This week IFAD released a helpful and incredibly insightful 2011 Rural Poverty Report. Many things have changed since 2001, when the last report was released, and this years focus takes an interesting look on the roles of small farmers, markets, and private sector development.
Enjoy a link to the report here for download.
A few weeks ago I posted on invisible assets and the need to put a price tag on environmental resources. Farmers, in particular, often feel the pinch or prod of these “hidden assets” which includes assets like quality soil, favorable weather conditions, functioning credit systems, or access to water (via adequate rainfall, groundwater wells and nearby lakes and rivers). Putting a price tag, as I mentioned, is riddled with controversy. Yet these assets make cultivation of healthy products less expensive, less risky, and more appropriate for crop diversification which translates to higher potential incomes, higher flexibility to changes in international markets and preferences, and overall productivity.
Matching Assets with Liabilities: Considering Guatemala
But resources are not distributed equally. Neither are the incentives for using them sustainably and ethically. What translates as a high-cost constraint for one farmer (for example, water, or labor) may come free or more easily to another. In a country like Guatemala, for example, water access for farmers in the Central Highlands, where a majority of the export-agriculture of the country is done by poor, indigenous Mayan communities. As an aside, check out this great article on sustainable water use which discusses green vs. blue water sources and the impending water crisis.
For communities like the indigenous Mayans in the Central Highlands, this is a major asset; and yet they remain incredibly constrained in terms of production capabilities. Investments in irrigation, a popular trend in development projects, would likely do little to increase productivity. Where then, are the hidden liabilities constraining full production potential? Fertilizer? Labor? Land? How can the accurate identification of these constraints inform better government policies and interventions? At the moment, fertilizer is relatively cheap and available (although costs are rising), thus policy or program objectives to further subsidize costs of fertilizer may do little to significant change constraints (at least as of November 2010). Ample labor in Guatemala had originally why Guatemala had an advantage for export-oriented production in the first place. In fact, a large migratory workforce, occurring both from internal conflict and displacement as well as movement for greater economic remittances, has been a pressing public health and social justice issue. Indisputably, land rights and land availability, however, has remained a critical issue for indigenous communities for over a century. One benefit of non-traditional export crop cultivation in Guatemala has been that farmers with very little land were able to achieve high incomes – but increasing needs for more land on account of a booming population as well as a desire for export-oriented crop producers to use has had both ecological and political consequences.
How can we best direct policy and programs to attack hidden, perhaps even invisible constraints?
Innovative modeling technology may give us an idea at where the constraints lie, but significant progress can be made by simply asking farmers themselves. Here’s a few resources that struck me as interesting and innovative this week:
Aline.org.uk (Agriculture Learning & Impacts Network) offers some interesting areas of insight into how to collect farmer-driven feedback, assess how efficient/inefficient service provision is for citizens within a particular community (which can include resource distribution like fertilizer, water, seeds, etc), and more macro-community scorecards on regional access to critical necessities, in order to uncover where constraints may lie. When we finally understand the reality of both assets and liabilities for small growers, or at least know ways to uncover what they are, can we steer policy and programs towards maximum effectiveness.
Note: This post is Part 5 of a 6-part series exploring new business models for linking small farmers to global markets being analyzed through an international collaborative effort that can be read about here. Read an introductory post, see links to parts 1-4 below, or follow our series at Nextbillion.net.
Innovation and Development
Innovation is the way of the future. Or at least that seems to be the buzz word of development recently. We have finally realized that the “same old, same old” tactics of implementing top-down interventions have not eliminated poverty, hunger, diseases, or food insecurity. The search is on for new business models and technologies to help the bottom billion escape poverty, poor health, and low educational attainment. Development approaches now focus on the capabilities and originality of those at the bottom of the pyramid, instead of their deficiencies. Organizations like Ashoka and Acumen seek to break the traditional development paradigm and harness the innovative spirit of entrepreneurs with experience in their respective communities by providing mentoring and financial support. These organizations’ investment in local abilities is paying off both in terms of economic growth and social well-being. So how can other already existing companies and organizations exploit the power and experiences of those at the bottom of the pyramid to improve business performance and enhance the lives of all actors in the value chain?
The New Business Model series focuses on increasing the participation of smallholders in the decisions and processes that affect their livelihoods. Inclusive innovation by definition incorporates these smallholders in the process of transforming the market chain to increase value in one or more of the links and for the chain as a whole. In the case of agricultural supply chains, often the smallholders’ knowledge of best farming practices given the geographical, cultural, and technical context can prove vital to effectively adding more value to the product, increasing the earnings of actors in every phase of production, and generating or responding to new market opportunities. A new report by the U.N. “The MDG’s: Everyone’s Business” touts the ability of inclusive business to catalyze innovation, create new markets, and fortify supply chains in rapidly changing markets. Hence, I use an example from the Philippines to illustrate the power of local knowledge and community inclusion to drive innovation and markets:
Bo, a native Filipino, was horrified by the poverty that plagued small, Filipino coconut farmers. He recognized the possibility to eliminate waste and improve the livelihoods of the farmers by creating twines and ropes using a traditional 100-year-old weaving process, which then would be processed into nets. Bo started CocoTech, which incorporated the community into each stage and truly considered the community as a business partner. The local farmers’ organizations share the accountability for operations, hence, creating a sense of responsibility to the company and enhancing the efficiency of the supply chain. Through collaboration with other coconut processing organizations, both groups benefited from the discovery that design modification of the twiner and loom could double production. CocoTech secured market access through contracts with Mercedes-Benz and Presidential mandates to use nets in public works projects in the Philippines. The introduction of new markets reinvigorated the coconut farming industry that was failing in the Philippines and created multiplier effects in other industries as well. Through continued research and collaboration, the processes and equipment continue to improve.
