Unlocking opportunities for smallholder farmers

Last month at the World Economic Forum in Davos, Switzerland, the World Food Program announced a landmark agreement that centers on smallholder farmers, a group that represents half of the 80 million people the agency serves each year.

In partnership with stakeholders from public and private sectors, the WFP’s Patience Procurement Platform aims to connect 1.5 million smallholders to commercial markets and supply chains, rendering them more independent.

How does the platform work? To find out more, Devex met with Mahadevan Ramachandran, deputy director of procurement within the WFP supply chain division, who is overseeing the platform’s development.

Describing how the PPP will make a difference, Ramachandran called for more assistance from global development professionals to boost the venture, highlighting the need for more expertise in the supply and finance side, as well as support with facilitating partnerships.

“We [also] need a lot more cash investment on the risk side too — both in terms of human capital and financial resources,” he said. “There is a lot of donor money going for assistance to charity, but we need a lot more high-risk capital and insurance that allows local banks to be able to lend to a farmers without having fears, either perceived or real, of them not repaying.”

Here are some more excerpts from the conversation with Ramachandran:

The PPP will provide smallholder farmers with the room to take financial risks and make investments. How will this make a difference to the current approach taken by global development actors?

If we are able to aggregate farmers that are market ready, at scale, and then figure out the risk pieces as insurance for repayment, risk crop loss and price risk, this could definitely be a game changer.

There are quite a few financial players willing to take bigger risks ... A lot of things are coming together. But the key is to show that it can be done profitably.

Many don’t want to deal with smallholder farmers because it is usually a loss-making venture, usually the quality is bad, and the farmers don’t deliver, among other things. But urban demand [and] population growth means the need for food is going up, so there is a market that is literally growing in leaps and bounds.

Also, many local companies are under pressure from shareholders and consumers to get their supply chains to be more sustainable, climate smart and environment friendly. So I think the combination of those two factors makes it a great time to try a demand-led platform, a market-driven platform.

You’ve outlined three key risk areas for this project: crop loss, repayment credit and price. How does the WFP plan to tackle these?

Through strategic partnerships. We are predominantly on the demand side because we know the markets as we buy $600 million worth of food in developing countries. We know the buyers, the traders and the processes in these markets. But on the financial risk side, we are [forging] strategic partnerships with [the International Finance Corp.] and Rabobank that were signatories in Davos with us.

Simultaneously, we also have help from Imperial College in London on the modeling side and the design of risk instruments that are affordable in the markets for these three risks.

We’re also trying to get significant amount of help from Willis Re and Swiss Re — some serious muscle on the financial side, both in terms of loans to farmers and also in terms of the risks identified. We’re also partnering with large seeds and fertilizer companies like Yara and Bayer, that are willing to share some of the repayment risk along with the local banks, IFC, etc.

Building on the work of the PPP pilot phase in Rwanda, Tanzania and Zambia what will the WFP do differently going forward to effect change in this area?

We thought that getting the buyers on the platform would be the difficult part, but interestingly, we’re getting lots of buyers who want to pledge these contracts for a few years.

What we had trouble with was structuring the finance in terms of getting the farmers the loans and the quality inputs. We are working quite actively on that and getting help from partners like the IFC and Rabobank in order to deal with this and unlock the loans to the farmers.

The other lesson learned is “how do you select the farmers so they are market ready?” We are working on this.

Sustainable Development Goal 17 aims to “strengthen the means of implementation and revitalize the global partnership for sustainable development.” This platform aims to work towards this, but partnerships are often said to neglect the grassroots. Do you think that through the PPP the beneficiaries, smallholder farmers in this case, are well represented?

Yes, farmer’s rights are protected because our goal is to protect their interests and make them players in the economic realm so they will not be dependent on us anymore. When we design the program in each country there are a series of consultations with the farmers.

So we have significant grassroots consultations, and WFP will continue, even after the program starts, to monitor on the ground and ensure that all the parties are doing their correct share and that profits are equitably shared. That is the great thing about having a public-private partnership: the public part stands up for the “little guy” as well.

In 2015, we have seen WFP step up with mobile tech innovations including your mobile Vulnerability Analysis and Mapping. What further innovations are you planning for the coming year?

We have an innovations department that allows us to piggyback on a lot of operations and scale them up. We have definitely benefitted from our mobile technology and our climate resilience innovation, among others.

To give a specific example, in Uganda, we did a project on postharvest loss using farmer-level silos [small metal containers that are vacuum sealed] that could significantly reduce the postharvest loss. We’re now trying to scale up the innovation project, learn from it and apply it in other countries of the PPP.

But we are also learning a lot from others on the ground. For example, in Tanzania there was a Danish managed repayment risk company called PASS, which worked with local banks and through working on these innovations we can learn a lot from them as well.

Following on from the WEF agreement, how do you think the PPP will evolve?

Having eight CEOs at the highest level [the IFC, AGRA, Rabobank, Yara, Syngenta, Bayer, Grow Africa and WFP] gives a significant political push within each of these organizations to do more operationally on the ground.

Through the platform’s work we are already seeing more financial experts assisting us with the platform, and the political momentum is being converted to actual human beings and instruments on the ground.

Additionally, there are already $40 million worth of contracts that have already gone out to the farmers and we are seeing many other buyers coming out to the platform. I think in 2016 our ability to scale up has been significantly expanded. It’s now more a question of structuring so many pieces of the value chain in a synchronized manner. I think our challenge will be to be able to keep everything aligned so we’re able to implement it.

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