A Fintech, a Digital Agri Solution Provider, a Rice Company and an NGO walk into a bar….
Joint Press Release of Mercy Corps, Golden Sunland, Village Link and Daung Capital
On 19 February 2020, Mercy Corps announced the successful launch of a collaborative action with Golden Sunland - a rice company, Village Link - a digital agri-solution provider, and Daung Capital - a fintech. This action, as part of the Linking Laputta to Markets (LLM) Program, will redefine the program’s contract farming approach to create a sustainable future for smallholder farmers. The LLM Program is an initiative by Mercy Corps, funded by the multi-donor fund - LIFT and implemented in Laputta, Ayeyarwady Region of Myanmar.
Farmers in Myanmar often bear the brunt of erratic weather conditions due to climate change and managing a highly demanding crop. Although 25% of the nation’s GDP is generated via the agriculture sector and the majority of the population is involved in rice farming, little initiative has been done successfully to ease the smallholder wicked problem in the long term. Many donor funds have been poured into this situation, hoping some relief is enough for farmers to ride out bad times. Microfinance tasked at lending to the financially excluded shun away, leaving farmers in the lurch. Rice companies end up with spare capacity for both processing and storing rice grains, making operational cash flow hard to come by. In addition, small-scale nature of farmer operations has resulted in high transaction costs for them to have better access to quality inputs, services, and improved markets.
The LLM Program, since its inception, has reached out more than 3,000 smallholders, leading to the creation of 65 Farmer Producer Enterprises (FPEs) across the hard-to-reach locations in the Ayeyarwady Delta of Myanmar. Wahyu Nugroho of Mercy Corp remarked that “by tapping into the increased private investments in the country, since early 2018, Mercy Corps has been refocusing program interventions by partnering with the private sector actors as a way of project continuation beyond using donor funds. Mercy Corps has then organized the FPEs into a formally registered entity, as a platform for smallholders to engage more productively in the value chains.”
The unique collaboration between the farmer entity and the for-profit firms overcomes all of those challenges and more. By leveraging the production contract with Golden Sunland, smallholder farmers gain access to credit to purchase seed, fertilizer and operation capital on an extremely versatile credit terms offered via Daung Capital. To complement, Golden Sunland provides the requisite training and buy back clause for farmers to avoid debt trap, market instability and ensure peace of mind, while Mercy Corps help the farmer entity performs the necessary due diligence of the Farmers Producer Enterprises (FPEs) involved and brings in Village Link to assist in digitizing information sharing and farm monitoring for all engaged.
“In this project, through Htwet Toe, the country’s most popular farming app, we use remote sensing technology to provide personalized advisories, broadcast weather and pest outbreak alerts to farmers based on farm location, soil condition, crop type, sowing date, and weather conditions on site.” Said Quyen McGrath from Village Link. By using a combination of satellite and field data, Village Link establishes a platform to remotely monitor the farm conditions for farmers and partners to improve farming and business operations by making informed decisions.
While technology is an important element, the willingness of engaged parties with differing interests to come up with a shared value had played a crucial role in this partnership to flourish. “This is inclusive innovation at its best. Instead of talking about first world technology that may be inapplicable, simply re-thinking relationships, applying everybody’s interests in a creative fashion, so that all participating stakeholders’ benefit. Most importantly, it’s the farmers that need it and benefit the most from this alliance” explains Leon Qiu, Founder and CEO of Daung Capital. Daung Capital was recently acquired by Get All Myanmar Co.
COO of Golden Sun Land, David Chen commented “To sustain the good work that NGOs such as Mercy Corps has done over the years, it is important to tap into the private sector. Candidly, we were able to launch the collaboration simply because the people at the table understood the principles of meaningful partnership. We came on board understanding the need to create mutual benefits and risk sharing. The result is a new model that is tailored to the needs of the rice farmer. Seeing what we had on a makeshift white board come alive is really an important milestone for smallholder farmer transformation.”
This promising collaboration was established towards the end of the LLM project. As such, LLM is challenged by the limited timeframe available for the program to continue and expand the work. “While it gives us hope that we have created a framework that can create a sustainable agricultural future for farmers engaged, additional time and extra resource will allow us to fully transform the farmer entity to manage the relationships and expand the work. Our goal is not just expanding this beyond the existing farmers, but also help farmers diversify their production and income beyond rice.” Wahyu Nugroho concluded.