Partnering with the private sector is now a core activity for the International Fund for Agricultural Development. Not only did it issue a strategy for partnerships between companies and small-holder farmers, IFAD centered its 2013 annual meeting in Rome around the issue.
Released in 2011, the strategy highlights IFAD’s role as broker of partnerships that will connect small-holder farmers to the market and suggests an increasing use of grants and loans to support private-public partnerships.
“It is not all roses and wonderful,” Mylène Kherallah, senior technical advisor for IFAD, told Devex. “There are risks and we have to keep our eyes open.”
Kherallah prepared the fund’s private sector engagement strategy. We spoke with her on the sidelines of the IFAD annual meeting, which was held earlier this month. She discussed how the strategy has changed the way IFAD operates, including how it delivers technical assistance.
How are you helping small-holder farmers be engaged with the private sector?
It’s building their capacity to engage with the private sector. That means technical assistance, in terms of improving their business and management skills, increasing their productivity and the quality of their products, so that the private companies are interested in buying from them.[It also means] improving or brokering the relationship between the small farmers and private sector companies: bringing them together, having consultation together, facilitating that partnership.
Then, one very important thing you may know, we are very big supporters of farmers organizations and cooperatives. We think about that by aggregating and organizing farmers we actually make it much more compelling for private sector companies to work with these farmers because when they have a whole group to work with, an organized group that can produce the quality and quantity that they need, that’s a much easier type of partnerships for them than if they have to deal with separate small famers that are dispersed, they don’t produce the quality, they don’t produce enough quantity. …
Why would the private sector be interested in this type of partnership?
Because they are now deeply concerned about sustaining their supply sources and diversifying their sources.
If you look at cocoa, they are saying [that] if the productivity level of cocoa stays the same, there’s going to be a big supply shortage of cocoa in the next five or 10 years. If they want to maintain a stable supply of cocoa, they have to promote, improve production, improve productivity. Most of cocoa is produced by small farmers.
So there is really a clear profit motive for this. It’s not that they are trying to do this from corporate social responsibility or reputational issue. I think some companies are realizing that unless they also support farmers, their supply sources may become more uncertain and unstable in the long run.
Will this strategy change the way IFAD and its staff work?
Yes, because it is much more now looking at the market. Now it is much more what is that the market needs, what are the types of quality standards that are requested from the private sector, from the markets, keeping an eye on prices to make sure that producers will be able to get the prices that will cover their production costs.
Before we were much more production-oriented, just increasing productivity, increasing production, without necessarily thinking how is that going to be linked to them selling it in the market. Now, we are much more aware that pushing production is not enough, because if they are not able to sell it … at least the excess production — because some of them can be consumed and that’s good for them, for the household nutrition and food security. Beyond that, they need to sell to generate money, to generate income, to make a profit out of that investment in increasing productivity. I think the change is much more being aware of what the market needs.
Does this mean further training for your staff? Are you now looking for a different set of skills from consultants?
Probably we are now. I see we need much more consultancies in private sector development, business development, marketing, information system, understanding markets, brokering. Yes, there are some different skill mix that is needed and we are doing some training sessions on value chain development, [on] how to analyze market, how to analyze value chains, how to integrate small farmers into value chain. So it’s both training the existing staff and using new skills in consultancies, or when you hire new staff you, start looking at these skills more.
How is IFAD supporting this strategy financially?
It is mostly through our projects on the ground, and our projects on the ground either try to raise cofinancing from the private sector or doesn’t have to be even … co-financing in the project, but it could be parallel financing. For example, we would say: “We are going to support the farmers, we are going to organize the farmers within a providing capacity building and training, but you need to provide the factory, processing, the buying and the marketing.” And so they do not have necessarily to put money in our projects, but they have to be parallely doing complementary financing.
We are gradually evolving toward more and more these [new] models [such as] contract farming, out-grower farming .
How are you going to deliver technical assistance under the partnership strategy?
A lot of our projects are through governments; it could be either loans or a mix of loans and grants. And then, within those resources, there is usually a project design …. a planned budget that defines the activities that will be financed and often we finance activities that are related to training, technical assistance, business management.
We support farmers’ fields schools which is really a local type of activity where you have lead famers. Farmers go visit other farmers that have adapted technologies, they go, they learn, they bring it back. We have a grants program with research institutions to also develop technologies and improve the adoption rates among small farmers. We sometimes have NGOs that develop these training programs.
That’s also the innovative function that we want working with the private sector and partnering with private sector. It is often that they are willing to provide technical assistance, especially if they see the direct link between providing this technical assistance and the improvement in the quality of the products they are going to be receiving from small famers. There are various means of delivering this technical assistance, depending on the country, the project, the models that we are using.