Jessica Graf

About HYSTRA Hystra works with business and social sector pioneers to design and implement hybrid strategies, innovative business-like approaches that are economically sustainable, scalable and eradicate social and environmental problems; and combine the insights and resources of for-profit and not-for-profit sectors. Hystra itself is a hybrid organization, a for-profit tool for social change. Hystra consists of a core team of full time consultants and of a growing network of partners already present in 12 countries. For more information, visit www.hystra.com.

It makes business sense to work with and for smallholder farmers. But a balanced and stable relationship is essential to ensure that everyone grows and thrives

BoP as supplier
Inclusive business models and strategy
Partnerships
Agriculture or Food
10. Nov 2015

Imagine, for a minute that you are a small farmer. You have between half an acre and 3 hectares of land, to feed a large family. Your parents were farmers before you, and your children, at least some of them who won’t leave for the city in search of better incomes, are likely to become farmers too, on an even smaller land if they have to share the little you have.

Your whole life, you have worked as hard as you could, and yet you are still poor, and still entirely depend on things outside of your power for survival. These things are weather, the quality of inputs that are sold to you, and the price at which you sell your harvest. All of those must go well for you to be able to feed your family throughout the year and send your children to school, to cite only that. But if only one of those fails, you are doomed.

What we know is that working with smallholder farmers is tough. In fact, many projects remain small and stuck. Many blame it on the farmers…they are risk-averse, they need ‘education’, they are just ‘too small’ to work with…But what we have seen is that it rather depends on how balanced the relationship is between the farmers and the organization working with them.

"Dependencies of farmers and other organizations"
Balance of dependencies

In 3 out of 4 cases, things can go wrong. I.e. the relationship is not balanced.

Either the organization has invested much and is very dependent on small farmers for its success, but on the other hand, this relationship doesn’t matter that much to the farmers (e.g., it is a crop they cultivate opportunistically or it only represents a little of their income, or the company is not really able to offer them a better deal than what they were used to in the past). That is what we call the uncommitted farmer scenario.

In the uncommitted organization scenario, the farmers are highly dependent on the organization working with them to access essential inputs or sell their harvest, but the organization itself is not committed to developing these farmers in the long run. This is not a viable situation and may lead to exploitation of farmers. Mitigation measures exist though, and should be enforced whenever possible.

In the flirting scenario, neither side is investing much, so there is not much to lose either, but it is unlikely that this set-up will produce significant long-term benefits to both sides. In some cases, the lack of investment from the organization and the opportunistic behaviour of farmers will result into a downward spiral of lower productivity and heightened competition among organizations (mostly based on price), which will trigger further opportunistic behaviour among farmers.

Then there is happily married scenario, where both sides are equally and deeply committed to each other, and thanks to that, thrive respectively in ways that were not possible before.

How to get to a successful marriage? And who is better placed to achieve this, buyers of produce or sellers of inputs and equipment?

While sellers of productivity-enhancing technologies and inputs can quickly transform the lives of the farmers they sell to, they must find ways to increase penetration sufficiently to reach economies of scale, and roll-out operations in a very cost efficient ways. This is not easy in the context of smallholder farmers, who live remotely and tend to need support and training to get to use successfully new products and equipment.

On the other hand, buyers of agricultural produce have a distinctive advantage: they have an intimate understanding of the farmers they work with. They know how much they produce, sell and make. Buyers often try to invest into ‘their’ farmers in many ways, but many of these interventions actually translate into much less income increase for farmers (compared to the impact of technology provision that sellers help realize). And given buyers bring them limited value, farmers often show little loyalty and side sell.

The answer to these questions and many more insights can be found on Hystra’s newly released report Smallholder farmers and Business, available on http://hystra.com/smallholder. This report was prepared with the support of the Swiss Agency for Development and Cooperation, Danone Ecosystem Fund, responsAbility Investments AG and C&A Foundation.