from

TM

TM

Pearl’s objective is to be a

cooperative owned by

small-holder farmer groups.

Summary: • Develop coops for small holder farmers. • Increase production with training, quality inputs, and

loan guarantees • Specialize in market provision

2

Solving Underlying Problems Changes Lives

Most of the poor are subsistence farmers: in East Africa is 60-90% of the people.

The poverty is profound and the needed change needs to be just as deep to last.

UnderlyingProblems

The story of subsistence farming

4 Halves of Have-NotsUnderlying

Problems

AGRICULTURE WITH FOOD CROP FOCUS NEEDED

Farmers produce little for sale• So no

commercial loans

• So no reliable market causing much waste

Food businesses lack crop inputs• So limited

growth and investment

• So they import needed volume competing with nearby farmers

Dysfunction in the Food Value Chain

Pearl must work on both halves because the problems are linked in a

Vicious Cycle

UnderlyingProblems

Markets Solutions are Needed Too

Agricultural Value Chain Analysis - Tanzania

Cooperatives Ecology Farm Inputs Crop Mgmt. Markets

Valu

e Ch

ain

Com

pone

nts

1)FarmerGroups 2) Soil 3) Inputs 4)

Harvest5)

Markets

4c) Storage

4e) Preservation

4d) Processing

5a) Retail Markets

5d) Import Competition

5c) Exports

5b) Wholesale

Buyers

4b) Trucking and Roads

4a) Taxes3a) Finance Guarantees

3b) Finance

2a) Climate

2b) Plant Diseases

2d) Fertility

1b) Government Regulations

2e) Agronomists

1a) NGO Organizing Assistance

3c) Agridealers

3d) Imported Supplies

5e) Local Competition

1c) Culture

3e) Local Seed

Production

2c) Land Access

Color code:

Green is workable

Yellow indicates difficulties

Red is serious problems

UnderlyingProblems

Farmers Lack Access to Crop Input Finance

UnderlyingProblems

• With careful manual application, it costs $200-$1000 per acre for seeds, fertilizer and treatments

• There is not enough money in aid to lift farmers out of poverty. BIG LOANS are needed; more than microfinance offers farmers.

• Microfinance constrains people to subsistence.

• What is a market? -List of buyers to negotiate terms (a business function)

• Distribution systems lacking so need market building (rather than ‘market linkages’)

• Access paradox: market is BIG but farmer is SMALL

(too small to connect)

Farmers Lack Access to Markets

UnderlyingProblems

Interlocking Relationships

• Interconnecting finance, markets and farmers is needed

• Many microfinance and development programs disconnect them

• Local commercial banks need to be involved for sustainability

Finance

MarketsFarmers

and Production

UnderlyingProblems

Key Conclusions

• Focus on food crops is needed (export crops are only used because markets are easier)

• Massive volume is needed to meet local market needs – so big groups required

• Farmers should and are able to produce more but can’t without…

• Large loans and guaranteed markets, which are lacking

UnderlyingProblems

Strategy: Link Many Farmer Groups

Create coops/farmer companies that are formed from small farmer teams.

Link coops into a large company for strength and market access.

Coops are the Answer: • Cooperatives have been a model for

lifting farmers for over 200 years (1810 in USA) and all cultures

• They provide sharing of production expenses and joint marketing, financing and purchasing

They fail in Africa for three primary reasons:• Lack of trust - corruption• Shortage of finance• Unreliable market access

dominated by middlemen12

Successful Coops Need All

FINANCE (inputs and equipment)

PURCHASE LEVERAGE (discounts on inputs,

equipment, services, etc.)

SHARED SERVICES (equip rental, insurance, storage,

processing)

Group strength for MARKETS (larger, reliable supply gets a higher price)

Coops

13

FA

RM

ING

, M

AR

KE

TS

AN

D F

INA

NC

E

Farmer Group

Farmer Group

New Coop Structure

Accountability and mgmt with Teams of 5-15 self-selected farmers

Structure is a combination between savings/microloan groups and coops

Pearl Foods is Joint Venture Between Farmers Groups and Cheetah

JV is unifying point for coop marketing. Controlling crops secures investments

Multiple farmer groups come to own Pearl; business is divided naturally

Timu

Wakalimu

Team

Farmers

Farmer Group

Team

Farmers

Pearl Foods

Cheetah (& Loan

Guarantors)

Masoko, Markets

Benki, Bank Finance and

Accounts

Wateja Customers (Buyers of Crops)

Strategy: Commercialize Farmers

Beyond subsistence to sustenance:

Maize fields planted on the same day. (Pearl supported farmer on left.)

4 Steps to Leave Subsistence Poverty

1. Organizing

in Registered

Groups

2. Technical Farming

(Agronomy and Inputs)

3. Large

Commercial Loans

4. Guaranteed

Markets

Farmer Commercialization

Pearl prefers to partner with NGOs

Pearl’s focus and income

Partner w/ local banks (metafinance)

Strategy: Provide Finance

Beyond subsistence:

Maize fields planted on the same day. (Pearl supported farmer on left.)

Greasing the Wheels

Agriculture & Food

Markets

Finance

Pearl focuses on markets and

finance because most

lacking in traditional

development approaches.

Results need to start with markets not ‘link’ later

Cheetah Innovation: Metafinance with Catalytic First Loss Capital

• Metafinance reaches groups rather than individuals

• Paves the way for commercial bank finance – provides collateral farmers lack to get needed loans

• Metafinance linked to another innovation: catalytic first loss capital

• Risk tranches allow for wider participation of lender types

• Cash sits in bank lending to farmers, unlocking finance

Sub-Debt 2 (Mission Driven Investors)

Program Absorbed Risk

Possible Government

or Major NGO Shared Risk Program

(45-60%)

Senior Debt(Low Risk; Protected by

Other Investors)

Sub-Debt 1(More Risk but still Protected by Other

Investors)

10%

20%

20%

50%

Summary and Conclusion

Dev

elop

men

t Pro

cess

Grow Enterprise

Increase number of farmers Allow successful farmers to double loans

Increase coop mgmt training

Initiate ActivitiesBegin with harvest to establish mutual trust Continue with finance for trusted members

OrganizeRecruit members and train Legally register groups Arrange for finance and

markets

Select a Target VillageChoose target villages based on

productivity, work ethic and trust Hold meetings in many villages and choose

best

Mission Summary

Strategies:• New form of old success:

strengthen coops with sub-groups (teams) and JV

• Commercialize farmers• Include significant finance• Interconnect with guaranteed

markets

CropsInvestments

(Markets and Finance)Cash

Thank You!

www.CheetahDevelopment.org

23