ECOM Agroindustrial Corp. Ltd: reducing supply-chain risks in Ghana and Nigeria

Sustainability at ECOM means focusing on improving farm productivity and product quality, leading in turn to lower costs and higher incomes. ECOM’s goal is for farmers to produce more and better product and for cocoa, coffee, and cotton farming to provide opportunities for dignified and profitable livelihoods for generations to come.

ECOM started work on certification of farmers in 2011, in response to demand for certified cocoa. The company established a partnership with IDH to implement the Better Business for Better Beans (B4) project in Ghana and in Nigeria, with the aim of improving the living standards of cocoa-farm families through delivery of extension services: laying the foundation for sustainability initiatives in West Africa.

Initially the program focused on delivering certification-focused training through a network of trained lead farmers in each district. Aligning farmers to the requirements of certification catalyzed thinking around the delivery of other (very new at the time) services, such as access to inputs. To professionalize cocoa farming practices, ECOM established Farmer Development Centers (FDCs) as local hubs. The FDCs served a twofold function, as buying station and farm-service depot. Services offered included training, farm inputs, and improved planting material.

In 2013, ECOM was able to use CPQP funding (in partnership with Lindt & Sprüngli) to significantly enhance and scale the reach of the FDCs. Innovative and inclusive agricultural services were offered to an additional 50,000 farmers. These enhanced services included the establishment of entrepreneurial farm shops, coaching, a Farmer Business School for champion farmers, nutrition and crop-diversification modules in training services, and Farm Development Plans.

Discover the stories behind five years of partnership with CPQP

Managing risk: inputs for cash and credit in Nigeria and Ghana

For the first three years of CPQP, ECOM perceived inputs on credit as too risky to deliver. The company was already financing farmers for cocoa delivery and the prospect of additional debt was unattractive. In Nigeria, a credit scheme was particularly risky, as debt recovery was poor due to low farmer loyalty (in a context of an unregulated cocoa market and price—unlike in Ghana where a minimum price is set by the Cocoa Board). In addition, efforts to establish an innovative inputs credit facility in partnership with IDH and FMO (the Entrepreneurial Development Bank) were assessed and deemed too risky.

Therefore, ECOM began the Nigerian inputs program with cash sales—offering recommended chemical inputs through rural shops, which exposed farmers to new products. ECOM negotiated with suppliers for reductions on bulk purchases, which passed on prices that were generally more competitive.

In Ghana, a credit scheme was tested (with 500 farmers) in 2014. ECOM employed an Inputs Coordinator to manage this component of the program: a role initially funded by IDH. Farmer groups were given credit for a limited package of chemicals, fertilizer, and tools—carefully put together for application on 1 hectare of farmland. Farmers in need of a larger inputs package could finance the difference themselves. By limiting the size of the package available to farmers on credit, ECOM controlled the risk. Full repayment was achieved. The scheme was scaled to 5,000 farmers (with a 98 % recovery rate) and by 2016 had reached 15,000 farmers.

In addition to the de-risking factor of the upper credit limit, ECOM has achieved success in credit for inputs by assessing farmers’ ability to repay in cash or cocoa, only servicing farmers within ECOM’s supply chain, and taking advantage of bulk purchases to increase profitability. The company now employs a full team to manage and implement this strategy, which is funded internally and is not reliant on donor funds.

See also: Finance

Training: from certification to farming as a business

ECOM realized that carrying out training according to certification requirements (wherein a basic curriculum is repeated annually) was insufficient to ensure high adoption rates. The company began to experiment with other ways to motivate farmers and enable them to improve productivity. In 2015, field trainers were introduced to coach individual farmers. These field trainers deliver and are remunerated against targets, encouraging consistent service delivery.

New modules have been introduced to the training: for instance, diversification of farming activities to include other products such as maize, cassava, and snails. This is in part a response to indications from profit-and-loss statements that all farm livelihoods benefit from diversification, and partly due to the realization that many cocoa farmers are working on small plots with low yields.

Intensification is also encouraged: a Farmer Business School was established in April 2016, which offers a five-day training course on farming as a business. The curriculum was developed by GIZ and is designed to help farmers make informed economic decisions regarding input requirements, investments, and practice adoption. Financial literacy and nutrition are both included in the training, which is still in development.

Because of the time commitment required, the ECOM school is currently self-selecting. Farmers willing and able to put in the time to learn are more likely to represent a return on ECOM’s investment. Scale-up is slow, but the aim is to cover around 25 % of farmers during one year of training. ECOM intends to refine the farmer selection procedure since demand is higher than the current capacity to provide the training.

After training, many farmers set up a savings account either with a group or with a financial institution. ECOM will be tracking whether farmers change their decision-making behaviour as a result of their learning.

