Introduction
Improving the livelihoods of smallholder farmers in developing economies is one of the five impact focus themes of IDH, and closely relates to the first Sustainable Development Goal: ending poverty.
A critical question for smallholder farmers, and all who depend on their productivity, is how we can build economically viable systems to enable the delivery of key services. Smallholder farmers need access to inputs, such as seedlings, fertilizer, responsible agrochemicals, GAP training, access to markets and access to finance. Those with access to services can increase their yields, improve their productivity and profitability, and continue to invest in their farm.
The learning agenda on service delivery models (SDMs) concerns how to create cost-efficient models that realize a high return on investment for both farmers and service providers—and how to ensure these models can continue without donor support. By adopting a cross-sector approach, IDH aims to learn about workable solutions more quickly, having greater impact on the livelihoods of smallholder farmers.
Target 2020:
IDH aims to train 3.7 million farmers on good agricultural practices (GAP), covering an area of 6.3 million hectares (adoption rate of around 60%). Of those, 2.8 million farmers (4.7 million hectares) are expected to have better yields and livelihoods.
Improving smallholder livelihoods with service delivery models
Our work on SDMs has been central to several of our smallholder commodity and landscape programs. We have seen delivery strategies shift from a focus on increasing productivity to one that also encompasses increasing profitability. This shift has been reflected in the actions of companies who have transferred SDM work from their CSR departments to their sourcing divisions. These companies have realized that when farmers can’t make a living income, they can’t produce the products that the companies want to source. In short, there is a growing awareness of the need to build economically viable systems that trigger investments in more professional and profitable farming, so that farming becomes an attractive occupation for farmers and their families.
A focus on productivity alone is not enough to enable better livelihoods for smallholder farmers. Even if productivity significantly rises (as has been the case with most IDH smallholder programs), service models don’t become economically viable—and hence are not sustainable—if the costs are too high. To be profitable you need to look at cost efficiency. And for service providers to be able do that, they need to know how to service their farmers best.
These are not projects. Projects end. We want SDMs to continue, and they can only be economically viable if they make business sense for service providers and farmers. You can’t de-link the two.
In our experience, isolated interventions do not work: it is about a package of services that meet the needs of different kinds of farmers. Service models need to be attractive to investors, and this is where our smallholder livelihood agenda meets our innovative finance approach. Service delivery is a pivotal element in our Production-Protection-Inclusion (PPI) agenda: farmers need to produce more on the same land, with high return on investment.
Creating opportunities: when SDMs make real business sense
Our learning journey on SDMs began with the creation of an inventory in 2015: a systematic, data-driven analysis designed to help us understand and improve SDMs.
Most companies’ SDMs have grown organically, and we needed to find out what was working and what wasn’t. To that end, we partnered with companies in the cocoa and coffee sectors willing to share information about the costs and benefits of their service models. Openly investigating such highly competitive information is tough, but the solid reputation of IDH helped us to gain trust. Participating companies had to be willing to share information about how they work with smallholder farmers, who they source from, and how their business is doing. Allowing companies to filter what can be publicly shared was also key to their cooperation.
One clear conclusion is that current SDMs have had limited impact on farmers’ livelihoods. While most models have increased productivity, profitability and income at the smallholder farmer level remains low. There are several reasons for this, including the fact that adoption rates for isolated interventions that focus on training or distributing fertilizer are low. In addition, providing a one-size-fits-all solution to different types of farmers contributed to a lower return on investment and impact.
Timing is often an issue, too. For example, between yields, coffee farmers will typically use “coffee fertilizer” on food crops with only moderate effect. This practice is cost inefficient for both farmers and providers. Farmers might also side-sell their coffee for much lower prices in order to have cash for school fees. And inefficiencies caused by not addressing the whole picture can hamper progress. For example, training farmers who have to work on depleted soils and/or with crops that need rehabilitation or renovation will not produce good results. And training farmers who don’t have the means to make the necessary investments into crucial inputs, such as fertilizer, is also ineffective.
