The Smallholder Agribusiness Development Program (SADP), initiated by Agricultural Cooperative Development International and Volunteers in Cooperative Assistance (ACDI/VOCA), has helped more than 40,000 smallholder farmers access markets through financially sustainable associations. The organization facilitated the funding of the National Smallholder Farmers’ Association of Malawi (NASFAM), which now manages activities and programs through an ongoing government levy.
SADP/NASFAM has succeeded in reaching large numbers of farmers and achieving high levels of sustainability by linking farmers to private-sector markets, rather than by constructing alternative markets.
The project, started in 1994, provides farmers with a range of services along the marketing chain from production assistance to market information and from input supply to transportation and sales assistance. The services are offered through a vast network of farmers’ clubs, regional groups, and larger associations, as well as through the National Smallholder Farmers’ Association of Malawi, which is gradually taking over program implementation from the project. The primary focus of SADP, and now NASFAM, is building the capacity of these clubs and associations to collectively solve marketing problems by linking their farmer members to private-sector services.
a. Services. The project offers several primary services, such as
§ Providing empowerment and management training to clubs of 10 to 20 members and developing standard training packages, accounting systems, and other management systems to facilitate institutional development and capacity building;
§ Helping to organize and form group action committees (GACs), each comprising 5 to 10 clubs, and associations, consisting of 100-200 clubs;
§ Developing the capacity of associations and, ultimately, helping the form or establish NASFAM, to provide these services to existing and new clubs;
§ Helping to identify problems and consider solutions through clubs and associations;
§ Helping to develop solutions by
providing market information, direct technical training for farmers, and regular market bulletins;
identifying private-sector service providers;
negotiating transportation and other service agreements;
creating standard contracts;
negotiating fair entry to the tobacco auction floor; and
developing improved delivery systems to reduce waste and ensure product quality;
§ Linking associations and clubs to sources of credit;
§ Providing advocacy for smallholder farmers; and
§ Soliciting funds, monitoring and evaluating the program, reporting to donors, and conducting strategic planning.
b. Behind the Design. How and why was the program designed this way? SADP initiated the program by working in tobacco, the largest and most profitable cash-crop sector in Malawi. It designed the program to help smallholder farmers take advantage of changing policies to deregulate the sector. The project selected the better-performing farmers clubs from those established by the Malawi Department of Agriculture, helped form others, helped farmers gain access to the tobacco auction floor for the first time, and helped them acquire input and marketing services from the private sector. Initially, the project provided farmers with business skills training, but services quickly expanded to facilitate collective action to solve common problems. From there, SADP helped club members organize larger associations that, in turn, established a national association while engaging in broad, sector-level interventions such as promoting advocacy, negotiating better terms for smallholder farmers on the auction floor, and publishing market information bulletins. Even before the precipitous fall of tobacco prices in 1998, the program had been working with farmers to help them diversify production to other cash crops with strong markets.
c. Identification of Services. SADP identifies services through the following means:
· From farmers’ requests;
· Through a broad understanding of the structural changes required for smallholders to succeed in particular sectors (such as tobacco) and the willingness to represent them in key decision-making arenas;
· By observing the initial work with products and services farmers are already engaged in and, once institutional mechanisms are in place, providing support for a transition to other crops; and
· Through a philosophy of collective action and of linking farmers to the private sector, rather than of trying to replicate private-sector marketing initiatives.
Because tobacco and other selected cash-crop sectors are mass-market crops that are also lucrative, they lend themselves to standard interventions that can be replicated for large numbers of farmers.
d. Uniqueness of Design. What is unique about the design? A singular aspect of the SADP design is that, as much as possible, services are contracted out to private-sector providers. Clubs and associations generally do not provide services directly, but they bring farmers together to identify and solve common problems, and they forge links with service providers. They find solutions through better negotiations with the private sector, not by depending on the association to provide services. Providing services would require far more start-up capital and more management expertise than any of the organizations possess. In fact, the farmers’ associations were established to accomplish the following:
In this advisory role, the associations keep activities as simple as possible; maintain focus on benefits to farmers, not on the growth of associations and clubs; and minimize the opportunities for corruption that can arise.
