engaged in a process of boosting its innovation and knowledge management strategies, and is promoting the vision of small-scale farmers as business-persons. The ensuing debate emphasised the contribution that institutions such as IFAD can make by promoting innovations at a local level through an awards system, or by sponsoring innovations that are promising but would not be immediately profitable if marketed. IFAD could also make use of its extensive networks at country and regional levels to promote innovations in its projects and on the local markets. A number of challenges were identified on the road, such as the difficulty of working through public agencies to promote innovation. The presentation and debate also stressed the importance of experimenting with the incubation of innovations in order to progressively define the right set of tools and a flexible strategic framework and the need to innovate and sharpen our own instruments if we are to engage in this field more substantially.