Issue 31: March-April 2010 - Value chains

In this issue

IFAD has invested US$ 3.7 billion of its resources in agricultural development in the Asia and the Pacific region. These investments have enabled poor rural people, most of them smallholder farmers, to improve their income, food security and livelihoods.

In today’s rapid commercialization, industrialization and globalization of agricultural systems we recognize the importance of agriculture, irrespective of the size of the farm, as a business that can provide a way out of poverty for many farmers. But for the agricultural sector to develop, long-term investment is required.

“This has to be throughout the entire agricultural value chain, from producers to consumers - from farm to fork,” said Kanayo F. Nwanze, President of IFAD, at the World Economic Forum on 26 January 2010. “This means providing the necessary infrastructure like roads, inputs, market linkages and information, and capacity building,” he pointed out.

Governments and the private sector need to work together to support smallholders and to ensure that they are included in the value chain. Only then is it possible to create sustainable rural employment, increase demand for agricultural produce and improve the living of smallholder farmers and their families.

This newsletter provides some examples of IFAD’s work in the region in the area of linking smallholders to value chains. Hans Posthumus, consultant, shares how staff working on value chains in various IFAD-supported projects gathered in a ‘writeshop’ to exchange their experiences in value chain development and to define and document good practices. They produced a number of articles, some of which are in this newsletter.

In Bangladesh, IFAD has been supporting poor rural communities in establishing ‘collection points’ where farmers bring their produce and sell them to buyers who come to their villages. Md. Nurul Amin, Team Leader of the Rural Enterprise Development component of the Market Infrastructure Development Project in Charland Regions, describes how such a collection point was established and works in a remote area of the country.

Sant Kumar, General Manager of Nature’s Way Cooperative Fiji Limited, and Stephen Hazelman, Coordinator, Information Communication and Extension, Secretariat of the Pacific Community, which works through an IFAD-supported programme, present the operating system of Nature’s Way cooperative that inspired other countries in the sub-region to assist rural producers in their business development.

Some of the finest turmeric in the world – Lakadong turmeric – is produced in Meghalaya State of India. Yet, it is still marketed as ordinary turmeric. Bhupal Neog, Manager of Business Development Services in the Livelihood Improvement Project for Himalayas in Meghalaya, describes efforts to add value to Lakadong turmeric and thus enhance the incomes of poor rural farmers.

Can the value chain approach be a solution to poor rural communities that are isolated from markets, lack sufficient resources and suffer from food insecurity? Kulwant Singh, Chief Technical Advisor of the Rural Livelihood Improvement Programme in Attapeu, Laos, asks this question and looks into how his project supports the development of value chains in Attapeu province.

Virendra Nath Upraity, Project Coordinator of the Local Livelihood Programme, illustrates how an IFAD grant is supporting disadvantaged families living along north-south ‘road corridors’ by enhancing market and economic linkages in Nepal’s Mid-western Development Region.

Navaratne Walisundara, National Programme Coordinator of the Dry Zone Livelihood Support Programme describes the difficulties of improving marketing linkages in Sri Lanka by contracting service providers. He explains how the programme addressed the problem by introducing a Facilitation Marketing Model.

Nguyen Truc Son, Project Director of the Project for Developing Business with the Rural Poor in Ben Tre province in Viet Nam, shares how his province selected some key products to develop pro-poor value chains, increase value and create jobs for poor farmers. One of the key selected value chains is the coconut industry, which is the focus of the article.

Martina Spisiakova, Newsletter Coordinator, Asia and the Pacific Division


Sharing and documenting good practices in value chain development

In November 2009, IFAD’s Asia and the Pacific Division held a ‘writeshop’ on value chains. The objective was to share experiences in projects dealing with value chain development, define good practices and write case descriptions for further dissemination. The writeshop was facilitated by Hans Posthumus, consultant, and Vineet Raswant and Ayurzana Puntsagdavaa from IFAD. About 20 staff from various IFAD-supported projects in the region and one private-sector representative participated.

Methodology

The writeshop methodology, as shown in the figure below, enabled inputs to be incorporated from all participants, ideas to be validated, and articles to be produced quickly. The participants benefited from diverse experiences and expertise and developed lasting peer networks.
Text Box:
The participants analysed nine cases of value chains in their projects. Each case was presented and analysed in the first 90-minute round, after which the ‘case holder’ wrote a short article describing the case and the findings. In the second round, the case description was presented and discussed, after which the ‘case holder’ finalized the article. All cases (articles) were presented and discussed in plenary on the last day.

The value chain framework

The cases reflected experiences gained in different areas of value chain interventions according to the framework provided in figure below, distinguishing between value chain actors, supporters and influencers. Value chain actors are those that own the commodity at certain stages, from input suppliers to consumers. Value chain supporters are financial and non-financial actors that provide commercial services to the actors. Value chain influencers are factors (human and other) that influence but have no direct stake in the chain (enabling environment).

Most projects intervened at the actor level. Hardly any project focussed on intervening at the supporters or influencers level. We decided to select the most interesting cases that illustrate the different contexts and intervention logics. Many projects appear to be integrated bottom-up projects intervening at upstream levels (farmers’ production and upgrading). Only two interventions intervened at downstream levels (processors, exporters). Although projects included elements of
improving financial and non-financial services, these were of secondary importance. The majority of projects focussed on creating farmer organizations, often in weak enabling environments.

