Business Call to Action Agribusiness and the Smallholder Farmer
Did you know that smallholder farmers produce about half of the food required to feed the world’s current population? Yet agricultural production in developing countries is characterized by very low productivity. Increasing this productivity is essential for global food security, poverty reduction, job creation and economic growth. Many of our Business Call to Action companies in the agribusiness sector are using pro-poor, inclusive business strategies to productively engage smallholder farmers at various stages in the value chain.
To commemorate the March mini-series on Inclusive Agribusiness, we are featuring three recently published case studies on the innovative enterprises who are using partnerships, financial and technical assistance in their quest to strengthen smallholder supply chains and support agricultural development.
Juhudi Kilimo
Juhudi Kilimo, a Kenyan social enterprise, provides financing that allows Kenyan smallholder farmers to access high-quality agricultural assets that enhance the productivity of their farms. The company provides rural smallholder farmers with micro-financing to purchase agricultural assets such as dairy cows, poultry, greenhouses and biogas digesters. These assets generate income for farmers and act as collateral for loans. Asset financing allows Juhudi Kilimo to work in Kenya’s poorest rural communities, where little business activity or collateral exists, improving farmers’ incomes and food security. For example, a farmer can take a loan for a high-yield dairy cow, which will generate enough milk in 12 months to pay for the cow, the interest on the loan and training, and still leave the farmer with enough extra income and milk to sustain a family. Once the loan has been repaid, the farmer owns the asset. After several loans, farmers can build an asset base, which can double or triple their income.
Similarly, Juhudi Kilimo maximizes the benefit of asset financing by providing both technical assistance and business training. The company administers asset financing loans to rural clients through a network of field offices throughout Kenya. Juhudi Kilimo’s clients must be active members of farmers’ organizations and participate in completing loan applications. Juhudi trains each organization for two months on governance and financial management of its loans. Most of the company’s clients have never used a formal loan product before and require significant training in bookkeeping as well as the risks and benefits of finance. Juhudi works through partners including the Government and local NGOs to provide a high level of technical training and avoid the conflicts of interest with its clients. The company is currently enhancing its training with innovative technology that is also cost effective. Loan officers are now equipped with tablets to provide training videos and presentations specific to agriculture.
Read BCtA Juhudi Kilimo case study here
Taze Kuru Inc.
Taze Kuru Inc., a Turkish company active in the food and retail industries – and an innovator in promoting healthy foods – has demonstrated the importance of supplier finance to working with smallholder farmers. The company sources its products from small farmers in rural areas of Turkey. In its efforts to support smallholder farmers, Taze Kuru plans to build suppliers’ production capacity according to European Union standards. As such, Taze Kuru’s traceability system enables the company to track the product from the farms to the shelves of the European and U.S. stores. Traceability is a mechanism which can be used to not only achieve a withdrawal of food products from the market, if necessary, but also to track the sustainability and impact of production.
The company has been successful in reaching low-income farmers who lack access to finance for innovative farming methods and equipment, including drying equipment and food-storage techniques that can improve vegetable production and harvest yields. Because most smallholder farmers in Turkey lack cash flow and are unable to receive credit from formal institutions, Taze Kuru provides financing to its suppliers.
Read BCtA Taze Kuru case study here (no longer available)
Sambazon
U.S.-based food company, Sambazon, trains communities in the Amazon Estuary region on organic and environmentally responsible production and non-invasive harvesting of açaí fruit. Its aim, since its inception in early 2000, is to integrate impoverished individuals into the company's value chain as suppliers, producers, distributors and employees. Sambazon is the global leader in açaí fruit-based products, 100% of which is derived from sustainable wild harvesting in the Brazilian Amazon Estuary. The company only sources Açaí from small-scale suppliers who participate in an organic and fair trade certification and sustainable agroforestry management program.
In order to promote long-term sustainable development, açaí growers are provided with training in topics such as forest management for better açaí productivity and yields and organic crop production and good harvesting practices. In order to implement the training program and facilitate the courses, Sambazon collaborates with government institutions who support the project. Through its initiative, Sambazon will profit from having a larger number of certified suppliers and increased opportunities to source fruit from a variety of different locations.
Read BCtA Sambazon case study here (not longer available)
Additional resources:
- Read BCtA report, ‘Is Finance the Primary Binding Constraint for Sm...(no longer available)
- Learn more about Business Call to Action >>
- Visit Business Call to Action Guardian Platform >> (no longer available)
This blog is a part of our March 2015 series on inclusive business in the agriculture sector. To view all the articles in this series click here.