What do Cassava and Potato Growers Need to Move Beyond Subsistence Farming?
Roots and tubers make up one of the most important crops across sub-Saharan Africa. They are vital not only for food security but increasingly for income generation, particularly for women.
Cassava and potato growers typically own small plots of land from half a hectare to five hectares. For these farmers, growing urban food markets brought about by national and regional urbanization represent a unique opportunity to move beyond subsistence farming. Nonetheless, taking advantage of this opportunity will not be easy. The cassava and potato value chains are fragmented and relationships between value chain actors are loose and often conflictual. Knowledge on food processing, storage and food safety practices is limited and there is a lack of professional farmer, trader and small enterprise associations.
Farmers also suffer from a lack of access to financial services. Many financial institutions do not see the sector as profitable due to high transaction costs and risks, including climate variability. Production is at risk as a result of climate change, which has brought about higher temperatures and unexpected changes in rainfall patterns.
So, how can we support roots and tubers farmers to move beyond subsistence farming and become reliable value chain partners? Is it possible to develop profitable and valuable financial products for this sector?
FAO, with the support of the European Union (EU) and of the African, Caribbean and Pacific group of States (ACP), has been supporting the cassava and potato value chains in seven African countries: Benin, Cameroon, Côte d’Ivoire, Ghana, Malawi, Rwanda and Uganda. It has followed a comprehensive approach aiming to increase production and improve quality. The project has built the capacity of smallholder farmers, processors and traders to meet increasing market demand and developed inclusive business models that strengthen value chain links and increase access to markets.
However, FAO realized that building capacity and facilitating relationships might not be enough to allow farmers to move beyond subsistence farming. It recognized the need to unlock access to credit, savings and insurance, as well as customized risk management tools.
To enable access to finance and climate risk management tools, FAO began by exploring the financial needs of cassava and potato value chains actors. The research was conducted using interviews and focus group discussion, as well as business-to-business meetings. Before the business-to-business meetings, FAO carried out technical training sessions for the financial service providers, building their capacity to assess business opportunities in the two value chains, and to translate those opportunities into valuable financial services. On the other side, FAO worked with farmers and processors to help them put together more accurate business plans. The farmers and processors then presented their improved business plans to the financial services providers. These business-to-business meetings allowed both sides to reach a common understanding of increased market demand and potential economies of scale.
As a result, many financial institutions began to serve small farmers and businesses in these value chains. Several banks in Malawi, for example, identified the potential high return on investment of cassava processing equipment.
In addition, financial literacy and business management sessions were provided to farmers and processors through Farmer Field Schools (FFS), through digital channels, and at the community level.
Since 2015, the support provided by FAO has led to the development of new financial products specifically tailored to the needs of small farmers and processors, offered both by commercial banks, MFIs and savings and credit cooperatives. Loans have been disbursed to around 400 smallholders, ten small businesses and four producers’ organizations. A total of around US$ 20,000 was saved by groups established under the FFS schemes. In Uganda, rapid access to small loans to cover short-term cash shortages is now possible through 60 new savings and credit schemes with amassed equity of more than US$ 20,000.
Through FAO’s support, farmers also benefit from access to climate risk management and financing strategies, such as agricultural insurance. FAO worked with government officials, National Meteorological and Hydrological Services, and financial service providers to build their capacity and to develop strategies to reach value chain actors. In Uganda, a unique insurance product for potato farmers was developed with the Uganda Agribusiness Alliance (UAA) and the country’s Insurance Consortium. It is an index-based insurance product which compensates farmers when drought hits. The cost of the premium is 5.5 per cent of the yield value (partially covered by government subsidies of 30 to 70 per cent of the premium, according to farmers’ location and farm size).
Other countries, including Rwanda, are considering starting similar schemes. One farmer from the Kopanja Potato Cooperative in Rwanda explained the importance of introducing insurance: “With the support of FAO we tripled our income through improved productivity. Yet, the floods of 2017 destroyed 80 per cent of our production and we struggled to purchase food and pay school fees. We hope the new insurance will protect us against such losses.”
The project has shown that it is possible to make small farmers and processors more reliable partners for big players in the roots and tubers value chain in Africa. To do so, farmers’ and producers’ lack of capacity should be addressed, as well as the information and financial and risk management services available to them. Improvements on both sides bring about business opportunities and benefit all players in the value chain.
Written by Massimo Pera, Project Coordinator at the Food and Agriculture Organization (FAO),
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