The cases presented and analysed during the writeshop covered Fiji, India, Laos, Nepal, Sri Lanka and Viet Nam. Some are included in this newsletter. The articles describe the problem, the intervention itself, the role of IFAD, the analyses (what worked and what did not) and lessons learned. The articles conclude with two types of recommendations – case-specific resulting from the group review and more generic recommendations that came up during the plenary presentations and discussions. The facilitator translated these recommendations into a short overview of good practices for the design and management of value chain programmes.

Participants concluded that the writeshop methodology leads to rapid and focussed sharing and learning from peers. Exposure to other programmes and interventions is eye-opening and will help them to manage their programmes better.

Hans Posthumus, Consultant

Read more about value chains :


Shantirhat collection point: one-stop marketplace for fingerling sellers and buyers in Bangladesh

In some parts of Bangladesh, rural communities are creating collection centres where farmers gather their produce and sell to buyers who come from different places. Such a centre, also called ‘collection point’, has been established in a remote char (land surrounded by river) with the help of the IFAD-supported Market Infrastructure Development Project in Charland Regions.


A woman with small fish that she will take to the local collection centre

In August 2009, a collection point (CP) was established in an existing bazaar called Shantirhat in remote Boro char of Samaya village located in Bhola Sadra upazilla (sub-district) of Bangladesh. The Rural Enterprise Development (RED) component of the IFAD-supported Market Infrastructure Development Project in Charland Regions (MIDPCR) supported the CP.

The project is being funded jointly by the Government of Bangladesh, IFAD and the Government of The Netherlands. It is being implemented by International Development Enterprises - Bangladesh (IDE-B).The objective of the RED component is to identify market opportunities and value addition to the products, and help build capacity of the small char producers so that they will link to market and economic opportunities in the fish sub-sector.

A CP is usually located at the centre of a village, at the intersection of roads or within the existing weekly market where products such as beans, milk and fish are gathered for wholesale. It meets the prime need of fingerling producers, fingerling traders and fish producing farmers.

The Santirhat bazaar has been operating for the last 40 years, However, it is characterized by poor infrastructure and transportation, a lack of public services and local economic institutions to develop markets, and a lack of access to appropriate inputs and knowledge.

Before the CP was established, fingerling producers used to sell fingerlings near their nursery pond. Fingerling traders  contacted the fingerling producers  and bought the fingerlings from the nursery located in different parts of the villages. Now they all come to one place – the CP – which is becoming popular and unique to the users for its distinct one-stop services and selling of diverse fingerling products such as rui, katla, mrigal, pangash, sorputi, grass carp, miner carp, telapia, kalibous and golda post larva.

RED staff helped form a 15-member Collection Point Management Committee to ensure the smooth functioning of the CP. The committee is promoting the CP to potential distant fingerling markets, as far as Jessore district, to obtain quality fingerlings for sale at the CP. The Department of Agriculture Extension, the Department of Fisheries, non-governmental organizations (NGOs), Lal Teer Seed Co. Ltd, Ispahani Seed Co., Megafeed Co. and Fishtech Ltd have provided technical and business support to the committee, farmers and entrepreneurs. In addition mosquito nets were set up at the kash (land or any property under government custody) pond, to preserve fingerlings during selling.


A farmer harvesting radish

The CP is linked with different companies, dealers and wholesalers of feed, medicine and seed to make the market effective and competitive, and to ensure availability of these inputs in the CP. Three new shops have recently started their business in the CP compound, selling fertilizer, pesticide, fish feed and seed. One entrepreneur is planning to take a loan from the bank to establish a small fish feed mill adjacent to the CP. Due to sound CP management, solid promotion and better linkages, traders are increasing and improving the competitive market environment. The facilitation process has also improved the linkages between the CP and distant fingerling traders and fish producers. Fingerlings from the CP are being distributed among eight to ten unions of the upazila as well as to outside consumers.

The project has held workshops and meetings which have brought together 25 fingerling producers, 55-60 fingerling traders and more than 250 fish-producing farmers to transact business (compared to 10 fingerling producers, 10 fingerling traders and 150 fish-producing farmers before the CP was established).

Average sales from the CP are Tk. 50,000-60,000 (US$ 723-868) per day, which is significantly higher than the sales of Tk. 12,000-15,000 (US$ 173-217) per day before the CP was created.

As the market expands, 22  project participants received a loan in the amount of Tk. 375,000 (US$ 5,407) from Padakhep, the project’s partner NGO, to start up seed, fertilizer and fish selling businesses and a grocery shop, and to produce fingerling and fish as a commercial activity.

Moreover, local buyers are planning to invest in fish and vegetable marketing because of the growing demand for vegetables from distant markets and because they see the village as suitable for vegetable production.

Md. Nurul Amin, Team Leader, RED component, MIDPCR, IDE-Bangladesh

Read more:


Supporting processors to export in Fiji

The operations of Nature’s Way cooperative have continued despite many challengers and adversities. The cooperative assists producers, including small-scale farmers, and others involved in the commodities pathway, and its activities have generated much foreign exchange for the government and people of Fiji. Its governance structure and mode of operations have benefited other Pacific Island nations as well.

Some history


Farmer collecting coconuts

In the early 1990s, Fiji was unable to export eggplant and papaya to New Zealand due to a ban by the New Zealand authorities on the methyl-bromide quarantine treatment. A new and acceptable method of treating these commodities had to be found quickly. Fortunately for Fiji, the USAID-funded Commercial Agriculture Development (CAD) programme agreed to provide Fiji with a High Temperature Forced Air (HTFA) treatment plant, which ensures that any fruit fly adult, larvae or eggs are killed. The Fiji government contributed to building the facility. With the building and HTFA equipment in place, the next question was: who will manage it?