The private sector, however, may not be able to provide some services farmers need, such as technical training or seed replication. In some instances, SADP helps farmers clubs work together on these activities. In other cases, SADP is in a better position to provide farmers with services such as monthly market information bulletins or negotiations with auction floor managers. In general, however, the project’s philosophy is to keep association and club activities simple and to use private-sector providers where possible.
2. Program Management. SADP has a large, cooperative institutional structure that has evolved from a development project serving farmers groups into a national movement. In 1999, the project, managed by ACDI/VOCA on behalf of NASFAM, had eighty-three full-time staff in Malawi. Over the years, the U.S. Peace Corps and other volunteers have provided technical assistance. New staff receives one week of training, and all staff attends two one-week training sessions each year.
Around 2,500 clubs serve some 40,000 farmers, up from 33,000 in 1998 and 19,000 in 1997. Farmers pay fees to become members of clubs, all of which are organized into GACs of five to ten clubs. Clubs apply to be members of association and pay fees.
Seventeen associations, up from twelve in 1997, employ their own staff and often share managers with seven managers working for fourteen of the staffed associations. The associations pay all costs for a total of sixteen employees. They apply to be members of NASFAM and pay fees. Membership rules govern the roles and responsibilities of members. Clubs have constitutions and the associations and NASFAM have bylaws. ACDI/VOCA and NASFAM have a memorandum of understanding that governs the financial and management aspects of that partnership.
SADP monitors and evaluates the entire initiative, including the activities of NASFAM and its member associations. It also uses association and club records to gather data. The long-term vision for sustainability is for NASFAM to take over SADP functions and to become increasingly independent. This process is well under way; all former ACDI/VOCA-SADP staff now works for NASFAM and the project effectively belongs to NASFAM with ACDI/VOCA acting in an advisory capacity and as a conduit for funds. To increase its capital base, NASFAM advocated to have a grower’s levy that was automatically allocated to a competing tobacco farmers association, redirected to help it finance its smallholder services. The Ministry of Agriculture has approved this change, and NASFAM now receives 60 percent of the levy.
Unlike other complex structures, the SADP project avoids corruption and mismanagement because the program
§ Provides empowerment and democracy training as a key part of club and association development training. The training emphasizes that clubs exist to help farmers succeed, not the other way around. A standard training package helps control the quality of training.
§ Keeps the functions of the associations simple by contracting out services rather than having the associations provide them.
§ Implements standard accounting systems and conducts regular internal audits.
§ Selects stronger farmers clubs from a large pool of clubs.
§ Provides role modeling, confronts corruption openly, and cultivates an anticorruption culture: SADP is eradicating programs and services that have a history of corruption and unfair trade practices to farmers. A relatively open political environment (many corrupt providers are government agencies or government-supported organizations) makes such candor possible.
§ Expects associations and clubs to be businesses from the start and links them to commercial sources of credit rather than giving them grants.
The major management challenge the program now faces is scaling up further. Although the program currently serves approximately 40,000 farmers, membership represents only a small portion of the 2 million smallholder farmers in Malawi. Project managers estimate that it will take another ten years and an additional fifty staff to reach a national scale.
Another special feature of SADP is that, from the start, the project never provided grants to clubs and associations; it expects them to be solvent. All project support has been in the form of technical assistance, advocacy, linking services, or direct supply of a few key services, such as marketing information. Associations did not hire staff until they could afford to do so. As mentioned above, one possibility for financing NASFAM was to have the government allocate a portion of the grower’s levy to the association, and that has now happened. In the case of NASFAM, this levy is voluntary; but for members of the competing tobacco growers association, it is mandatory.
SADP selects large commodity sectors that serve mass markets. For tobacco, for example, where a marketing auction already existed in Malawi, the project focused on linking farmers to that existing structure. To help smallholders diversify their production from tobacco, SADP conducted significant market research, selected crops with growing markets, and helped farmers access existing wholesale markets. The task of collecting marketing information on mainstream crops is fairly simple because of the availability of trade journals, price bulletins, and the Internet. The project developed a comprehensive data storage and retrieval system for tobacco and is in the process of replicating it for other crops. SADP also produced a monthly source/price bulletin. All of these interventions help farmers respond quickly to changing market conditions. Their ability to respond quickly became evident in 1998 when tobacco prices dropped suddenly: farmers throughout Malawi suffered, but those associated with NASFAM fared better than others, proving that the association’s services do protect farmers somewhat from market shocks.
