The key question in this workshop session was how to help include the poor in value chains; poor producers are generally too small to transact directly with large buyers. This exclusion leads to the poor selling to small poor buyers which reduces prices and decreases value for the poor producers. This problem is most exacerbated in agriculture, livestock and other perishables. In the absence of proper storage facilities – i.e. cold storage facilities and/or proper transport facilities, low-income producers are forced to sell as they produce which may not be the most favorable keeping in view price fluctuations.
Multiple examples from numerous organizations were shared in this session that aimed to address just this conundrum – how to help poor farmers and other micro-entrepreneurs better integrate in value chains. This essentially requires the establishment of a national enabling environment through linkages of small producers to specialized organization at each step of the value-chain.
The Jollibee Foundation shared its investment into and organization of onion farmers cooperatives which helps increase prices for farmers up to 75% more than they would be able to without the value chain. Jollibee Foods requires a steady supply of onions for its ‘secret recipe’ but unfortunately onions are only grown once in the year in the Philippines. While larger farmers can store these onions in proper storage facilities, smaller farmers need to sell the onion as soon as they harvest them. Naturally this reduces profit margins for small farmers. Jollibee Foundation has helped organize farmers into cooperatives by ensuring purchase of onions grown by the farmer cooperatives. As a consequence of this steady and confirmed demand, MFIs give loans to the small farmers to help them form these cooperatives. Through these cooperatives, a win-win situation emerges wherein the farmers earn better prices for their onions and Jollibee is assured a steady and fresh supply of onions.
Another value chain development project for small farmers that was featured was cashew nut processing through NABARD in India. NABARD has been able to secure a direct buyer for processed cashew nuts in Wal-Mart USA as a result of which it has been able to help small farmers form into a production cooperative. The production cooperative is trained and supported in replacing manual techniques such as breaking the shell by hand with using machines to do the same. Moreover NABARD has also introduced drying machines and trained the farmers on techniques of how to grade the quality of the cashew nuts processed. NABARD also involves the local governmental agriculture officer that helps with monitoring and trainings aspects at various steps along the value-chain. As a result of this value chain, poor farmers have been able to earn much fairer prices and have been able to register themselves as production cooperatives.
The main crux of the session was that there are multiple ways in which Financial Institutions; especially MFIs can support value chain development in small/poor farmers. The process needs creativity, an enabling regulatory environment, willing partners, and involvement of multiple stakeholders!