Enabling poor rural people
to overcome poverty
In Mozambique, small-scale rural traders have been trained and supported to develop an organized market network. As a result, smallholder farmers now have easier and more profitable access to markets for their products.
In rural areas of Mozambique, the market network is underdeveloped and often non-existent. Smallholder farmers face a number of constraints in selling their products, such as high transportation costs and long walking distances to market sites. In addition, many farmers lack information about prices and actual market demand. The Government of Mozambique launched the Agricultural Markets Support Programme (PAMA) [Programa de Apoio aos Mercados Agrícolas], cofinanced by IFAD through the PAMA Support Project, to increase the number of smallholders marketing their produce and help them obtain a fairer share of the market prices for their products. One of the biggest PAMA innovations was its Rural Traders Development Programme (PDCR) [Programa de Desenvolvimento de Comerciantes Rurais (Niassa e Cabo Delgado)]. Within its overall goal of improving incomes and food security for smallholders, the programme focused on improving smallholder farmers’ access to markets that added more value to their produce. In particular, PDCR facilitated the establishment of market relationships and organized trading schemes. The programme invested in increasing the capacity of small and medium-sized rural traders to provide market services to farmers. Rural traders eventually became the direct beneficiaries of a specific component of the programme. They received training, technical assistance and support to link with other market intermediaries. Smallholder farmers and traders were provided with information about, for example, commodity prices during the marketing season in different market centres, the cost of transport and bags, new market opportunities and major buyers. As a result, the average annual volume of sales per trader was around 3.4 times higher at programme completion than at its beginning.1PAMA successfully developed the ability of rural traders to become better informed and more efficient in their marketing activities, enabling them to manage their businesses and build relations with bigger traders. As a result, smallholder farmers, the programme’s main target group, benefited from increased availability of market services for their products. In this way, PAMA has been able to bring significant benefits to both farmers and rural traders.
Results
- Around 33,000 farmers2 benefited from improved marketing services delivered by well-trained rural traders. The involvement of rural traders in agricultural sales helped overcome smallholders’ lack of access to markets.
- 88 per cent of the traders who received training are now involved in the marketing of agricultural products, compared with only 21 per cent at the beginning of the programme.3
- Trading of agricultural products increased significantly in terms of volume and variety of products. In the programme area, the share of agricultural products rose from 8 per cent of total sales at the beginning of the programme to 51 per cent at the end.4
- The behaviour of traders changed. As they became part of a network of relations with other intermediaries, they showed more readiness to meet commitments towards their suppliers and clients, including farmers.
Main lessons
- By targeting and training a few traders providing market services, it is possible to reach a large number of farmers.
- By providing adequate market information to small and medium-sized rural traders who buy from small-scale farmers, production can be gradually shifted to satisfy consumer demand. In this way, agricultural production becomes more marketable and more profitable for smallholder producers.
- Access to credit is one of the biggest constraints faced by small and medium-scale traders operating in rural areas. It is crucial to make financial services available to traders in support of their businesses.
- It is important to integrate a stronger gender approach into programme design, providing not only training but also forms of empowerment for women to enhance their participation in economic activities.
- A system of cost recovery for training and counselling provided should be established among beneficiary traders, for example through a cost-sharing scheme. This helps develop a culture of payment for services received and strengthens the commitment of traders to market information services.
Main challenges addressed
| CHALLENGES | SOLUTIONS | BENEFITS |
| 1) Disorganization and bad business management: traders often buy farmers’ products without planning according to demand. | The programme provided support, capacity-building, training and counselling to participating traders. | About 91 per cent of beneficiary traders improved their business management through the preparation of business plans.5 Most of them also keep a daily record of their sales and customers. Likewise, capacity-building helped increase traders’ eligibility to access credit. |
| 2) Inaccurate price information: when traders arrive at markets to sell their products they find that prices have changed. | The programme successfully facilitated linkages and contacts with larger traders and other market intermediaries through inclusive seminars. In addition, the use of mobile phones was promoted, and market information was disseminated through Radio Mozambique.a | Rural traders are now better able to negotiate their contracts. Behaviour towards other market intermediaries and their providers has become more transparent and reliable. |
| 3) Scarce access to formal credit: when the programme started, 77 per cent of traders could not access credit facilities,6 mainly due to lack of collateral and the weak credit culture. | Loans were provided to eligible traders through the establishment of a special credit scheme (FAMA) managed jointly by two rural finance institutions: GAPI and AMODER. The programme also made considerable efforts to introduce a culture of solidarity for credit guarantee. | Around 85 per cent of beneficiary traders had access to credit at programme closure. 7 Thanks to their participation in credit schemes, combined with their new business management capacity, rural traders have become more bankable, which makes it easier for them to obtain credit from financial institutions. |
a As one of the activities of the marketing information support component.
