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From TM. Pearls objective is to be a cooperative owned by small-holder farmer groups. Summary: Develop coops for small holder farmers. Increase production.

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Presentation on theme: "From TM. Pearls objective is to be a cooperative owned by small-holder farmer groups. Summary: Develop coops for small holder farmers. Increase production."— Presentation transcript:

1 from TM

2 Pearls 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

3 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.

4 The story of subsistence farming 4 Halves of Have-Nots AGRICULTURE WITH FOOD CROP FOCUS NEEDED

5 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 Markets Solutions are Needed Too

6 Color code: Green is workable Yellow indicates difficulties Red is serious problems

7 Farmers Lack Access to Crop Input Finance 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.

8 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

9 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 FinanceMarkets Farmers and Production

10 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 cant without… Large loans and guaranteed markets, which are lacking

11 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.

12 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 middlemen 12

13 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

14 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

15 Strategy: Commercialize Farmers Beyond subsistence to sustenance: Maize fields planted on the same day. (Pearl supported farmer on left.)

16 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 Pearls focus and income Partner w/ local banks (metafinance)

17 Strategy: Provide Finance Beyond subsistence: Maize fields planted on the same day. (Pearl supported farmer on left.)

18 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

19 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

20 Summary and Conclusion

21 Development Process Grow Enterprise Increase number of farmers Allow successful farmers to double loans Increase coop mgmt training Initiate Activities Begin with harvest to establish mutual trustContinue with finance for trusted members Organize Recruit members and trainLegally register groups Arrange for finance and markets Select a Target Village Choose target villages based on productivity, work ethic and trust Hold meetings in many villages and choose best

22 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

23 Thank You! 23


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