The link between professional agribusinesses and living income in Rwanda

Agribusinesses are often overlooked for their role in agricultural transformation, but professional agribusinesses can have a significant impact on the lives of their members. To help farmers reach a living income in Rwanda, it is important to professionalize agribusinesses in Rwanda.

An overlooked aspect of agricultural transformation

Agribusinesses can have a significant positive impact on farmers

Membership in an agribusiness is often helpful to smallholder farmers. Agribusinesses can help local development from three perspectives: economic, social, and political. These perspectives each help member farmers as well. Through them, agribusinesses can alleviate poverty and create employment. They can also protect their members from risks, solve social problems, and defend their members’ interests. In Rwanda specifically, agribusinesses have a significant contribution to agricultural productivity and have helped many vulnerable people earn steady incomes. For example, in 2008, Rwandan cooperatives created over 10,000 jobs across the country.

Professionalism and impact are linked

For agribusinesses to have the greatest possible positive impact on their member farmers, they must be run as professional businesses. This is because more professional agribusinesses are more likely to access finance and markets, and are often more productive. Many agribusinesses worldwide have not reached their full professional potential, and thus it is imperative that the development community focuses on helping them optimize so they can.

The most straightforward and objectively measurable way to do this is to assess an agribusiness so that capacity builders can pinpoint the areas that need the most support. Using a standardized, quantitative tool that covers the most important aspects of agribusiness success and fail factors is important. If working with emerging agribusinesses, one could choose to use the SCOPE Basic assessment, which measures eight dimensions and twenty-four subdimensions of professionalism and can clearly show the areas in most need of strengthening. This data can be benchmarked against similar agribusinesses in the country and/or region.

Professional agribusinesses can help farmers reach a living income

As agribusinesses help their member farmers to earn a higher income, they also help bring them closer to earning a living income. Professional agribusinesses see benefits and improvements that can promote a living income for their members. These include larger crop yields, as well as greater access to markets, inputs, and finance.

Together with NewForesight Consulting, we have created a predictive model that analyzes the drivers of living income. Using our twelve years of assessment data, we have determined that agribusinesses can influence four out of the five drivers, and they can influence three of those four significantly. This means that support for agribusinesses can help create an enabling environment that will allow more farmers to achieve a living income. In addition, focusing on agribusinesses instead of individual farmers allows for a more easily scalable approach that can support many farmers at once.

The Rwandan agricultural sector

Agriculture accounts for over 30% of Rwanda’s GDP and employs 70% of its workforce. Smallholder farmers do approximately 75% of this agricultural production. Many of these farmers are members of an agricultural cooperative. There are over 4,700 agricultural cooperatives in Rwanda, with over 1.13 million members.

Since 2012, SCOPEinsight has assessed 665 agribusinesses in Rwanda. The data shows that most of these agribusinesses are maturing, which means they tend to have rudimentary processes, weak planning, and high vulnerability. This can make competing in local and regional markets difficult. These agribusinesses may also have difficulty reaching their full potential in terms of productivity and resilience. With the help of specific, targeted interventions, however, they can become more professional and more able to meet the challenges of the Rwandan agricultural sector.

Living income in Rwanda

Agribusinesses have unmet potential

According to a Global Living Wage Coalition report, a living income for a rural Rwandan family is 187,633 RWF per month, or approximately $204. However, the average income is only 70,967 RWF per month, or approximately $77. This is approximately 30,000 RWF per month below the World Bank’s extreme poverty line of $1.90 a day and over 100,000 RWF per month below a living income.

As mentioned above, drivers of living income include the price of the crop, the yield, the farm size, the cost of production, and diversification. With the SCOPE Basic assessment tool, it is possible to measure these drivers under the dimensions internal management, operations, sustainability, production base, market, and enabling environment. A score of 5 in these dimensions would indicate that the agribusiness has reached basic best practices. However, in Rwanda, the average agribusiness is immature or maturing in these dimensions, with scores ranging from an average of 2.8 in operations to 3.9 in enabling environment.

Improvement is possible

While the scores for Rwandan agribusinesses are currently too low for agribusinesses to truly create an enabling environment for their members to earn a living income, it is very possible for these agribusinesses to improve. With targeted training, these agribusinesses can work to strengthen themselves and thus better provide for their members. Through assessments, capacity building, and reassessments, agribusinesses can make specific, provable improvements to their practices. This can lead to many benefits, including access to markets, higher productivity, and a higher likelihood of a living income for the member farmers.

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