SADP has long played a key role in improving the quality of smallholder tobacco. Market research and discussions with buyers and farmers identified the major causes of poor quality: no reliable transportation, a lack of storage facilities, and to some extent, inadequate input supplies. The project has helped farmers procure transportation services in which they are using a standard contract that holds transporters responsible for losses by paying them only when the crop is accepted at the final destination. The project also has helped eliminate storage problems by immediately selling tobacco when it arrives at the auction floor; SADP negotiated this arrangement with auction managers as well as an arrangement that allows for higher quotas on the floor for smallholder farmers. The project has improved input supplies by helping clubs and associations replicate seeds and purchase good-quality, bulk fertilizer from private-sector suppliers.
Training farmers to manage these activities is an important service that SADP provides. The project locates trainers and technical assistance providers, works with business and agricultural experts, and provides open-ended, customer-responsive technical assistance, as well as standard services and training packages.
SADP’s main sales strategy has been to link farmers to existing commodity markets. With tobacco, this move has occurred in an atmosphere of significant market reforms. The project has assisted smallholders benefit from the project’s privatization and liberalization efforts by (1) helping farmers increase production and improve quality; (2) representing farmers at meetings of donors, government agencies, and the private sector; and (3) representing farmers at associations of tobacco stakeholders that formulated the liberalization policies and made the new commercial deals. Moreover, SADP has negotiated with private-sector businesses and the tobacco auction and then trained the farmers to deal with them in the future.
Project staff have reported resistance from several fronts: government institutions that previously provided such services, a national tobacco association that should have provided them, the estate sector that did not believe smallholders could produce good-quality tobacco, and private transporters who wanted a bigger cut of the pie. SADP has cultivated a culture of “standing up to the big guys” and of holding leaders accountable. This attitude has motivated staff to continue confronting these systems while working to develop more equitable systems for farmers.
With the help of government, the project has used an effective tool: regular radio shows that promote farmers clubs and the SADP program. These shows have contributed to the positive image of the project, which has increased public support for the efforts of the clubs, associations, and NASFAM, as well as the demand for their services.
SADP/NASFAM in Malawi
GOAL 1: INCREASE OUTREACH (SCALE AND ACCESS)
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BDS Market Development Indicators
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Objective
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Indicators |
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Expanding the market for BDS |
Market size: number of SMEs purchasing services (or procuring through other commercial transactions)* |
40,000 members; 80% growth in 1998 |
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Market size: amount of sales by BDS providers* (Sales to final customers, not to SMEs) |
Total volume of association business exceeds $27 million |
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Market penetration: percent of potential SME market reached with a BDS service |
Unknown |
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Developing a high-quality, diverse, competitive market |
Number of BDS providers* |
17 associations and 2,500 clubs |
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Number of BDS service types |
6 |
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Well-distributed, wide price range for BDS services |
Unknown |
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Average price for a unit of BDS (markup) |
Unknown |
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Number and proportion of multiple-user customers in the market |
Unknown |
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Market distortion: average subsidy content of a BDS* |
Unknown; association business activities are not directly subsidized |
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Increasing access to BDS services by underserved groups |
Extent of access: number and percent of SME customers purchasing a BDS, who represent targeted populations (women, microenterprises, exporters, etc.) |
100% smallholder farmers; 36% women |
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Target market penetration: percent of potential SME-targeted markets reached (women, microenterprises, exporters, etc.) |
Unknown |
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GOAL 2: SUSTAINABILITY AND COST-EFFECTIVENESS
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Assessing BDS Suppliers
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Objective
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Indicators |
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Supplier sustainability |
BDS supplier cost-recovery of operational costs from clients’ fees |
In 1998, 11 of 12 associations audited were profitable; joint surplus of $15,000; average income-to-expense ratio, 2:1 |
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Program cost-effectiveness |
Simplified cost-benefit assessment comparing total program costs to aggregate program benefits for entrepreneurs |
For a 6-year period, total in-country project costs, $3M; average annual project costs, $500,000 |
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Total program cost/customer served |
Cumulative cost/customer, $75; annual, $12.5 |
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Total program cost/supplier assisted |
$176,500/association; $1,200/club |
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Total program cost/increase in supplier revenue |
$0.11 cents/$1 in revenue |
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GOAL 3: IMPACT
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Assessing BDS Customers, SMEs
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Objective |
Indicators |
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Increase customers’ acquisitions of BDS |
Customer satisfaction with a BDS |
Unknown; 80% growth in membership in 1998 |
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Repeat customers (percent of customers who buy more than once) |
Unknown |
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Increase customers’ use of BDS |
Percent of customers who improve business practices, as defined by the supplier |
Mostly unknown; 20% used transportation services |
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Increase customers’ benefits from BDS |
Change in value-added (sales—raw materials) |
Member revenue 13% above nonmember revenue; input costs reduced by 9%; total net savings, $400,000 |
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* Should be reported for both the market at large and the providers assisted by the project. In these cases, the projects did not track the development in the market at large.