Under USAID-CAD project rules and regulations governing their assistance at the time, NGO management was preferable to government management. Mr Sant Kumar, who had recently retired from the Ministry of Agriculture as Director of Extension Services, was engaged by the Americans to find a way to resolve the management issue. A decision was made to establish a cooperative.

Nature’s Way

Nature’s Way cooperative started in 1994 with 65 members, mainly business people, exporters and farmers, including poor and marginalized people, who were keen to continue exporting fruits and vegetables. A board was formed and Mr Kumar was engaged to manage the facility.

The HTFA facility offers a service (treatment) for export commodities. The cooperative members had to pay membership fees, and later arrangements entitled them to dividends.

The next step was to secure operating capital, but none of the commercial banks (or the Fiji Development Bank) wanted anything to do with what they considered a risky venture for which there was insufficient collateral. A chance meeting with the Fiji-New Zealand Business Council in Fiji netted the initial US$ 20,000 capital. Another chance visit by the New Zealand Minister of Foreign Affairs netted an additional US$ 45,000 to kick-start operations and hire people.

Agreement between Fiji and New Zealand

New Zealand quarantine authorities had to agree to the use of the HTFA facility as a treatment for Fiji commodities. Many discussions, meetings and visits by representatives of Nature’s Way, New Zealand Bio-security, The Fiji/New Zealand Business Council and Fiji’s Ministry of Agriculture produced the ‘Fiji-New Zealand Bilateral Quarantine Agreement’ (BQA), which is still operating. Currently, there are four commodities exported to New Zealand under the ‘BQA systems pathway’: papaya, eggplant, mango and recently breadfruit – all of which are fruit fly hosts.

The systems cover farm registration, field control measures, exporter and pack house registration and operations, quarantine treatment (HTFA- Natures Way), phyto-sanitary certificates and regulations and, on arrival, inspection and clearance at New Zealand’s port of entry. The systems have a major quality assurance mechanism that covers issues such as auditing of the export pathway, compliance and monitoring (tracing) and feedback on non-compliance.

The system approach has been replicated in Cook Islands, New Caledonia, Samoa, Tonga and Vanuatu, with other Pacific nations expressing keen interest. IFAD will assist in reviewing the current system of improvement, refinement and scaling-up of expertise in other Pacific Island countries. IFAD has also financially supported the establishment of the Pacific’s own organic standards and is exploring ways of modifying the BQA Commodities pathway approach to devise organic pathways of relevant commodities.

Taking stock

The cooperative has been instrumental in supporting the whole value chain of the four commodities, with very close collaboration among the farmers, exporters, the Ministry of Agriculture’s Quarantine Division and the overseas buyers. Its approach has clearly defined the roles of the various players: Ministry of Agriculture’s extension workers, researchers, farmers, exporters and middlemen, the cooperative, markets and importing government officials.

Other nations in the Pacific have learned from the Fiji experience. However, in countries where the facility is run by governments, the approach is not working due to issues of ownership, policy and responsibility; hence in these countries the facility is lying idle.

One area being reviewed is the cooperative’s financial mechanism and support. Currently, Nature’s Way charges US$ 0.45 for every kg of treated exportable fruit. The question is to determine whether this is sufficient for future sustainability and profitability. There is a big push for more crops gaining export market access to broaden the financial base and operations of Nature’s Way.

During the writeshop on value chains in November 2009, the participants agreed and recommended that:

An important lesson learned for IFAD’s operations in the Pacific is that commercial units need to be managed by businesspeople, and that exporters (as a cooperative) are best at steering and coordinating value chains, while service cooperatives are good at providing essential services; trading should be left to individual and traditional business relations. It is also important to ensure that imported technology can be serviced locally.

Sant Kumar, General Manager, Nature’s Way Cooperative Fiji Limited
Stephen Hazelman, Coordinator, Information Communication and Extension, Secretariat of the Pacific Community

Read more


From cultivating to marketing turmeric in Meghalaya, India

The Jaintia Hills District of Meghalaya produces some of the finest turmeric in the world with its “Lakadong” (curcuma longa) variety. Most of the turmeric is cultivated by small and marginal farmers for household consumption and for sale as a cash crop.
Due to its high curcumin content, robust aroma, colour and organic nature, this variety could have good market potential in India and possibly abroad. The IFAD-supported Livelihood Improvement Project for Himalayas in Meghalaya (2004-2012) has been working to capture this niche market and help enhance the incomes of poor rural farmers.

Cultivation of turmeric

What is turmeric?

Turmeric is a member of the Curcuma botanical group, part of the ginger family of herbs (Zingiberaceae). The root and rhizome (underground stem) of the Curcuma lomba L. plant is crushed and powdered into ground turmeric. Ground turmeric is used worldwide for seasoning, being the main ingredient in curry. It is also the source of curcumin.

What is curcumin?
Curcumin is the main biologically active phytochemical compound of turmeric. Curcumin, which gives the yellow colour to turmeric, was first isolated almost two centuries ago. Extensive research has demonstrated the renowned range of medical properties found in curcumin.

