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Not by technology and money alone – blog #3

Not by technology and money alone – blog #3

Publicado el: 02 - noviembre - 2017

A blog series on the importance of relational capacity strengthening in local agribusiness partnerships

In March 2017, 2SCALE1 consortium partner ICRA organised a review and capitalization workshop. ICRA agribusiness trainers, who have been training and coaching supply chain actors in the 2SCALE programme for several years, came together from Benin, Ghana, Mali and Nigeria. The objective was to collectively reflect and draw lessons from their work. The gathering included a write-shop to translate these lessons into stories. This resulted in a booklet of 15 stories illustrating the importance of strengthening functional capacities, i.e. relational and organisational “soft skills” that make local actors function better in their value chain as agribusiness partners. Each blog in this 6-weeks series showcases two stories from this booklet and highlights how the stories address a specific theme in agribusiness development. This week features stories on access to finance and the role of agribusiness clusters (ABC) herein, with two examples from Benin.

Easier financial conditions and lower interest rates
Stronger linkages and trustful business relations within agribusiness clusters (ABCs) support better access to credit and the development of new credit arrangements between local ABC actors (farmers, transporters, input-providers and banks). ABC actors often do not realise how relational and organisational soft skill training can contribute to this. The below stories from Benin address this and show how capacity strengthening enables easier financial conditions and lower interest rates.

New wings for vegetable growers in Benin: Raising €1 million of credit
In June 2012, I – Eric Lakoussan – was entrusted by the 2SCALE programme with the facilitation of a vegetables partnership in Benin. During one of my first workshops with the actors – I had just finished explaining in my local language (Fon) the interest of ABCs – one of the presidents of a vegetable-growing group called out: “Young man, your explanation of ABCs is good, but don't forget: without money, we will go nowhere and people do not want to finance vegetable growers. We have tried and tried but to no avail.”

Indeed, we could foresee that gains would not come without pain, all the more since the actors were used to receiving short-term solutions (like free inputs and subsidised equipment) for challenges that are actually rather structural, such as lack of access to markets and financial services. Many producers were unable to deal with these issues, and some had started to look for odd jobs in town to survive. This scenario was not at all attractive to bankers, especially as they have limited understanding of agriculture. Moreover, the risks are generally considered too high, and only some micro-finance institutions as well as a few “loan sharks” operate in the sector. Their interest rates are very high and their access conditions (procedures, administrative documents and material guarantees) are so difficult to fulfil that the majority of vulnerable actors such as women and young people are excluded. In the face of these challenges, the number one priority was to restore confidence in the sector: confidence not only of the bankers, but also of the farmers, traumatised by their failures and uncoordinated actions.

 

In partnership with the East-West Seed International (EWIT) company, we started supporting the set-up of 24 demonstration and learning sites on good agricultural practices in the major vegetable-growing areas of Benin. Beyond paying attention to technical issues (water control, pest management) these sites have consolidated the partnership relations between farmers, input suppliers and vegetable traders, thus giving life to my discourse on ABCs. We also involved ALIDÉ2 in the cluster, a local micro-finance institution that is familiar with agriculture. We negotiated and established a guarantee fund with ALIDÉ that allowed for a lower interest rate, down from 24% to 12% per year, with a repayment schedule based on the crop production cycle. Instead of the material guarantees previously required, the producers negotiated and obtained the principle of collateral security. Supported by their coach, they set up management committees responsible for identifying potential beneficiaries, and to ensure correct use of the credit and its timely repayment.

 

Besides monitoring of the management committee, we organised learning cycles on topics like management, negotiation techniques, strategies of joint purchase and sale, etc. The coaching focused on strengthening business relationships between the actors, and contributed to the actual functioning of the ABCs. Furthermore, exchange visits between ABCs allowed for a discussion on the management mechanisms and strategies and on the recovery of the loans set up in each farmers’ organisation. The results? In 100% of the cases, the farmers’ organisations settled all loans on time. Within two years’ time, more than 6.5 million CFA francs (€ 1 million) of credit have been provided to 921 producers.

 

Coordination and collaboration: Far from being a waste of time for pineapple farmers in Benin
Below you find a dialogue between Nina, one of 2SCALE’s agribusiness coaches, Athanase, a pineapple farmers’ organisation leader from southern Benin, and his cousin Marcel visiting from Alibori, a city in northern Benin. With great patience, Athanase argues and convinces his sceptical cousin about the many benefits farmers have achieved by being part of an ABC and the pineapple platform of Promo Fruits: the enterprise that processes pineapple into juice.

 

As Nina is talking to Athanase about the next coaching session for the pineapple agribusiness cluster (including his farmers’ group together with input and credit suppliers, extension officers of the zone and representatives of Promo Fruits), Marcel interrupts.

 

Marcel: You people of the South, you definitely prefer to make speeches than to work! The last time I was here, you were talking about capacity strengthening to have access to production inputs – or was it on strengthening your business relationships – I don’t remember exactly!

Athanase: First of all, we are not making speeches, that is for politicians. With the help of our coach Nina, we discuss, exchange and reflect together with all actors involved in the pineapple cluster to explore ways to improve our business. As you know, we produce pineapples for the juice processor Promo Fruits, but that does not mean that we are no longer interested in what happens with our pineapples after they are transported away.

 

Marcel: Well, in any case, the processor makes much more profit than you do, it is always like that. Look at Promo Fruit’s directive on inducing pineapple flowering, where you had to take account of your neighbours’ production calendar: in the end it is the processor who profits with a regular supply of pineapples!

 

Athanase: Ah, but you do not understand that those speeches as you put it, generate money in a very concrete way! They lead to better coordination between all the actors involved, helping them to become more competitive. And this goes on at all levels - from the field to processing and even beyond. Do you know that because I am a member of the ABC, with the support of our platform3, the CLCAM4 (local branch of the mutual agricultural credit institution) granted me a loan at only 11% interest?”

 

Marcel: What? But the normal rate is 24%!!

 

Athanase: Indeed, we are now involved in the pineapple partnership, which is considered as a kind of guarantee! By the way, the processor also benefits from this positive image. They received a bonus of 1% on their investment credit - and as we are talking about millions, even 1% counts!

 

Marcel still needs more arguments to be convinced… and Athanase and agribusiness coach Nina are happy to provide him more. Read the complete dialogue in the ‘Not by technology and money alone’ booklet where you can find the full stories.

 

Next weeks’ blog will feature stories on how capacity strengthening impacts and stimulates market opportunities for youth- and women agripreneurs. You still have the opportunity to hear these – and more - stories first hand: we welcome you to join and register for the 2017 2SCALE event, November 7th in Utrecht, The Netherlands (just a few more seats left!).

 

Footnotes:

1 2SCALE (Towards Sustainable Clusters in Agribusiness through Learning in Entrepreneurship) is a major agribusiness incubator programme implemented since 2012. The programme promotes inclusive agribusiness partnerships in nine African countries and is implemented through an international consortium, led by the International Fertiliser Development Centre (IFDC) together with the Base-of-the-Pyramid Innovation Centre (BoPInc) and ICRA, an international centre for developing facilitation skills in agriculture.
2 Association de lutte pour la promotion des initiatives de développement
3 The pineapple platform is formed by representatives of all the local-level ABCs and some other regional actors involved in the pineapple value chain.
4 Caisse locale de crédit agricole mutuel 

 

 

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