Background
The Agricultural Markets Support Programme (PAMA) launched in 2001 and, specifically, its Rural Traders Development Programme (PDCR) have been a pillar of IFAD’s strategy in Mozambique to improve the market participation of smallholder farmers. PDCR originated from the merging of two former components - produce-trader training and rural retailer training - and was implemented through a partnership with GAPI SARL and Enterprise Mozambique.
In Mozambique, market liberalization has existed since 1987. However, a number of factors have continued to hinder effective competition and the participation of smallholder farmers in markets. Some forms of monopoly still exist and a few large-scale companies dominate the market for some products. At the sub-district level where the trading network is not developed, smallholder farmers need to travel between 10 and 50 kilometres on average to sell their products. In addition to the travel costs, producers often risk product deterioration, and they lack information on market demand. In a context where the commercial network is at a very early stage of development, as is the case in the northern part of Mozambique, the role and capacity of traders is essential to establish efficient trading connections. PAMA was implemented in Cabo Delgado, Maputo and Niassa; PDCR was implemented in the northern regions of Cabo Delgado and Niassa. The strategic objective was to build trader capacity to provide marketing services to smallholder farmers. Small and medium-scale rural traders improved their performance as intermediaries for agricultural products, generating benefits for a large number of smallholder farmers.
Fostering ownership and sustainability
Overall, PAMA adopted a participatory/consultative approach involving all key stakeholders in the planning of activities: farmers, traders, agribusinesses, public actors and NGOs. The programme helped organize focal area resource groups (FARGs), which included stakeholders responsible for approving focal area strategies and monitoring activities. To discuss PAMA’s activities, regular FARG meetings, usually chaired by local administrators, were held. Generally speaking, it was the beneficiaries themselves who expressed an interest in taking part in the programme components.
The programme contained elements designed to ensure its sustainability:
- As a result of the training and capacity-building provided, most participating traders (88 per cent) gained a greater ability to work efficiently.
- The linkages established and developed between rural traders and other market intermediaries are commercial in nature and based on the shared interests of the parties.
- The relationship between traders and credit institutions is dependent on the interest of the credit institutions in dealing with more reliable and more efficient clients (the traders). Traders, on the other hand, continue renewing credit requests for their businesses.
- Traders have been able to accumulate capital and make investments to improve their businesses and ensure that they are financially self-sustainable.
Replication and scaling up
The policy environment has become increasingly favourable for the replication and scaling up of PAMA’s activities, thanks to the strategies adopted by the Government in support of agricultural markets. The innovative PDCR was the first of its kind in the country. Its success and ability to reach targeted beneficiaries indicate that it has potential for replication and scaling up.
The implementation of PDCR has enabled rural financial institutions in the country to adapt financial products to the needs of traders and set up a sustainable business development service. The interest shared by the financial institutions and their new clients in building a lasting relationship can provide the necessary resources to support the further development and enlargement of traders’ businesses in agricultural markets.
The 2008 evaluation of PDCR found that the programme had built positive partnerships among small-scale traders, financial institutions and other market operators that are likely to last.
Neither PAMA nor, in particular, PDCR provides for a specific and structured strategy for disseminating and scaling up innovations. However, replication and scaling up of the PDCR experience is taking place informally through individual initiatives, mainly based on the linkages with credit institutions built by the programme.
6/ IFAD and Ministry of Planning and Development of Mozambique (2008b). PAMA: Project Completion Report. Maputo, p.11.
7/ IFAD and Ministry of Planning and Development of Mozambique (2008a). Avaliação do Programa de Desenvolvimento de Comerciantes Rurais (Niassa e Cabo Delgado). Maputo. (PDCR evaluation, Portuguese only.) p.28.