Source: www.curcumin-turmeric.com

India is the largest producer and exporter of turmeric in the world. Meghalaya State in the North Eastern Region produces about 8,000 MT of turmeric each year. More than 70 per cent of this production is concentrated in Jaintia Hills and Garo Hills because of their favourable micro-climatic and soil conditions. Jaintia Hills produces three varieties of turmeric: Lakadong, Laskein and Ladaw.

Research conducted by Indian Council for Agricultural Research shows that the Lakadong variety has a high curcumin content of 6.0-7.5 per cent, while that of the other two varieties is below 5 per cent. There is a very high demand by the pharmaceutical industry for turmeric varieties with high curcumin content as it can be used in cosmetic, pharmaceutical and dye/food-colouring industries. 

The number of cultivators of Lakadong turmeric in Jainitia Hills is estimated to be 500-600. However, a visual survey of the area indicates a much larger number of cultivators. They are mostly located in a 300 square kilometre area located in and around the following villages: Shangpung, Raliang, Mowkaiaw, Sahsmiang, Lakadong and Nongryngkoh in Jaintia Hills. The size of holdings devoted to turmeric ranges from 0.04-1.2 hectares. Its cultivation is popular among very poor farmers.

Lakadong turmeric in Jaintia hills is currently sold in powdered form, catering to local markets. There are approximately 40 mills in the district, all privately owned and located in the above-mentioned villages. The average output per mill is 200 kilograms per day.

Marketing turmeric


Turmeric plant, Source: District Horticulture Office, Jainitia Hills

The marketing of turmeric takes place primarily in unregulated markets called ‘haats’, or weekly bazaars. Traders come from Shillong to purchase Lakadong at wholesale prices in Jaintia Hills haats and even at the farm-gates of cultivators. Even organized trading companies such as ITC Ltd procure turmeric from the rural haats of Jaintia Hills through local middlemen. The marketing of Lakadong turmeric is thus controlled by a handful of middlemen.

Despite Lakadong’s high value, it is still marketed as ordinary turmeric. ITC Ltd procures only Lakadong turmeric slices from Jaintia Hills and mainly processes it to extract curcumin content for pharmaceutical units. The pharmaceutical units pay as high as US$ 35 per kg for turmeric active ingredients (95 per cent curcumin content). Since ITC also buys from middlemen, farmers are not benefiting from the value addition of turmeric and the benefits of bulk procurement. The farmers simply market turmeric at Rs 40 per kg (US$ 0.9) while turmeric powder is sold at Rs 70 per kg (US$ 1.50).

The regional consumers are also unable to buy pure turmeric since there is large-scale adulteration of turmeric in the market. Lack of market information among cultivators, lack of adequate infrastructure and topographical constraints are some of the factors which limit the marketing efforts of the cultivators.

Creating a niche market for smallholders

Through a value chain assessment, the Livelihood Improvement Project for Himalayas in Meghalaya found that farmers could make more money by marketing Lakadong turmeric powder as a niche product, rather than simply cultivating it. It would be more profitable for farmers to extract curcumin content and market it. However, it would be impossible for farmers to compete with ITC Ltd because they are constrained by limited resources and technologies. The project realized that it would be more beneficial for farmers to actually collaborate with ITC Ltd. But how can a farmer obtain a fair price?


A farmer packaging turmeric powder, Source: District Horticulture Office, Jainitia Hills

To help farmers have more control over value addition and thereby earn higher income, the project facilitated a farmers’ federation called ‘Laskein Federation for self-help groups’ (LIFE). Recently, the federation set up a processing unit for value addition of turmeric so that high-quality turmeric is available in the market. The establishment of the processing unit has created opportunities for the farmers to obtain a better value for their own product and to negotiate with market forces like ITC for bulk supply to cater to the needs of the pharmaceutical industry. LIFE is managing the processing unit with the help of professional support and is taking steps to have necessary certification for marketing pure Lakadong turmeric.

The establishment of the federation also attracted the attention of the District Horticulture Department, which came forward to fund the farmers for organic production of turmeric. Organic production of turmeric will create new marketing channels and thus have potential to bring more income to the farmers.

The marketing power of farmers lies in their consolidation and organization so that they are able to negotiate with the market forces as well as government institutions and move up in the value chain. However the challenge is to develop their capacity to manage value addition and live up to the expectations of the market.

Bhupal Neog, Manager of Business Development Services, Livelihood Improvement Project for Himalayas in Meghalaya

Read more:


Developing value chains in food-insecure conditions in Laos

The IFAD-supported Rural Livelihood Improvement Programme in the Attapeu Province (2006-2014) is seeking to reach 6,200 poor rural households in Phouvong, Saysettha and Xansai districts. In these three districts about 68 per cent of the families experience a rice deficit and are food-insecure. Can the value chain approach be a solution for the members of these communities, who are isolated from markets, lack sufficient resources and suffer from food insecurity? Is the project structure and approach adequate to the development of value chains? The article provides an overview of IFAD’s activities in the development of value chains in the area.

Before IFAD’s intervention


Solar irrigation system at Mae Nakok village in Xansai district. The programme has helped farmers to install 23 such systems. One system can benefit about 20 families.

Most of the farmers engaged in shifting cultivation by slash and burn of the forest. About 68 per cent of the families faced a hungry period that lasted from three to nine months. In spite of the availability of plenty of fertile arable land, farmers were not able to use much of it due to a heavy infestation of unexploded ordinance (UXO) from the second Indochina war (1964 to 1973). Moreover, villages were not linked with the access roads and had very poor health facilities. Farmers lacked financial resources to invest in both farm and non-farm activities. Institutional village structures, such as village committees for for soci-economic development, natural resource management or gender mainstreaming, were not in place.