See also: Training

Delivering loyalty: the ECOM Service Delivery Model

ECOM built its Service Delivery Model (SDM) around key lessons on adoption and impact. The company began to think of the farmer as a client: developing services aimed at creating farmer loyalty (to minimize the risk of default) and delivering products farmers were willing to pay for. Design and development are key to the ECOM service delivery model: as the farmer has become a more significant actor in the SDM, the farm-economics data necessary to inform effective programs has become increasingly important.

A 2015 analysis of the Lindt & Sprüngli project (see ECOM Agroindustrial Corp, Ltd: reducing supply-chain risks in Ghana and Nigeria, in this chapter) provided ECOM with a data-driven approach that enabled structural modeling of the SDM. The report highlighted the need for better data in order to reduce the reliance on assumptions that can make it hard to predict the effectiveness of an SDM design. It also revealed that the current heavy subsidization of the SDM could be mitigated by asking farmers to pay for the aspects of the model that relate to the last mile of service delivery. There is also the potential for introducing professional farm-rehabilitation services via long-term loans (an effective model used in the rubber industry in Ghana).

See also: Good Data, Service Delivery Models

The search for good data: data mapping and Farmer Field Books

ECOM has, through its Farmer Development Centers, become closer to farmers: and as a result has been able to explore new ways to collect and analyse data. Reliable data is a vital component of well-designed, impactful services, and informs the creation of innovative finance packages capable of minimizing risk to all the actors in the value chain.

ECOM has tested several methodologies for data collection and is working to converge what works into a single system. The company’s approach, which began with basic data collection, has been significantly refined to provide insights on specific questions: for example not only whether farmers are applying fertilizer, but whether they are applying it in the correct way.

ECOM initially mapped farmers using the partner services of GeoTraceability—a UK-based company that collects, analyzes, and visualizes field and producer data. In 2013, surveys were introduced to better understand farm characteristics and management practices. A questionnaire was developed in close collaboration with the Committee on Sustainability Assessment (COSA), aimed at capturing different data points that would provide a more nuanced understanding on how and why farmers are managing their farm. Farmers were surveyed in 2016 by the ECOM data collection team: 80,000 farmers in the supply chain (out of a total of 120,000) received a basic questionnaire, and every fifth farmer was interviewed in more depth to find out (for example) where they purchased inputs and whether they were satisfied with services. Follow-up surveys will be carried out annually to track progress over time.

Other methodologies are being used to assess the best way to collect accurate data on specific metrics. For instance, Farmer Field Books, which rely on bi-weekly data collection, are used to provide more accurate information on variables such as costs and income (instead of using only annual surveys). It is through experiments like the Farmer Field Books approach that ECOM has been able to give farmers new entrepreneurial tools: by breaking down costs for different strategies against income earned, farmers can begin questioning the merits of their own investment activities.

With continually improving collection methods in place, ECOM’s next challenge is to make the most of the data it generates. Currently, the company relies on external analysis: but it is planning to recruit an in-house impact assessment adviser who will provide systematic data analysis (and upgrade the database to provide more in-depth reports).

See also: Good Data

Fertilizer-readiness and the adoption pathway: taking farmers from theory to results

To boost both soil quality and the efficiency of fertilizers and other agro-inputs, ECOM is exploring how different soil types affect production and has begun to integrate soil types into farmer training. Different types of soil have different reactions to the introduction of fertilizers: it is vital that farmers understand the soil quality in order to minimize wastage and pollution. Drawing on experiences from other projects with Integrated Soil Fertility Management, ECOM is now developing soil action plans at community level, which will include soil-fertility practices tailored to different soil types.

The creation of these ‘fertilizer-ready soils’ is an excellent example of ECOM’s cautious approach. In preparing the soil to receive the fertilizer, ECOM is also de-risking investments in fertilizer by ensuring it will be applied where it will have the biggest impact. The company also aims to develop an ‘adoption pathway’ to encourage farmers to take up the practices and inputs to which they are given access. Non-adoption of Good Agricultural Practices (GAP) was a notable problem uncovered by CPQP: ECOM’s solution is to identify certain GAP practices as so cost-effective that they encourage automatic adoption. These practices also tend to be those that lead to a change in yield significant enough to repay loans.

ECOM has also increased adoption through more personalized contact with farmers—for example through farm visits to discuss individual circumstances. However, it is complex to deliver this at scale. To better understand adoption, ECOM is now following up on services such as the inputs credit package to see if uptake patterns are emerging (i.e. whether farmers have been attracted to the package, whether they have been able to access it, and whether they are repeat customers).

See also: Fertilizer