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Posted on June 20, 2017

Posted By Carolijn Gommans, Senior Consultant Agricultural Finance and Digital Financial Services & Janske van Eijck Consultant, Sustainable Business Practices

In a project funded by the EU and implemented by IFAD under the Technical Assistance Facility (TAF) for Africa, Enclude and the West Africa Rice Company are working with extension agents, a local financial institution and a private palm oil processor to improve yields, product quality and access to finance for smallholder farmers. The project’s extension agents have organized 2230 local growers into 152 farmers’ groups for training and resource sharing, and on their travels by motorbike throughout the countryside around Daru, are finding many opportunities for increasing smallholder productivity, as well as an enthusiastic and engaged audience among the farmers.DSC_0236

For many years, local farmers did little or no maintenance, such as weeding or pruning, on their trees, and often planted lower quality local varieties with much lower yields than hybrid seeds. In addition, many were not aware that seeds collected from hybridized plants will not produce in the second generation, but since it takes 3-4 for a palm oil tree to mature and bear fruit, much time was invested and lost in growing trees that would never yield properly.

One of the main components of the project therefore focuses on distribution and financing of quality seedlings. This is particularly important now, as many tree crops were planted prior to the war and are now reaching the end of their productive life.

The local palm oil processing facility and major buyer in the region, Goldtree, was founded 5 years ago, bringing better access to markets for local growers. Goldtree sold seedlings directly to farmers but the distribution and monitoring of the seedlings was challenging. Some seedlings were provided on credit but GoldTree lacked the knowledge and processes to effectively manage those loans.

Under the TAF program, a permanent staff of 14 field agents trains farmers in the planting and assists with the distribution of the seedlings. Enclude’s team also has helped to put in place loan application, assessment, monitoring and repayment processes with clear division of responsibilities and roles. Staff has been trained and equipped with tools to assess and monitor loans, and farmers now pay for seedlings which are subsidized by TAF and partly financed by Goldtree.

By the end of this year 30,000 new, high quality seedlings will have been planted and while it will take some years for them to mature, a potential $5,000 increase in net income per farmer is projected over a 20 year period. This amounts to an annual net income of $ 360 during the trees’ peak years (year 7 to year 15) for each hectare replanted – or about a 20% increase in annual household income from a relatively small investment of $700, including a subsidy showing an IRR of around 30%.

DSC_0070 CSC_0093 (2)Based on the pilot, we anticipate expanding the lending program to increase the incomes of many more farmers. These financial products and loan processes are being extended to farmer groups, who operate joint plantations, as well as employees and agents who want to invest in their own farms.

In conversations with growers, some hidden sources of inefficiency in local production processes were discovered and are now being addressed. One surprise was how growers were setting aside a portion of their harvest to finance school fees. Since school fees are due in March, well before harvest time generates most of the year’s income, farmers were making side deals with independent traders to deliver a certain quantity of palm oil at harvest in exchange for a cash advance to pay fees. This informal source of credit is granted at terms that are not very favorable to the farmer, and results in productivity loss since on-farm processing is far less efficient than the process employed by Goldtree. If farmers sell all of their product to the factory, they capture a greater share of revenue rather than losing part of it to financing costs and reduced yield of palm oil. To solve this problem, Enclude has facilitated a partnership between GoldTree and a local community bank to develop and launch a schooling loan product allowing farmers to borrow at reasonable rates and maximize revenue from their crops.

Another limit to productivity is due to the fact that in Sierra Leonean culture, women are not allowed to use machetes, which are necessary for harvesting and weeding/clearing fields with palm oil crops. Furthermore, there are only a handful of young men who can do the job of climbing the trees and cutting down the fruits, and given the labor shortage, their services are expensive for the farmers who must employ them. The cost of this labor can amount to 60% of the farmer’s selling price, so the project is exploring alternative harvesting methods using poles, which are only possible with the consistent weeding and maintenance that farmers are now learning.

Being organized into farmers’ groups has had benefits in terms of resource sharing as well. Now participants are helping each other with farm work and saving some labor costs, which is especially beneficial for women. In addition, the field agents provide access to much more reliable partners for transport to market. In the past, independent brokers collected smallholder harvests in remote areas, but their cut of profits was again high, and in many cases they simply didn’t show up as promised, resulting in lost produce since palm fruits have a very limited storage life once they are cut from trees.

Now the field agents can refer trusted agents associated with Goldtree to pick up the harvest, and the farmers have more confidence that they will get a fair price and not experience needless losses due to spoilage. Market prices are more transparent now thanks to Goldtree’s announcement on the radio station, and even those out of range can hear the latest from their field agents.

fieldofficers motorbikeInformation on farmers’ experiences under the program flows back to the TAF team thanks to quick surveys administered by agents during field visits, using the smart phones with which they have all been equipped and a mobile data collection software called Dooblo. Farmers keep in contact with field agents and with each other via What’s App. Together with the data kept by GoldTree on the location and size of smallholder farms and quantities supplied, program data on loan repayment history provides a wealth of information that GoldTree can use to manage risk in its their supply chain and at the same time make a meaningful environmental and social impact.

In keeping with the program’s emphasis on farmer-to-farmer training, Goldtree and the TAF project team recently hosted an event called Empowering Women Day, to share and celebrate the experiences, challenges and successes of female farmers and to highlight the important role that women play in driving inclusive rural development and economic growth. Over 600 women farmers showed up at the event, where the project’s female extension agents were highly visible, serving as energetic and engaging MCs, speakers and panel facilitators.

While some changes implemented under the program will, quite literally, take time to bear fruit, it is clear that the smallholder farmers have a better access to markets for their products and opportunities to increase their income, which in a very remote area like Daru in Sierra Leone has a major impact.

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