Developing the vegetable value chain

Before the programme started, there was negligible production of vegetables in the area, with only a few farmers growing onion, coriander leaves and others. Most of the farmers depended upon forest products to use as vegetables. In urban areas, vegetables were imported from other provinces and Viet Nam. Contracted consultants selected a number of crops and livestock for the programme to focus on, based on the availability of crops in the project area, market demand and suitability of the agro-climatic conditions. The selection included a number of vegetables, coffee, cashew, cassava, rice, cattle, goats, pigs and poultry.

To develop the vegetable value chain, the programme (RLIP) undertook a number of interventions:


Chilli being dried before it is sold in the market

Challenges to be addressed


A farmer making organic pesticide from a local plant

Recommendations


A woman harvesting cucumber from the cash crop garden in Keng Mak Khaya village of Saysettha district

A number of recommendations were made by the working group in the workshop in Yangling China to help meet these challenges.

Farmers should be the first people to have access to sufficient amounts of rice by increasing the area and productivity of rice for smallholders. In this way, they can eliminate the need for rice lenders as well as the need to conduct daily wage labour and can use their time for vegetable production in the dry season.

Apart from the sale of the fresh vegetables, some primary processing of vegetables such as drying and grinding of chilly, pickling of garlic and cucumber, canning of baby corn, and drying and packaging of vegetables could be undertaken so that further value addition can be achieved to increase profit. Moreover, surplus vegetables can be preserved and stored for eventual sale in distant markets.

Farmers should adopt controlled grazing for their livestock. Green fodder cultivation and feeding should prevent destruction of the vegetable plots. On their part, more farmers should be encouraged to use stronger fencing by using barbed wire.

Capacity of technical staff should be strengthened through on-the-job training in coordination with the technical staff of private companies that are engaged in vegetable production. Local traders should be organized and trained in grading, packaging and marketing for the domestic and international markets.

Regulation of phyto-sanitary standards should be strictly enforced to reduce unauthorized trading and ensure food safety, especially pesticide residues in vegetables. In coordination with the private sector, organic certification of vegetables should be undertaken, and suitable international markets should be identified.

Through its activities in the development of value chains in Laos, IFAD has learned that it is important to define the selection criteria for value chains and to ensure that the farmers are involved in the selection process. In addition, perishable items must be introduced carefully, especially when the market is not stable.

Kulwant Singh, Chief Technical Advisor – Rural Livelihood Improvement Programme

Read more:


Transforming road corridors into growth corridors: creating and supporting marketing cooperatives in Nepal

Nepal has a diverse ecology, from the flat plains of Terai in the south to the snowy mountain peaks in the north. A number of roads have opened up isolated farming communities situated near north-south road corridors, such as the Chhinchu-Jajarkot and Surkhet-Jumla road corridors in the country’s Mid-western Development Region. The Local Livelihood Programme, an innovative project supported by an IFAD grant, is supporting disadvantaged families living along these corridors by enhancing market and economic linkages between the north and south.

About the programme


The local cooperative inaugurates its 'collection building'

The Local Livelihood Programme (LLP), implemented by the Centre for Environmental and Agricultural Policy Research, Extension and Development, is in line with the first strategic objective of IFAD’s Country Strategic Opportunities Programme (COSOP) for Nepal: increased access to economic opportunities by poor farmers and producers in hill and mountain areas. LLP targeted 5,000 rural poor and disadvantaged families, including marginal and landless families and households headed by women. The livelihood of most of the households in the area revolves around on-farm activities supplemented by wage labour from migration.

LLP was able to introduce some new economically viable and socially acceptable livelihood options along the road corridors. The target groups were provided with a wide range of market-led enterprise options matching their environment and resources. Besides these, small rural infrastructures such as micro-irrigation schemes, collection centres and cooperative buildings were developed. As a result, significant positive changes in the livelihoods took place: enhanced food security, increased farm income, grassroots institution building, reduced outmigration, increased local employment opportunities and enhanced social status.

Social mobilization as a key driver


Producing off-season vegetables

The programme mobilized 234 farmers’ groups and provided technical training and assistance in micro-enterprise development, especially in horticulture, small livestock, non-timber forest products and off-farm production. The farmers then were mobilized to form 22 different cooperatives by federating the farmers’ groups. The capacity of these cooperatives was further strengthened in marketing management of vegetables.

Seven collection centres, all of which are currently managed by cooperatives, were established in strategic locations. An estimated 3,057 MT of vegetables were marketed in these centres, which generated a cash sale value of Rs 72 million (US$ 1 million) within three years. This is a landmark in terms of a value chain established between producer farmers and traders. This chain was able to trigger the evolution of other service providers such as input sellers, who were almost absent before the programme started.

Among 234 farmers’ groups covering 5,121 households,  3,568 households are affiliated with the 22 cooperatives. The remaining  households are in the process of joining the cooperatives.

A sometimes rocky road

The programme ran smoothly during the entire period of the project cycle (July 2006 to June 2009), and the expected outputs were achieved: small-scale and community-based physical and economic infrastructure developed; access to appropriate agricultural technologies and extension services improved; access to necessary production inputs improved; access to micro-finance improved; access to markets for local product improved; capacity of local institutions strengthened; and programme learning system developed and made operational.