How is Inclusive Innovation different?
Inclusive innovation breaks from the traditional development values of wealth redistribution instead focusing on wealth creation through creating value both for the populations at the bottom of the pyramid, other supply chain actors and final consumers. Rather than trying to redistribute a static or, or in many cases, shrinking pie, inclusive innovation seeks to grow the overall value of the product and thus provide incentives and additional wealth which can accrue to the diverse sources of innovation in the supply chain. In contrast, “normal” innovation tends to occur through research and development initiatives sponsored by actors at the end of the value chain. As a result, the majority of benefits tend to accrue to market proximate actors. A recent report by the U.K. Department for International Development (DFID) stresses the benefits of including all stakeholders in the innovation process as a means to both maintain leadership in the marketplace and to create sustainable solutions for the future of agriculture. The report outlines many benefits associated with inclusive innovation in research that increase efficiency:
In addition to the points highlighted by DFID, inclusive innovation can also provide important competitive advantages for the overall supply chain. For example, as market demands shift and new market opportunities emerge, having the capacity to react in a coordinated and collaborative fashion can allow the supply chain to bring novelty to market faster as opposed to a traditional R&D approach. In this regard decentralized and smaller production units operating in a networked fashion tend to be more efficient. Examples of this can be found not only in agriculture, but also in areas like textiles and fashion in northern Italy.
In the final segment of the series, we will discuss shared measurements and outcomes as they relate to new business models for small farmer inclusion.
Past posts on this series, Exploring New Business Models for Linking Small Farmers to Global Markets include;
Everywhere you look someone is clamoring on about business and the return to creating authentic market value. If your thinking, like I did initially, that this is an overwhelmingly obvious notion glammed up to look like a new concept, then yes, you’re completely right. Thinking that people, products and concepts should create some kind of real contribution to society and the marketplace, probably wouldn’t be categorized as a stoke of brilliance – but sadly, it’s not a given either. To prove it, we have more than a decade or two of a lot of fancy products and empty ideas that, as of late, have created little more than serious havoc.
[youtube http://www.youtube.com/watch?v=fPI8XFfBxHk]
I use the obvious example of the financial sector, but misguided ideas in development and agriculture have caused us to take significant steps backwards as well. For those of use involved in research and innovation, this is a plea to use research in a way that will drive new services, build new models and bolster systems that can deliver both sustainable growth and positive impact. In short, we need research that can support businesses to do well by doing good.
Making the development case for sustainable agriculture in a pro-poor, inclusive food system is simple. More than 75% of the world’s poorest get the food and income from agriculture. These 400 million small growers are amongst the most marginalized and vulnerable on our planet; including female-headed farm households in developing countries which produce between 60-80% of food in the developing world. Aside from lingering rural poverty rates, agriculture encompasses destructive and divisive systems of slavery (both in the United States and beyond) and is often the key driver of extreme environmental degradation, contributing to climate change and poor resource management.
For far too long research for development has rested on staggering facts and jaw dropping statistics (like those above), in an attempt to drive change through empathy and charity. We know that our research and implementation of inclusive business models in agriculture can do global good, but how can we create and communicate real value on the business end and really drive change to scale?
To answer this, we have to look at some of the major components of company value that generate long-term profitability and success:
1. Sales and Market Access
2. Operational Efficiency
3. Access to Investment and Capital
4. Risk Management and Impending Legislation (read a past post here)
5. Brand Value and Reputation
6. Human Capital
Often we see companies attaching sustainability or social-impact objectives as a sort of appendage in one or a few areas – for example, through sales and marketing campaigns or through new product development to capture a 
new market. All too often this disjointed approach to sustainability reduces the overall impact that integrated sustainability policies could, when working together across these areas in a concerted effort, profitably make towards the bottom line.
Within the Markets theme at DAPA, we are looking to create real value that motivates the public and the private sector to embrace meaningful, authentic changes that can have a real impact on poverty and support the sustainabledevelopment of emerging markets. Towards this end, our New Business Models for Sustainable Trading Relationships in Agriculture work seeks to help agribusinesses do better by doing good, we’re launching this series that will evaluate how the advancements in small-farmer inclusive business models are taking shape and promoting long-term value in each of the above listed areas. Defining value in terms of both business growth (profitability) and measurable social and environmental impact, we’ll look at the specific tools, trends, and case studies that are proving that companies with a concentrated, coherent sustainability plan are coming out ahead. Ideas that create value. Models that generate change. Growth that demands replication. Research that becomes relevant. Stay tuned.
A month or so ago the international research community was finally granted easy access to a wide array of data and information on poverty and development. With the release of the World Banks Data Catalog freely accessible on the web, those in research, policy, and advocacy can point to clear and uniform data and make critical steps towards both development reform and continued progress. Even more interesting, is the opportunity for web developers and programmers to use this data to create new methods of knowledge and information sharing, opening up opportunities for mobile applications, new tools and technology, and creative partnerships around critical development objectives.
“I believe it’s important to make the data and knowledge of the World Bank available to everyone,” said World Bank Group President Robert B. Zoellick. “Statistics tell the story of people in developing and emerging countries and can play an important part in helping to overcome poverty. They are now easily accessible on the Web for all users, and can be used to create new apps for development.”
Off you go now to the world of indicators and data… enjoy!
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