Despite providing a large proportion of food supply in developing economies, 40 percent of smallholder farmers live on less than USD 2 a day.
With more than 2 billion people currently living on around 550 small farms, 40 percent represents a huge number of disenfranchised farmers. Solutions that support improved economic results in a sustainable way are therefore critical to prepare for the predicted global food requirements that see a 50 percent increase in food production by 2050.
But implementing those solutions isn’t always a simple or sustainable task.
A recent Harvard Business Review article presents results from the Better Life Farming (BLF) multi-stakeholder alliance, which provides recommendations for improving the sustainability and profitability of smallholder farms. BLF works to connect smallholder farmers in India, Indonesia, and Bangladesh with corporations and NGOs’ capabilities, products, and services, offering last-mile delivery services that enable smallholder farmers to become commercially viable agricultural product suppliers.
From Palladium thought leader and creator of The Balanced Scorecard, Dr. Robert S. Kaplan, along with authors Lino Dias, Harmanpreet Singh, the case study demonstrates how inclusive growth ecosystems that encompass rural communities, local governments, and agribusiness companies can provide real benefits, environmentally, and economically.
Putting Inclusive Growth to the Test with Farmers
The challenges faced by smallholder farmers are many and diverse in nature, from adverse weather and water scarcity, to limited access and low bargaining power with purchasers of their crops, to losses both during the growing period and the storage thereafter. Lack of access to inputs and improved practices leads to soil degradation and erosion. Often attempts to offset these risks see farmers try to increase incomes by accessing more land, cutting down trees in the process.
Meanwhile, agriculture technology companies like Bayer Crop Science cannot adequately sell to smallholders unless these can realise the benefits of higher costs through access to better markets and sources of finance.
The BLF ecosystem approach offers up inclusive growth solutions that benefit farmers, Bayer, and offtakers, and consumers alike. Everyone benefits from more efficient and sustainable use of land and water that results in higher yields, improved quality, and lower losses.
While many sustainability programs focus on training of farmers, the BLF approach empowers entrepreneurs to provide a package of inputs, equipment, and technical extension to networks of other farmers in their area. These entrepreneurs are centralised through a BLF centre, owned and operated by an agri-entrepreneur (under an agreement with BLF) who can make sure that the technology is available at volume discounts and well applied to maximise yields, safety, and quality.
According to Eduardo Tugendhat, Palladium Director of Thought Leadership, this is a great example of a company putting the Inclusive Growth Framework into practice, “In this case, a group of input and equipment companies led by Bayer realised that their own business can grow if they are able to solve for connecting smaller farmers to finance, markets, and technology.”
“Their approach is a kind of franchise system where they train and empower entrepreneurs, many of them young graduates or progressive farmers, to provide a package of services to others,” he adds. “Each of these then serve 500 farmers, which means that a thousand entrepreneurs can reach upwards of 500,000 farmers.” The key to success is that all actors are better off. It also provides an attractive technology-based career for young people who would otherwise migrate to cities.
These centres provide comprehensive and accessible services to smallholders, including education and training, access to credit and insurance, and agri-supplies, as well as providing networking opportunities that see smallholders engage with downstream customers and capacity-building partners, such as the IFC, Development Financial Institutions, NGOs and local farmer organisations.
Additionally, the centres aim to support and create more opportunities for women in the agricultural space, providing additional opportunities to release untapped business potential locally. Their approach is working – of the 900 BLF Centers in India, Indonesia, and Bangladesh, 10 percent of which are owned by women, who earned an average of USD 2,000 in their first year of operation, double the country’s rural household average income.
Projections for future earnings increase year over year, presuming that as each centre becomes more established, it will expand to support additional farmers provide additional services, attracting additional income.
As Tugendhat adds, the franchise system and network allows for growth at the scale needed to make a difference, “And the franchise network is the catalyst that brings about transformative systems change to the communities involved.”
We know that deforestation reduces the planet’s ability to absorb carbon gases from the atmosphere whilst releasing carbon gases when fallen trees rot or burn. Furthermore, when smallholder farmers plant crops and raise livestock on their newly deforested land, the environmental impact is further compacted. A large part of the BLF focus is to end such destructive agricultural practices by providing education and training on use of regenerative, yet profitable practice.
Using a model demonstration farm at the BLF Center, smallholder farmers learn sustainable agronomic and irrigation practices. This enables the farmers to operate with lower environmental footprints while becoming higher-quality and higher-yield producers.
Next steps? Tugendhat says it can only grow from here, “Using the scale, the network can access new and lower-cost sources of finance and apply the information systems as a means of providing end-to-end visibility that will help build trust as well as efficiency and market differentiation.”
With a rapidly growing global population, it is imperative to improve the sustainability and profitability of smallholder farms, given their vast contributions to the global food source. The BLF case study provides insights and learnings that can be applied to local models worldwide, offering hope for smallholder farmers.
By the end of 2021, BLF will have more than 1,000 BLF Centers operating in India, Indonesia, and Bangladesh, reaching more than 800,000 farmers, additionally, new pilot programs are planned for other Asian countries as well as countries in Africa and Latin America.
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