Overall, the programme has helped to improve the livelihoods and food security of poor rural people Before the programme, 80 per cent of the households had food sufficiency for less than six months, 14 per cent for less than nine months, and only 6 per cent were food-secure all year. After the intervention, only 30 per cent of the households had food sufficiency for less than six months, and food sufficiency for nine months increased to 42 per cent. Farm income also increased significantly, as did the value of the land, which increased threefold. Moreover, the living conditions of many households improved, with an increasing use of permanent building materials such as bricks and corrugated sheets. The programme has also contributed to reduced out-migration by generating 433,200 man-days of local work to India and neighbouring urban centres for off-farm employment.

However, there were a number of obstacles along the way, in particular the long dry spells during winter and spring seasons that dried water sources and reduced irrigation discharge. This severely affected winter and spring crop production. In some areas, the timely availability of quality seeds was a problem. Considering the geographical remoteness of the sites, the number of field staff was insufficient, and the budget allocation for staff recruitment did not allow the required number of staff to be put in place.

Lessons learned

Programme experience has shown that poor and disadvantaged people can develop into good entrepreneurs provided an appropriate package of needs-based technology, community infrastructure (for example, micro-irrigation schemes, vegetable collection centres, cooperative buildings and collective goat and pig shades) and social mobilization services is delivered. The demonstration effect of commercial vegetable farming is spreading fast: neighbouring households are quickly replicating this enterprise.

The programme worked with all 5,000 households, but at the beginning it focused more on those farmers who were better prepared to take up the enterprise, willing to adopt the innovative technologies and ready to bear the associated risks. The reason for this was to demonstrate success stories and thus attract and motivate more farmers to embark on new economic opportunities.

Before the programme, farmers were not receiving integrated support from the public sector service providers. Instead they were receiving piecemeal support, mainly in terms of technology for production. No intervention was in place to link production with the market. Access to technical services was mainly confined to areas near the district headquarters. However, to a modest degree the programme was able to pilot the delivery of integrated services to communities. It became clear that local livelihoods can only be improved if the services that farm families require are delivered as a package rather than scattered among various line agencies of the government.

Pilot projects should prove that the intervention or business model will work. They should focus on a few interventions and with advanced groups to be able to demonstrate viability, rather than creating many new groups within a short time span. The most appropriate exit strategy would be to continue supporting the local institutions through a mid-term investment project that would be implemented through a public-private partnership. The Government of Nepal should initiate this action based on clearly defined roles and responsibilities of different stakeholders.

Towards a larger investment programme

The proposed larger investment programme (planned to start in 2010) supported by IFAD and the Government of Nepal should continue building the capacity of cooperatives with the goal of helping them become sustainable entities in market-driven commercial production, The programme should also focus on diversifying sub-sectors, including non-timber forest products, livestock, fisheries and horticulture, and on fully establishing the already developed tomato sub-sector.

Virendra Nath Upraity, Project Coordinator, Local Livelihood Programme

Read more:


                                                                
Linking farmers to buyers in Sri Lanka

The IFAD-supported Dry Zone Livelihood Support Programme (2005-2012) in Sri Lanka aims to improve the incomes and living conditions of about 85,000 poor households in the programme area. One of the main activities of the programme is improving marketing linkages through the promotion of forward sales contracts by contracting service providers. However, the programme found it difficult to achieve desired results by practicing the forward sales contract system. This article explains why and how the programme addressed this situation by introducing an alternative – Facilitation Marketing Model.

Marketing constraints


When the maize crop failed due to severe drought, service providers had to abandon their work

Rural farmers face a number of problems in selling their agricultural products:

Middlemen model: buying from individual farmer for low prices and selling for high prices

During 2000-2004, the Government of Sri Lanka, non-governmental organizations (NGOs) and foreign-funded projects focussed more attention on finding alternative solutions to increase the income of the farmers by reducing middlemen interventions. The Central Bank of Sri Lanka, having implemented the forward sales contract (FSC) system in some places with rural development banks, recommended it as one of the best options.

The Dry Zone Livelihood Support Programme (DLSP) practiced the FSC system but found it difficult to achieve the desired results due to a number of problems that emerged during implementation.
  
Forward sales contracts and service providers

FSC is a legal arrangement whereby a farmer agrees at the initial cultivation stage to sell a certain quantity of his/her future crop to a certain buyer at an agreed price. Usually an FSC is accompanied by credit facilities from a bank.  

The DLSP contracted service providers to implement the FSCs.

Service provider model: linkages with different stakeholders

A service provider is a private-sector operator (NGO or consultancy company) that is selected by the project through a procurement procedure (advertising, bidding, technical and financial proposal evaluation). It has the following role:

One contract package consists of 3,000 farmers and has an estimated value of US$ 100,000. It lasts for three cultivation seasons. Fifty per cent of the cost is for training and the rest is to pay the service provider fee. Initial payment is provided after the identification of farmers, crops and buying company (20 per cent). The second payment is processed after signing the FSC agreement, providing training and organizing credit facilities (30 per cent). The balance (50 per cent) is paid after completing the FSC agreement for the season.

Attrition of service providers


Unable to sell their onions at agreed prices, farmers had to store the harvest at their houses

The programme office signed contracts with 15 service providers in 2008/09. Unfortunately, ten of them abandoned the work half-way through, while others continue at a low-performance rate. Discussions were held with the service providers to determine the main reasons for poor performance, which include:

The service providers thought it was difficult to continue the work due to these problems, which they believed were beyond their control. However, the programme had no alternative other than changing payment procedure or agreement conditions. Finally, it was decided to change the implementation approach.

