Lessons learnt from AFD support to smallholder rubber plantations

J. DELARUE– N. NOEL

AFD

Panel 2 : Different types of support programs for smallholder rubber plantations

Smallholder rubber plantation projects

• What were the projects’ outcomes and how were they achieved?

• What’s next?

– How can good quality plantations be achieved in the long term?

– Should we support a greater number of smallholders in the future?Who and how?

– Are rubber plantations a good way to alleviate poverty?

AFD support to rubber sector1993 - 2009

AFD Project name CountryGranting

date Financial

commitmentAFD

share

CGH1018 Petits planteurs d'hévéas GHANA 1993 1 168 979 nd

CKH1010 Restructuration hévéa phase intérimaire CAMBODGE 1994 1 466 560 nd

PCI1049 SAIBE (Investissement usine caoutchouc) C.D'IVOIRE 1995 533 572 nd

PCM1067 HEVECAM (Financement partiel investissement) CAMEROUN 1997 2 286 735 nd

CVN1024 Plantations villageoises d'hévéas plateaux centre-sud VIETNAM 1998 15 244 902 20.09%

CGH1050 Petits planteurs d'hévéas GHANA 1998 5 945 512 80.41%

CKH1044 Hévéaculture villageoise CAMBODGE 1999 1 929 242 92.00%

PLR1001 LAC Hévéaculture LIBERIA 1999 2 657 555 nd

CVN1045 Hévéa industriel hauts plateaux VIETNAM 1999 27 471 002 42.91%

CKH1068Projet intérimaire de développement de l'hévéaculture

FamilialeCAMBODGE 2003 3 500 000

81.98%

CKH3000 PRCC Caoutchouc naturel CAMBODGE 2003 800 000 9100%

CGH6008 Projet cultures pérennes (dont hévéa) GHANA 2005 8 620 000 43.31%

CKH6006 Projet de transition d'appui à l'hévéaculture familiale CAMBODGE 2007 840 000 72.00%

TOT AFD+PROPARCO     72 464 058  

13 interventions including 3 loans to private sector (PROPARCO)

Pilot phases followed by a rapid development

Pilot phaseContext ActivitiesNew areas Prove the feasibility of SRPLow rubber prices Build capacitiesAbsence of extension services Create first quality plantations Absence of LT resources for banks Deliver services

Development phaseContext ActivitiesBetter rubber prices Build capacities Extension services need money Create more quality plantations

Absence of LT resources for banks Deliver services

Reach smaller farmersPrepare a national policy

Country Beneficiaries Surface Area Total project costs

Cambodia 1 000 3 800 ha $9 841 000

Vietnam 27 500 41 000 ha $106 447 500

Ghana 2 100 7 000 ha $45 715 169

Outcomes

Implementation

CREDIT

EXTENSIONINPUTS

RURAL

ROADS

LAND

FARMER

Core aspect of projects (50 – 65%)

Long term with grace period

Covers all plantation monetary costs

Advice to farmers, nurseries, banks…

Plantation, immature period, tapping period

Research/Development

Costs covered by credit

Planting material

Inputs delivery on field

Coordination with national programs

Guarantee for bank

Mitigation of risk for farmer

High yields and profitability

Cambodia Vietnam Ghana

Total costs for farmer $/ha 1 116 1 016 2 180

Total costs for project $/ha 1 363 257 943

Number of hectares 3 800 41 000 7000

Expected yields 1 800 1 400 1 800

High yields and profitability

CharacteristicsRubber (project)

Rubber +Staple

products

Seedlings +Staple

products

Staple products

Cashew Banana

             

% surf. rubber 100% 60% 50% 0% 0% 0%

Credit yes no no no no no

Income/year/ha ($) 954 830 408 469 485 639

Income/man.day ($) 12.6 7.8 3.5 6.6 10.0 86

Cambodia:

• 4 ha farm

• real rubber prices until 2008, average price of 0.77 $/kg DRC after 2008

• 2007 prices for other products

Assessment of the situation

• SRP technically feasible• Sustainable loans repayments and profitability

• Price forecast not so pessimistic in the long run• Many spontaneous plantations

But

• Beneficiaries still need credit and technical advice:• Many non beneficiaries also have needs (quality planting material, technical advice, credit)

Risks on the plantations

• Difficulties to get banks involved on a long-term basis Dependence on donor’s financing and immature period not fully covered

Operational constraints Short-term projects don’t fully fit long-term needs

What’s next?

• How can good quality plantations be achieved in the long term?

• Should we support a greater number of smallholders in the future? Who and how?

