The institutional context

Private sector organizations

Farmers associations and cooperatives. Rwanda farmers have a tradition for creating associations for a variety of purposes, ranging from social activities to mutual assistance in case of need, to ROSCAS. Some associations are established to exploit opportunities offered by donors funded projects. They are often sponsored by NGOs but tend to disappear when such opportunities fade due to the closing of a project. Other associations respond to specific needs of the people, are more stable and tend to be more permanent even though their membership may be subject to significant turnover. Women generally more interested in group activities than men. A large number of formal cooperatives currently exist. The membership of some formal cooperatives may not be exclusively smallholders. There are many cooperatives of coffee growers, and some large cooperatives of tea growers. In terms of efficiency and capacity, the situation is naturally highly diversified. Many groups, associations, and formal cooperatives are confronted with serious operation and management problems and need considerable support for institutional strengthening and training.

National NGOs. There are a large number of national NGOs in Rwanda. The quality of their staff and of the services they provide is very variable. However, a number of them have acquired a reputation for having competent, well-trained professional personnel who have organized themselves under the NGO formula to provide services of a public nature. Many among them have returned to the country after a long period abroad where they acquired considerable experience. Several NGOs were initially developed under the financial umbrella of I-NGOs that funded their activities. Over time, they developed their own market, providing services funded by development projects, and/or serving private clients. Most of these NGOs have substantial experience in working with rural people on social development and agricultural production. Some are highly specialized, for example: ARAMET specializes on aménagement du territoire, ARD specializes in agricultural development and multiplication of planting material of improved varieties, DUTERIMBERE specializes in microfinance and rural institutions, INADES-RWANDA specializes in cooperative formation and training, IWACU on community development, participatory approach, and training.

Several among the best national and international NGOs operating in Rwanda have good experience of formation, training, and general support to farmer associations. Some have good experience in developing rural credit and micro-finance institutions. However, the capacity to train and support processing and marketing operations of farmer groups and cooperatives is generally poor. With the exception of a recently introduced USAID project, experience is practically non-existent with respect to developing export marketing operations. This reflects the slow development of marketing systems and technologies in the country, and the lack of competition in the key export markets for many years, which has prevented the introduction of innovative methods.

Fair Trade International Organizations and TWIN. A key feature of the IFAD project is the mobilization of the Fair Trade Organizations for introducing a new approach to developing the traditional export crop sub-sector. As indicated in Chapter IV, there are national Fair Trade (FT) Federation established in 16 highly developed countries, that bring together several “Fair Trade Trading Partners” within each country, and an international organization, “FLO International”, that provides independent certification of the products retailed by FT trading partners under true labelling of origin and quality in their respective consuming countries.

The TWIN group is one of the FLO trading partners. It was established 10 years ago in the UK. TWIN currently operates with 24 production cooperatives in 10 countries, supporting a great number of farmer families. Among the Fair Trade Organisations, TWIN is including countries in East Africa and Latin America, the most experienced in smallholder cooperative development, organisation and management. The TWIN group includes: (i) TWIN, which is a charity limited by guarantees, (ii) TWIN TRADING, a commercial private company, and (iii) three associated trading companies: Café-direct, Thé-direct, and Day Chocolate Ltd. TWIN is mostly responsible for work with poor primary producer cooperatives. TWIN’s skills are in the mobilization, training, and organization of farmers associations, and in providing quality control, market information; management assistance and marketing assistance. TWIN provides the link between producers and consumers and ensures that farmers understand and apply the cropping and crop-processing practices required to meet the standards that would command the highest prices in the international markets. The policy of the group is to develop, on behalf of cooperatives of poor producers, specific market niches for labelled products that can sell at very attractive prices. The price at which the produce that meets specific quality standards will be purchased is announced at the beginning of each crop year. The larger trading margins are used in three ways: (i) to return one part of the profits to the cooperative of producers, (ii) to invest in further development of the market niche for the products, and (ii) to pay for the continuation of TWIN services to the cooperatives. The FT organizations statutory mandate is “fair trade as a means to improve the livelihood of poor agricultural producers”, and TWIN controls that the communities use the bonus derived from FT sales to promote their own social, economic and human development.

TWIN’s major function is to facilitate the establishment of close relationships between producers and buyers. This includes providing essential market information to the smallholder planters, activating specific contractual arrangements with members of the FT network, controlling and grading the quality of cooperative products, informing producers of the reasons for the grades and of the causes of inferior grades, and arranging for FLO certification of the produce that meets the required standards. Although TWIN has its own marketing outlet, cooperatives are encouraged to sell to the best offer, either to other FT organizations, or, for the share of production that does not meet the FT quality standard, to other traders. The network of information and relationships made available by TWIN to the cooperatives is an important factor reducing market failures through asymmetric information that affects producers in developing countries. TWIN interventions are initially supported by donors. However, once the production and marketing of the products of a project has been established, and the donor funding ceases, TWIN continues to support the producers’ cooperatives with funds allocated by the FT trading partners from the trading margins, thus ensuring the long term sustainability of the operation. TWIN has agreed to participate in the IFAD cash crop project in Rwanda as Fair Trade technical partner of the project, and to contribute to funding part of its own intervention.

Private Sector International Trading Companies. FT organizations, such as Max Havelaar in France and Holland, act as intermediaries between cooperatives of producers and international trading companies interested in developing attractive market niches for poor countries that meet the required quality standards guaranteed by the FLO certified Max Havelaar-FT-label. A sizeable number of food processing and trading companies in Europe, the USA and Japan, have begun to cooperate with the FT network, prompted by the view that securing more stable relationships with producing countries, and helping local producers to improve their crops by offering remunerative prices for quality products, is necessary for the long term stability and development of sustainable trading relations. More recently, a number of trading companies (referred to as “ethically minded trading companies”) have also followed similar approaches independently of the FT network. They are beginning to pay prices that are comparable to those of the FLO network for similar quality. Some of these companies are willing to invest in partnerships with smallholder producers to help their local partners to strengthen their sustainable economic activities. This policy is prompted by a primary long-term interest in securing reliable supplies of products of high quality and a favourable trading environment with a reliable supplier.