Shifting strategy: the facilitation model

The programme introduced the facilitation model (see figure below) in which the programme provides facilities for marketing such as developing marketing and information centres.

Having consulted major buying companies (such as Cargills and Keels), the programme constructed two collection centres on a pilot basis. The ownership of these centres is entrusted to village farmer organizations, and the centres are managed by the relevant company. Each company expects to buy a minimum of 3,000 kg of vegetables per day at the initial stage, and at a cost of 15-20 per cent higher than the prevailing prices in the area. The operation cost is borne by the company and US$ 500 per month is collected by imposing a small levy per kg for future expansion of the programme.

Village-level Sunday markets (fairs) are promoted in the programme areas. Basic infrastructure and sanitary facilities are provided by the programme. In this way, it is possible for the farmers to sell their products at a competitive price to big buyers or collectors coming from outside areas. 

The programme is also promoting marketing information centres, whose purpose is to build linkages between the villagers and the wholesale centres, processors and major buyers. The programme has trained 20 young people as marketing facilitators. Their role is to keep close contacts with buying agencies and provide marketing information to the village units. Basic facilities such as telephone, fax and internet have been provided to these centres. In addition, the centres are used as temporary collection centres where farmers bring their products from remote villages and buyers come and collect it at a pre-arranged schedule. 

Facilitation model: The programme provides information and facilitates the process

Observations and recommendations

The middlemen model is widespread and is independent, self-driven and profit-oriented. The weakness of this model is that the farmers have limited bargaining power and selling options. The middlemen focus on the final product or the harvest but do not intervene in cultivation activities.

The service provider model has a number of complications. The basic issue is that service providers need to be involved from the initial stages of cultivation. Their performance depends on various factors, some of which are beyond their control (for example rains). It is not self-driven or profit-oriented. Performance as well as payments depend on quantity, and hence it can be difficult to obtain desired results. The cost-benefit and the sustainability of the programme are also problematic.

The facilitation model is also free from cultivation and only involves marketing. It can be turned into a self-running, profit-oriented programme and hence can be made sustainable. The bargaining power as well as assured market can be built up. The programme can provide facilities and maintain linkages during the programme period and gradually can be handed over to local government institutions.

Lessons learned

Marketing is a complicated process. Development programmes of governmental institutions cannot directly be involved in marketing activities. Instead, they should play a facilitation role. The FSC system can be implemented at a limited scale under certain conditions. 

Cultivation and marketing should be considered as two different programmes. Cultivation should be linked with technology transfer and input supply in order to improve yields. The marketing programme is different and should focus on selling the farm products and on value addition. The programme’s involvement from the initial cultivation stages, to provide better market prices at harvesting stages, was found unsuccessful.
 
Navaratne Walisundara, National Programme Coordinator, Dry Zone Livelihood Support Programme

Read more:

International experts recognize two IFAD-supported projects in Nepal and Sri Lanka for their state-of-the-art approaches to value chain development

In January 2008, IFAD introduced a new process during the design phase of its projects. International reviewers with experience in project development and implementation review IFAD project design as a final step before loan negotiations and submission to the Executive Board. The process is called ‘Quality Assurance (QA)’.

In 2009, the reviewers noted a growing use of the value chain approach in IFAD-funded projects. However, they found that far too many projects fail to outline a coherent strategy and that little or no hard evidence is presented to justify the concepts being advocated.

Such an approach calls for a well-designed strategy to ensure that components and activities are appropriately linked, and a thorough analysis of constraints along the value chain needs to be conducted.

The QA team did recognize two projects for their state-of-the-art approaches to value chain development and collaboration with the private sector: the Nepal High-Value Agriculture Project in Hill and Mountain Areas, and Sri Lanka’s National Agribusiness Development Programme. A value chain strategy has been included and clearly spelled out in project design.

For more information on these two examples please contact:
Ron Hartman, Country Programme Manager for Nepal
Sana Jatta, Country Programme Manager for Sri Lanka


A comprehensive approach to develop the coconut value chain in Ben Tre province of Viet Nam

The Project for Developing Business with the Rural Poor in Ben Tre (DBRP Ben Tre) province aims to reduce rural poverty in an equitable and sustainable manner, enhance the livelihoods of poor rural people and contribute to socio-economic development and in the province. The project should lead to more private investments through an improved business and investment environment, and rural business services, better rural infrastructure and enhanced capacity of local authorities and the community. The project is being implemented in 50 poor communes of eight districts in Ben Tre. The province has selected some key products to develop pro-poor value chains, increase value and create jobs for poor rural people. One of the key selected value chains is the coconut industry.

The coconut value chain


A member of a common interest groups taking care of young coconut plants

Ben Tre is the largest coconut-growing area of Viet Nam, with about 49,000 hectares of coconut groves. Approximately 200,000 rural people rely mainly on coconut-based production activities. The coconut processing industry has exported US$ 70 million worth of coconut products and created thousands of jobs for rural people. However, the coconut industry of Ben Tre has not yet fully developed, and the income of coconut growers is still low.