Note: BDS=business development services; SME=micro-, small-, and medium-sized enterprises
The CARE Egypt Agricultural Reform program, managed by Cooperative Assistance and Relief Everywhere, has provided information services to 5,000 smallholder farmers to help increase their income. Although highly subsidized, the program helps farmers link with sources of information outside the program. Once developed, these relationships and networking skills are sustainable.
CARE Egypt uses participatory appraisal techniques, combined with staff networking activities, to facilitate farmers’ access to relevant market information.
§ Staff conduct a participatory appraisal (two to four weeks) with groups of farmers to identify information needs.
§ Staff identify information sources such as other farmers, researchers, government agencies, nongovernmental organizations (NGOs), suppliers, and occasionally, potential customers.
§ Farmers visit information sources, with some or all of the costs paid by the farmers.
§ Farmers apply the newly acquired information to farms; project staff make followup visits to determine if farmers need more visits.
In one instance, poultry farmers visited chick and poultry feed suppliers to obtain better inputs and to learn how to make high-quality feed. In another case, a group of tomato farmers used market information to map out when producers in other geographic areas harvest tomatoes so they could harvest their own during the off season and get a better price in the markets. The project publishes a “yellow pages” of sources for farmers who have begun visiting information sources on their own.
b. Design. CARE Egypt designed the service to replace traditional agricultural extension services that were prescriptive, subsidized, and not always effective. In contrast, the linking services provided by AgReform are farmer-driven. They require a fee from the farmer, establish sustainable market relationships, and help build skills that farmers use to continue developing additional relationships after project assistance ends. The assumption of the project is that information is available in Egypt and that farmers have the know-how and financial capacity to make rational economic choices and to use the information; but they need to know where to get the information so they can build relationships with sources.
c. Uniqueness of Design. Several unique aspects of the program include (1) incorporating gender awareness into the participatory appraisal to include women’s views and meet their needs; (2) focusing on a single service across several sectors; (3) charging fees for information; and (4) helping farmers establish permanent, sustainable relationships with information providers.
2. Project Management. The AgReform project staff includes twenty-three agricultural extension officers in three field offices and six employees in the national office providing technical and management support. AgReform has held two marketing workshops, although staff members still need additional coaching in this area. The project has no formal partnerships and has formed no formal farmers groups, although farmers participate together in some activities.
CARE Egypt is talking with other NGOs and with the government about replicating the project, but not without a few challenges. The main replication strategy is to withdraw from areas where farmers have developed the skills for making new linkages on their own and to move on to other locations. This withdrawal is positive for scale and sustainability, but it presents a problem to the effective monitoring of program impact. To help address this issue, project staff are developing a participatory monitoring system.
Another challenge for replication is standardizing services. The program is highly flexible and provides staff with significant opportunity to solve problems creatively. Management finds it challenging, however, “in the midst of all this creativity,” to keep staff focused on expected impacts and to provide them with the tools they need to provide the most useful service, making it challenging, therefore, to develop a standard, replicable model.
