Creating investable agribusinesses in Burkina Faso, Ethiopia, Rwanda, and Senegal
The Strengthening African Rural Smallholders (STARS) Project is helping smallholder farmers by strengthening agribusinesses and the value chain ecosystem where they operate.
Stuck in a cycle of poverty
Despite smallholder farmers making up about 80% of Sub-Saharan African farmers, as well as producing the majority of the food consumed on the entire continent, these farmers often remain trapped in cycles of poverty. If they wish to increase their productivity, they must first face tremendous challenges. Many farmers lack the proper credit to invest in their businesses, and their access to the markets is low. Even when farmers can access the markets, they have difficulty competing on a larger scale. These farmers simply do not have the resources they need to be able to face these challenges on their own.
Strengthening the ecosystem
To address this challenge, ICCO Cooperation, with the support of the Mastercard Foundation, embarked on a four-country project which uses data and a market system development (MSD) approach to improve the access to finance and markets for farmers. The Strengthening African Rural Smallholders (STARS) project is a five-year (2017–2021) endeavor that has been creating access to finance for more than 200,000 farmers throughout Ethiopia, Rwanda, Burkina Faso, and Senegal.
In each of these countries, STARS is unique in its approach because of its data-led MSD approach which addresses challenges within the ecosystem around farmers. This means that they find solutions to address agricultural challenges as well as markets and finance.
Understanding the barriers
The STARS program uses a two-pronged strategy to aid in the development of small-scale farmers. The first strategy is a Making Markets Work for the Poor approach and begins by analyzing and understanding the challenges farming organizations face and the causes behind those challenges. Here, with help from SCOPEinsight’s SCOPE Basic® tool, assessors evaluate the farmer organizations and their ability to function as a business. An assessment is an important first step in figuring out where the most help is needed and is the basis for designing effective technical assistance approaches. SCOPE assessments can also be used to track progress over time and to compare various cooperatives with a standardized measurement.
The second part of the STARS approach is with one of ICCO Cooperation’s programs: ICCO Terrafina Microfinance. Through this program, the capacity of microfinance institutions can be developed, and these institutions can then be linked to value chains. Farmers require cash to develop their agriculture, which means they require access to financial services. Through this program, farmers can get tailor-made loans as well as saving services. In this project, ICCO Cooperation specifically works with nineteen MFIs. Together, they put together affordable financial products that the farmers can use.
After the farmer organizations needs were assessed and they received the appropriate technical assistance, the following market linkages happened:
- – In Rwanda, STARS has organized events to bring together rice and maize producers with other members of the value chain. This event helped all members of the value chain create connections with other members from varying levels.
- – In Senegal, STARS has helped cowpea farmers gain access to better quality seed and financial credit, and they have also helped to link these farmers to the Senegalese Baking Federation, which has given them access to a thriving market where they can sell their crops.
- – In Ethiopia, STARS helped to link potato farmers to Senselet Food Processing, a Dutch-owned factory that makes chips. This helps those farmers to be sure they are getting a fair and regulated price for their crops.
- – In Burkina Faso, link shea nut collectors were linked with unions in order to make sure their produce is sold for a fair price and not undercut by buyers. STARS has also helped these unions to improve themselves; they did a SCOPE assessment on a union called USCPPK_Houet in the city of Bobo Dioulassou, which helped the union to figure out which weak points needed addressing.
STARS has also helped smallholder farmers gain better access to finance. In order to lower the risk perception for agriculture with MFIs, ICCO Terrafina Microfinance has created a tool called the Agricultural-Credit Assessment Tool (A-CAT), which estimates how much a client needs for various costs, including inputs and labor, and also estimates the total income from their agricultural activities. This allows MFIs to see what the ideal loan size would be and the likelihood that the client will be able to pay back the loan. Last year, ICCO and Simbuka, a Dutch-based software solution corporation, joined forces to digitize A-CAT by integrating it with Simbuka’s loan origination software, which will make it easier to use. In Burkina Faso specifically, STARS has helped six financial institutions (ASIENA, GRAINE SARL, PAMF, URC Nazinon, RCPB, and UBTEC) to finance more than 35,000 farmers.
Once farmers have access to the markets, resources, and finance they need, they are able to invest in their own businesses. This allows them to improve their technology and their cultivation methods, which in turn will increase their production and quality. Some farmer organizations, for example, are now able to access better quality inputs, such as improved seed and agro-chemicals. This helps the farmers to increase their yield quantity and quality. Farmers are also taught financial literacy and business skills to help them in the future.
The end result is a win for everyone. Businesses are able to develop services that the farmer organizations need and will pay for, and the farmers are able to improve and increase their food production, as well as gaining better access to markets for increased profit. Overall, between the four countries, approximately 210,000 farmers are now able to feed their families and increase their income and, through those benefits, gain access to a better life.
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