Gathering insights into the actual effect at farmer level was a key driver for organizations to begin to look differently at their service supply.
Real change requires a holistic approach. Renovation and rehabilitation (R&R), for instance, aims to improve the long-term productivity of crops in order to generate significant returns. It calls for distribution of new seedlings – a service that is in the hands of governments in many countries. And it calls for fertilizer distribution – a service that needs pre-finance and potentially some income support for farmers who are faced with lower/ zero production during the replanting period. And these services require functional infrastructure. By creating an SDM that includes all of these elements, we increase the chances of delivering an effective R&R package—one that will have real impact on the productivity of targeted farms.
Towards economically viable systemic change
After thoroughly mapping what works and what doesn’t in 2015, 2016 saw us prototype solutions that are now being co-financed and piloted together with companies. And that’s where the learning has really started to take shape. We’ve learned that customized service packages only work if you identify the different kinds of farmers you want to provide services to, and you need to look at the farm as a farming system. To enable all of that, you need to build coalitions with parties who don’t normally sit around the same table. You need governments, companies, NGOs, banks, and other public and private stakeholders to work together.
There’s no one-size-fits-all solution: you need to tailor services to different kinds of farmers.
In order to build just such a coalition, we held the Renovation and Rehabilitation Forum in Amsterdam. Topics under discussion included how governments, companies, banks, NGOs and farmer cooperatives can work together in a systemic approach. During the forum, it became clear that we were moving away from a project-based approach towards transformative, economically viable, systemic change. We’re excited about this development, and we sensed the same excitement among other participants too.
Later in 2016, another forum was held in Tanzania. The systemic approaches first discussed in Amsterdam were made concrete and the first actionable plans were created. This was IDH convening power at its best.
Increasing farmer resilience through smart on-the-ground solutions
Piloting innovations with our partners has enabled us to identify smart, low-cost interventions with high impact. Technoserve in Ethiopia, for example, trains farmers in low-cost stumping with significant effect on profitability. Companies in Côte d’Ivoire teach farmer groups fermentation techniques that add value to their cocoa. In India, farmers produce their own organic fertilizer at significantly lower costs. In Madagascar, we’ve piloted the integration of cocoa and vanilla production so farmers are no longer dependent on loan sharks for cash in between yields. In other areas in Africa, sesame and coffee production has been integrated.
There is a lot of literature on extension services, but IDH is the first to pilot innovation together with companies in their own supply chains.
And we have been working with the insight that farmer cooperatives (through aggregation) are often able to provide members with access to inputs on credit, and that this results in better yields and higher income. This has led to work on creating scale through block farming, where small-scale farmers cultivate their fields as a group to reduce overall costs and to offer support across the crop-growing spectrum. Inheritance traditions typically mean that the plots of land get smaller with each generation. Bringing farmers together in an organized way (for example in a cooperative) creates scale, which enables investments in irrigation and mechanization to become profitable.
Implement best practices from one commodity or geography in another
The beauty of a cross-sector learning agenda is that it allows IDH to implement best practices from one commodity and geography in another much more quickly. Best practices in cotton in India can be transferred to cocoa in Ghana within a few weeks. An important next step is to continue piloting innovations together with companies. The effective distribution of the knowledge we glean from our programs is also crucial to future in novations, and to implementing best practices. We will continue to inform and inspire other stakeholders, companies, governments, and NGOs through our website, newsletters, and publications.
Companies are now actively approaching us and are very keen to improve [their SDMs]
2017 will be breakthrough year
The progress we’ve made in 2016 strongly suggests that 2017 will be a breakthrough year for SDM developments. Our efforts are highly appreciated by others. Work with the Bill & Melinda Gates Foundation and with Root Capital is ongoing, and we plan to pilot several innovations in service delivery models in our new facility. This is all happening alongside our work with Barry Callebaut to develop an SDM that can offer long-term loans for renovation to cocoa farmers. More and more companies are asking whether we can help improve their service delivery models because they can clearly see the benefits that such work can offer them. And, more importantly, smallholder farmers are beginning to gain greater profitability from their work.