• Are rubber plantations a good way to alleviate poverty?

How can good quality plantations be achieved in the long term?

Engaging perennial stakeholders in a contractual scheme is promising

Possible options:

Favouring the contract farming scheme in various countries

Increased support to producers’ organizations

Smallholder

Bank

PrivateCompany

Needs rubber supply :

Co-finances extension

Support nurseries

Tapping training

Sanitary controlAttracted by the company’s involvement, takes commercial risk, pre-finances

Delivers rubber to the company at a fixed price

Risks

• land ownership

• environnemental impact

• negociation capacity

How can we support a greater number of smallholders in the future?

(1) Absolute priority : quality planting material - Adapted clones available- Large demand for planting material

(2) Large-scale extension : necessarily through national extension services (Vietnam) or producers’ organizations

(3) Financing needs

Possible options (1) and (2): • Support nurseries development and certification system• Support producer’s organizations • Funding : attract bigger donors? Levy on rubber exports (?)

How can we support a greater number of smallholders in the future?

Current situation:

• Plantation costs are mainly covered• The loan is reimbursed by rubber production and profitability remains high

• Difficulties to get banks involved in the first place (Cambodia) or on a long-term basis (Vietnam) (subsidized rates)

• The financial scheme depends on donor’s provision of long-term resources (limits number of beneficiaries) and the immature period is not fully covered

(3) Financing needs:

Possible options (3)

For 60 to 75% of the farmers, we could probably adapt the credit … Financing needs

- Basing it on existing credit offer

-Reducing the total amount of credit through targeted plantation cost reduction

-posscredit

Are rubber plantations a good way to alleviate poverty?

Current situation:

-Projects have served about 20% poor SEprofiles

-Land scarcity is the main problem

-Rubber has long immature period

-Rubber has high plantation costs / access to credit Poorcst

But rubber is highly profitable!Possible options:

Political decisions:

Land distribution could be done as in Vietnam, Thailand…

High plantation costs : targeted subsidies for planting material

Within small-scale projects :

Study pro-poor crop associations

Propose low-cost plantation techniques

Direct scarce long-term credit resources to the poor

Conclusions

• Technical success was achieved thanks to intensive project support

• Short-term projects do not fit long-term needs

• Contract farming is a promising way of engaging stakeholders in the long term

• To serve more smallholders, credit product offerings for plantations should be adapted to integrate the constraints of the banks

• National policies are necessary to develop smallholders’ plantations on a larger scale or to target the poor

Financing needs

  CambodiaVietnam

(Kontum)Vietnam

(TTHué) Ghana

% credit is the main constraint 75% 74% 96% -

% credit is not necessary 25% 26% 4% -

CambodiaVietnam

(Kontum)Vietnam

(TTHué) Ghana

Other bank - 22% 39% -

Family - 14% 32% -

Own resources 45% 10% 4% -

Asset sold - 8% 0% -

Wouldn’t have planted 25% 38% 25% -

Other 30% 8% 0% -

Total 100% 100% 100% -

Moreover, rubber smallholders usually reimburse in advance

Retour

Socio-economic profiles of beneficiaries

72%

  Cambodia Vietnam* Ghana **

Average rubber surf 3,6 2,3 4,44 (3,3 fin 2007)

Standard deviation 3,6 de 0,1 à 11,9 2,47

Surface      

0 à 1,99 34% - 5%

2 à 3,99 29% -

4 à 5,99 17% -

6 and more 20% - 23%

Total 100% - 100%

  Cambodia Vietnam Ghana

% poor 29% 18% 16%

% middle 13% 77% 59%

% well-off 58% 5% 25%Retour

Poor people face strong constraints

  CambodiaVietnam

(TTHué)Vietnam

(Kontum) Ghana

Replace annual crop env. 30% 5% 65% 5%

Replace perennial crop env. 70% 0% 5% 11%

Replace fallow 0% 0% 0% 84%

New allocated land 0% 80% 11% 0%

Others 0% 15% 19% 0%

  Cambodia Vietnam Ghana

Credit obtained 57% - 99%

Withdrawal 39% - 0%

Rejection 4% - 1%

Land constraint

Credit selection

Retour

What credit was proposed for the next phase in Cambodia?

Year Outstanding debt

AnnualInterest

Capital reimb.

Annual repayement

1 600 108 108

2 600 108 108

3 600 108 108

4 600 108 108

5 600 108 108

6 600 108 200 308

7 400 72 200 272

8 200 36 200 236

Total ($) 756 600 1 356

Credit over 8 years / Interest rate : 19%/year

Retour