pearl foods - business based farmer cooperatives
DESCRIPTION
TRANSCRIPT
from
TM
TM
Pearl’s objective is to be a
cooperative owned by
small-holder farmer groups.
Summary: • Develop coops for small holder farmers. • Increase production with training, quality inputs, and
loan guarantees • Specialize in market provision
2
Solving Underlying Problems Changes Lives
Most of the poor are subsistence farmers: in East Africa is 60-90% of the people.
The poverty is profound and the needed change needs to be just as deep to last.
UnderlyingProblems
The story of subsistence farming
4 Halves of Have-NotsUnderlying
Problems
AGRICULTURE WITH FOOD CROP FOCUS NEEDED
Farmers produce little for sale• So no
commercial loans
• So no reliable market causing much waste
Food businesses lack crop inputs• So limited
growth and investment
• So they import needed volume competing with nearby farmers
Dysfunction in the Food Value Chain
Pearl must work on both halves because the problems are linked in a
Vicious Cycle
UnderlyingProblems
Markets Solutions are Needed Too
Agricultural Value Chain Analysis - Tanzania
Cooperatives Ecology Farm Inputs Crop Mgmt. Markets
Valu
e Ch
ain
Com
pone
nts
1)FarmerGroups 2) Soil 3) Inputs 4)
Harvest5)
Markets
4c) Storage
4e) Preservation
4d) Processing
5a) Retail Markets
5d) Import Competition
5c) Exports
5b) Wholesale
Buyers
4b) Trucking and Roads
4a) Taxes3a) Finance Guarantees
3b) Finance
2a) Climate
2b) Plant Diseases
2d) Fertility
1b) Government Regulations
2e) Agronomists
1a) NGO Organizing Assistance
3c) Agridealers
3d) Imported Supplies
5e) Local Competition
1c) Culture
3e) Local Seed
Production
2c) Land Access
Color code:
Green is workable
Yellow indicates difficulties
Red is serious problems
UnderlyingProblems
Farmers Lack Access to Crop Input Finance
UnderlyingProblems
• With careful manual application, it costs $200-$1000 per acre for seeds, fertilizer and treatments
• There is not enough money in aid to lift farmers out of poverty. BIG LOANS are needed; more than microfinance offers farmers.
• Microfinance constrains people to subsistence.
• What is a market? -List of buyers to negotiate terms (a business function)
• Distribution systems lacking so need market building (rather than ‘market linkages’)
• Access paradox: market is BIG but farmer is SMALL
(too small to connect)
Farmers Lack Access to Markets
UnderlyingProblems
Interlocking Relationships
• Interconnecting finance, markets and farmers is needed
• Many microfinance and development programs disconnect them
• Local commercial banks need to be involved for sustainability
Finance
MarketsFarmers
and Production
UnderlyingProblems
Key Conclusions
• Focus on food crops is needed (export crops are only used because markets are easier)
• Massive volume is needed to meet local market needs – so big groups required
• Farmers should and are able to produce more but can’t without…
• Large loans and guaranteed markets, which are lacking
UnderlyingProblems
Strategy: Link Many Farmer Groups
Create coops/farmer companies that are formed from small farmer teams.
Link coops into a large company for strength and market access.
Coops are the Answer: • Cooperatives have been a model for
lifting farmers for over 200 years (1810 in USA) and all cultures
• They provide sharing of production expenses and joint marketing, financing and purchasing
They fail in Africa for three primary reasons:• Lack of trust - corruption• Shortage of finance• Unreliable market access
dominated by middlemen12
Successful Coops Need All
FINANCE (inputs and equipment)
PURCHASE LEVERAGE (discounts on inputs,
equipment, services, etc.)
SHARED SERVICES (equip rental, insurance, storage,
processing)
Group strength for MARKETS (larger, reliable supply gets a higher price)
Coops
13
FA
RM
ING
, M
AR
KE
TS
AN
D F
INA
NC
E
Farmer Group
Farmer Group
New Coop Structure
Accountability and mgmt with Teams of 5-15 self-selected farmers
Structure is a combination between savings/microloan groups and coops
Pearl Foods is Joint Venture Between Farmers Groups and Cheetah
JV is unifying point for coop marketing. Controlling crops secures investments
Multiple farmer groups come to own Pearl; business is divided naturally
Timu
Wakalimu
Team
Farmers
Farmer Group
Team
Farmers
Pearl Foods
Cheetah (& Loan
Guarantors)
Masoko, Markets
Benki, Bank Finance and
Accounts
Wateja Customers (Buyers of Crops)
Strategy: Commercialize Farmers
Beyond subsistence to sustenance:
Maize fields planted on the same day. (Pearl supported farmer on left.)
4 Steps to Leave Subsistence Poverty
1. Organizing
in Registered
Groups
2. Technical Farming
(Agronomy and Inputs)
3. Large
Commercial Loans
4. Guaranteed
Markets
Farmer Commercialization
Pearl prefers to partner with NGOs
Pearl’s focus and income
Partner w/ local banks (metafinance)
Strategy: Provide Finance
Beyond subsistence:
Maize fields planted on the same day. (Pearl supported farmer on left.)
Greasing the Wheels
Agriculture & Food
Markets
Finance
Pearl focuses on markets and
finance because most
lacking in traditional
development approaches.
Results need to start with markets not ‘link’ later
Cheetah Innovation: Metafinance with Catalytic First Loss Capital
• Metafinance reaches groups rather than individuals
• Paves the way for commercial bank finance – provides collateral farmers lack to get needed loans
• Metafinance linked to another innovation: catalytic first loss capital
• Risk tranches allow for wider participation of lender types
• Cash sits in bank lending to farmers, unlocking finance
Sub-Debt 2 (Mission Driven Investors)
Program Absorbed Risk
Possible Government
or Major NGO Shared Risk Program
(45-60%)
Senior Debt(Low Risk; Protected by
Other Investors)
Sub-Debt 1(More Risk but still Protected by Other
Investors)
10%
20%
20%
50%
Summary and Conclusion
Dev
elop
men
t Pro
cess
Grow Enterprise
Increase number of farmers Allow successful farmers to double loans
Increase coop mgmt training
Initiate ActivitiesBegin with harvest to establish mutual trust Continue with finance for trusted members
OrganizeRecruit members and train Legally register groups Arrange for finance and
markets
Select a Target VillageChoose target villages based on
productivity, work ethic and trust Hold meetings in many villages and choose
best
Mission Summary
Strategies:• New form of old success:
strengthen coops with sub-groups (teams) and JV
• Commercialize farmers• Include significant finance• Interconnect with guaranteed
markets
CropsInvestments
(Markets and Finance)Cash
Thank You!
www.CheetahDevelopment.org
23