Smallholder farmers are in need of inputs such as fertilizers, improved seeds and planting material, and access to finance, delivered in a stable and cost efficient system. Insights from a new report, published by IDH, the Sustainable Trade Initiative, enable service providers to create these cost-effective and scalable solutions, empowering smallholders to grow and sustain their businesses.
Over the past years, IDH and others have been partnering to deliver services to smallholder farmers for improving their productivity and livelihoods. In doing so, IDH seeks to prototype more efficient service delivery models (SDMs) for supply chain structures that provide services such as training and access to inputs and finance to farmers. An efficient model should not only create real impact for farmers, but also make commercial business sense. However, we have seen that there is hardly any “science” on this. There is limited data and evidence on what works and what doesn’t - on cost structures, on funding models, and on levers for driving cost-effective impact, etc.
Therefore, we initiated a systematic, data-driven approach to understanding and improving SDMs with ten partners in the coffee and cocoa sectors. This report presents the overall findings of these case analyses. It provides data-driven insights on topics such as farmer profitability and value creation, service optimization and financial structures of SDMs. With the report, IDH aims to contribute to a more professional business management approach to smallholder service delivery, and to increase farmers profitability and livelihoods through sustainable growth of their business.
Some of the key findings from the report include:
- Farmer profitability as company driver – companies have shifted from focusing on farmer productivity to farmer profitability. A key component of this, is taking into account the overall farm system & cash flow needs of farmers when designing services.
- Farmers as clients – companies see smallholder farmers as “clients” of their service delivery model instead as sole beneficiaries. Farmer segmentation and tailor made service supply to specific farmer segments are seen as ways to optimize service supply to clients.
- Long term investments are needed – companies increasingly become aware that without long term investments in rejuvenation in coffee and cocoa their services will not create long term positive impact at farmer level.
- Models for financially viable service delivery – companies see the need to understand the degree to which services and types of farmers are subsidized by external funding and how revenue mechanisms make (parts of) their services commercially viable.
- Adding value to service delivery – following the analyses, companies see the value of either adding new services to the model, adjust delivery mechanism, or scaling services that have proven effective.
We hope that this report inspires service providers to innovate. If you have ideas or suggestions, or would like to get involved in this topic, please contact IDH through Iris van der Velden ([email protected]).