AgReform provides a networking service to help farmers overcome geographic, information, and class barriers to approaching key players in the industry. It does not assist them directly with market research, production, or selling, nor does it prescribe a particular market niche. What AgReform does do is this: it encourages farmers to seek out growing markets. Project staff help farmers think through production issues and give them advice on implementing new ideas. They do not, however, prescribe what improvement farmers should make in their production. While staff members encourage farmers to diversify, they do not make recommendations on how to do so. Unlike similar services, AgReform is customer-driven; it facilitates access to information while encouraging farmers to decide for themselves what their market position, product mix, production system, and sales strategy should be.
The project began by focusing on improving production and is now becoming more market oriented. Initially, a farmer’s first linkage trip was concerned with increasing production, and the focal point of the second was on marketing. Now AgReform requires farmers to examine the market for their crop or livestock before they concentrate on production. Although project extension officers and farmers both have been quick to understand and respond to the concept of a marketing cycle, staff need to learn how to analyze the market and how to access up-to-date market information, and farmers need to become more responsive to their customers.
The main way staff gain access to information is by networking with experts. Over several years, the program has amassed a “yellow pages” of more than 900 contacts in the agricultural and livestock arenas who are willing to provide information to farmers. Project staff started the publication with the names of research institutions, agricultural colleges, and suppliers. It has grown to include other NGOs and a majority of private-sector, agricultural-related businesses in Egypt. AgReform is becoming known as a way for buyers to identify and reach potential customers. These same buyers now approach project staff for help in contacting farmers.
AgReform in Egypt
GOAL 1: INCREASE OUTREACH (SCALE AND ACCESS)
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BDS Market Development Indicators
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Objective
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Indicators |
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Expanding the market for BDS |
Market size: number of SMEs purchasing services (or procuring through other commercial transactions)* |
5,000 farmers |
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Market size: amount of sales by BDS providers* (Sales to final customers, not to SMEs) |
Unknown |
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Market penetration: percent of potential SME market reached with a BDS service |
Unknown |
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Developing a high-quality, diverse, competitive market |
Number of BDS providers* |
1 provider |
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Number of BDS service types |
1service type; facilitating information linkages |
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Well-distributed, wide price range for BDS services |
Unknown |
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Average price for a unit of BDS (markup) |
No charge for service; farmers pay costs of information-gathering trips |
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Number and proportion of multiple-user customers in the market |
Unknown |
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Market distortion: average subsidy content of a BDS* |
Unknown |
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Increasing access to BDS services by underserved groups |
Extent of access: number and percent of SME customers purchasing a BDS, who represent targeted populations (women, microenterprises, exporters, etc.) |
All smallholders; 19% women |
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Target market penetration: percent of potential SME-targeted markets reached (women, microenterprises, exporters, etc.) |
Unknown |
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GOAL 2: SUSTAINABILITY AND COST-EFFECTIVENESS
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Assessing BDS Suppliers
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Objective
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Indicators |
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Supplier sustainability |
BDS supplier cost-recovery of operational costs from clients’ fees |
After several linkage trips, farmers can continue relationship themselves. |
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Program cost-effectiveness |
Simplified cost-benefit assessment comparing total program costs to aggregate program benefits for entrepreneurs |
Total investment to date, $2.23M |
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Total program cost/customer served |
$446/farmer |
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Total program cost/supplier assisted |
1 provider |
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Total program cost/increase in supplier revenue |
Unknown |
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GOAL 3: IMPACT
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Assessing BDS Customers, SMEs
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Objective |
Indicators |
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Increase customers’ acquisitions of BDS |
Customer satisfaction with a BDS |
Unknown |
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Repeat customers (percent of customers who buy more than once) |
Unknown |
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|
Increase customers’ use of BDS |
Percent of customers who improve business practices, as defined by the supplier |
Unknown |
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Increase customers’ benefits from BDS |
Change in value-added (sales—raw materials) |
Unknown |
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* Should be reported for both the market at large and the providers assisted by the project. In these cases, the projects did not track the development in the market at large.
Note: BDS=business development services; SME=micro-, small-, and medium-sized enterprises