The main aims of the coconut value chain are to: develop the local coconut industry; establish a contract farming relationship between processors, collectors and coconut farmer groups; increase incomes of coconut growers; and create jobs for poor rural people. Farmers and poor households are encouraged to join in the common interest groups (CIGs) or cooperative groups formed by the Women’s Union and Farmers’ Association. As a group, they will have better conditions to enhance their production capacity and sell coconut at better prices. In 2009, there were some 800 groups and 300 small businesses active in the coconut industry.

Coconut value chain framework

Value chain actors: small coconut farmers (from 0.1 to 3.0 hectares of coconut plantation),  200 groups of coconut farmers (CIGs), 24 commune- and village-level coconut collectors, white meat processors, 10 coconut processors, 5 candy manufactures, individual enterprises, 1 young enterprise club and 1 coconut enterprises association (50 members).

Value chain supporters: Viet Nam Bank For Agricultural and Rural Development (VBARD) of Ben Tre (project credit fund shares 80 per cent and own fund of bank shares 20 per cent), consultants from the Coconut Research Center and Department of Science and Technology and business service companies, farmers’ associations, women’s union (microcredit supply) and the Investment Promotion and Support Center of Ben Tre Province Ben Tre (provides market and investment policy information).

Value chain influencers: the provincial government of Ben Tre, which has passed the small and medium enterprises (SME) supporting plan, an incentive policy to attract private investment, and allocate the provincial budget and IFAD-funded commune investment fund to construct and upgrade rural infrastructure projects of the programme in Ben Tre in 24 communes.

The intervention


Women processing coco candy in a factory

The project, in cooperation with the Women’s Union and Farmers’ Association, strengthens the capacity of some 800 existing CIGs and provides technical assistance to help the Women’s Union and Farmers’ Association sustain existing groups and set up their own clubs and CIGs.

The project also provides training courses in production skills and techniques for farmers and their CIGs, especially in extension, marketing and investment analysis. In addition, it organizes training courses to processors and traders in business management, business start-up for SMEs and household businesses.
 
The project allocates funds for each commune to build rural infrastructure and markets. Coconut collection centres are set up and operated by private enterprises. Rural market centres are operated by residents of the commune.

The project links farmers, traders, and small businesses to VBARD when loans are required. VBARD lends depending on their production and investment plan. At present it satisfies 70-90 per cent of requests. Land-use rights certificates, facilities contracts and equipment formed from loan; loans without collateral below VND 10 million (around US$5,500) and loan below VND30 million (around US$1,640) do not need collateral document. Instead, they need a land-use right certificate and commune authority certification. The project, in cooperation with local NGOs, television stations and other mass media, produces and provides coconut market information and investment guidelines. It also organizes job fairs for rural youth and SMEs.

Initial success of coconut value chain


A coconut trade fair to promote products made of coconut

The project has not been operating long enough for an assessment to be made of the success of the whole chain. However attracting private investment and job creation has been successful. Stakeholders show their commitment to work and cooperate for the benefit of all parties; the coconut farmers sell their products at more reasonable prices; processors have enough raw materials for production; CIGs are consolidated and strengthened; and there is better rural infrastructure for poor communes.

The management role of farmers’ associations in the province has been enhanced and farmer members feel more confident in their groups and associations; the bank has agreed to provide loans to farmers identified, although loans for SMEs are still under discussion; and market information on the coconut industry is being provided to processors and traders.

However, a number of challenges remain:

Recommendations to improve effective operations of the coconut value chain

Project follow-up actions


Women processing nuts in a factory

The project will concentrate on supporting coconut CIGs to encourage sales to larger-scale private processing units. The project will work with VBARD to ensure that credit funds are available and sufficient for enterprises and processors in the coconut value chain.

The project and the Investment Promotion Centre in Ben Tre will also enhance the provision of coconut market information to all stakeholders, and continue to hold trade fairs on coconut products for SMEs and household businesses to promote coconut products in domestic and export markets.

Nguyen Truc Son, Project Director, Project for Developing Business with the Rural Poor in Ben Tre (DBRP Ben Tre)

Read more:


Call to participate in a marketplace of the Investment Forum for Food Security in Asia and the Pacific, 7-9 July 2010

Deadline: 15 April 2010

The Asian Development Bank (ADB), the Food and Agriculture Organization of the United Nations (FAO) and IFAD are organizing the first regional forum on food security to showcase Asia and the Pacific as an attractive region for increased public- and private-sector investments in food security-related initiatives. The event will take place in ADB Headquarters in Manila on 7-9 July 2010.

The marketplace

A marketplace will be held back-to-back with the Forum where private-sector companies and civil society organizations are invited to exhibit their innovative products and services in the following areas:

The marketplace will consist of 25 exhibition booths provided free of charge. The organizers will screen applications and select and allocate the booths by 30 April 2010. Their decision shall not/cannot be contested by applicants.

Eligibility

Private-sector companies and civil society organizations whose products and services meet the following features are encouraged to participate:

Contact

If you wish to be an exhibitor, please complete the Company Profile Form and send it no later than 15 April 2010 to Ms Suj Ronquillo, Forum Secretariat, by email at [email protected] or by fax at +632 636 2381.

If you are NOT interested in being an exhibitor at the Marketplace but would like to attend the Investment Forum, please visit our website and register online.


Upcoming missions and events

Bangladesh

Bhutan

China

India

Indonesia

Kyrgyzstan

Maldives

Mongolia

Myanmar

Nepal

Pakistan

Philippines

Sri Lanka

Tajikistan

Viet Nam