Size Isn’t Everything: Quality vs Quantity of Development Impact in Inclusive Agribusiness

Development programmes wish to be as impactful as possible – of course. It makes sense that for any investment, social or otherwise, that you want to see the biggest returns. So donors add up the number of beneficiaries reached by their development investments and these figures are the strongest and simplest way of communicating results. 1,000 cotton farmers reached or 10,000 consumers accessing better fertiliser. These are the headlines which dominate development communications.

The devil is, however, in the detail. Quite how were the 1,000 cotton farmers affected? Did they see a hike in the prices of their crop for a couple of years or was their productivity fundamentally and permanently improved to move them from subsistence farming to a more secure livelihood? If 10,000 smallholders had greater access to fertiliser, what does that actually mean? Was it simply available in the local store when it wasn’t previously, or could it be shown that farmers actually purchased x% more fertiliser than they were doing before? If they did, did they use it effectively, along with other essential farming inputs, to achieve greater yields and profits? Measuring meaningful impact at this level of detail is essential.

In terms of inclusive agribusiness, reaching the poor at scale is easier when the poor are the consumers in the business model. In general terms, reaching the BOP will be about accessing a new market segment for firms more used to targeting commercial farmers, and this means developing different strategies in marketing, packaging, sales and distribution, etc. These changes are broadly within the firm’s control and if done well, corresponding changes in behaviour (for example, purchasing choices) by smallholders will deliver a win-win result.  

However, an inclusive agribusiness delivering improved and/or cheaper products/services to small farmers is unlikely to have any impact on the wider market affecting farmers’ incomes. Constraints such as poor access to buyers, lack of awareness of market prices and poor agronomic skills are commonly found among BOP producers. A smallholder who has learned how to increase yields and quality, and who has access to a reliable market, will be much better off than one who has merely been able to buy seeds for a better price. So would it be fair to say that inclusive agribusinesses targeting poor consumers may record high outreach, but are likely to be less effective in having significant development impact?

Agribusinesses wishing to build business models that source from BOP producers in my view have a greater challenge. An existing business will have to both make internal adjustments, or, if a start-up, design the business model around engaging and buying from small farmers. However, the biggest changes required to make such models work most often lie with the smallholders themselves. For example, farmers will need to modify their farming practices to meet the time and quality thresholds required of the formal market, or form of co-operative structures in order to be able to aggregate produce and manage contracts. These changes can require huge behavioural and cultural shifts, depending on the context, and can only realistically be achieved through facilitation by third parties, such as NGOs or government, who may well be better placed to engage with small farmers than the private sector. While working in Malawi I recall Universal Industries (a confectionery business) being particularly good at building effective partnerships with NGOs to enable them to engage and buy crops from smallholders, for example sourcing cassava to process into high quality cassava flour. They recognised partnering was an essential part of their smallholder sourcing business model.

Such producer-based inclusive agribusiness models, if well designed and implemented, can achieve sustained and real benefits to small farmers. They are harder, however, to replicate or grow. There are few economies of scale to be made in the business reaching further groups of smallholders.

In contrast to inclusive business approaches – i.e. those which focus the on the supporting agribusinesses themselves (and thus benefitting the poor in their value chain) - a systemic development approach puts the poor at the centre of the problem. In simplistic terms, market systems programmes focus on higher quality results, i.e. changes that address all underperforming aspects of the system affecting a smallholder’s farming income in a manner that will be sustained. Inclusive business programmes generally lack the remit or the wherewithal to engage key players and constraints in the broader market beyond the individual business. As discussed above, there are limitations to the depth of impact for consumer-based models, and limitations of scale for producer-based models.

One could argue that it is usually a different scale of development programme that takes on support to individual agribusinesses to one that alters the way a whole market works. But I do wonder whether there is greater scope to take systemic approaches with smaller budgets – perhaps hitting lower smallholder numbers, but making more significant and durable change in the lives of those who are reached?

This blog is part of the July 2016 series from the Practitioner Hub and Seas of Change on Inclusive Agribusiness. Download the PDF for more insight, updates and opinion.