Private/financial sector development (PSD/FSD): learning and capacity building
“It doesn’t matter if the cat is black or white, as long as it catches rats.”
Day Three saw several Private Sector actors joining us for the first time. The morning took off with Peter Beez (Focal Point E + I) addressing the gathering on the importance of assessing the total value-added for the end client when choosing to engage with the private sector. Peter emphasized that although the private sector may seem to speak a different “language” to development actors that if the end goal of both was development, then a joint collaboration would be successful.
Improving the Productivity of Small Scale Farmers
Here are some key learnings from a study by HYSTRA (Hybrid Strategies Consulting) on maximizing value creation for small scale farmers through private sector partnerships:
- Partnerships that involve productivity enhancing trainings and inputs create greater value.
- Perceived risk determines the willingness of rural poor to engage with private sector.
- Farmers should have much to gain and not much to lose by entering into the relationship.
- Progressive, middle-income farmers are usually “early adopters” and make good partners.
- Hands-on technical training helps farmers understand the benefits of proposed innovations.
- Exposure visits where “farmers teach farmers” can convince new members on board.
- IT should be leveraged to reduce outreach costs, share information, and maintain contact.
- Reward faithful farmers with “carrots” (bonuses, flexible cash flow plans, easy credit)
- “Sticks” are key to discourage Cheaters (side-sellers), Opportunists (switchers) and Leavers.
- Share Value: offer upgraded products to farmers and help them graduate as they grow,
- Marry: both the company and farmers should be committed and not overly dependent.
- Accompanying financial services (especially credit) should be provided to farmers.
- Value-chains should be integrated so there is more value-add at the level of the farmers.
People, Profits and Planet
Two panels followed with private sector actors presenting their ongoing work with small scale farmers. Many of the organizations defined themselves as “social enterprises”: enterprises with a social as well as a for-profit mission. The first panel focused on the importance of offering a combined package of technical assistance-community development and financial services. The second panel focused on how enterprises should measure both profit and social impact.
Ultimately, the panel discussions confirmed that focusing on the triple bottom line is the key. Only in this way can we create systemic change to lift rural small-scale farmers out of poverty.
The public meets the private
After this introduction participants could join one of the 7 discussion tables and enter in closer contact with private actors. These discussions were very appreciated by SDC colleagues. The overwhelming majority was open to make a first step, engage with private actors, and explore collaboration opportunities in the future. The discussions can be summarized with these points:
From the private actors’ point of view:
- Private actors aim to create sustainable solutions with a return for the farmers. In the business world, the farmer not the beneficiary, but a private actor that needs to be connected to the private sector.
- SDC could play the role of the catalyst to make business happen, not philanthropy. SDC’s access to the governmental level in partner countries is invaluable for private actors in clarifying crucial business elements, such as justice, land rights, infrastructure development.
- Private actors would like to see a greater acceptance of market driven programmes. For example: current use of cash crops is unsustainable. With SDC’s help sustainable approaches could be pioneered.
- The market approach should be inclusive of the small producers and businesses.
From the SDC point of view:
- It is important to share risks among all actors, and not just by the farmers, as is often the case in the business world.
- Give options to farmers. Farmers should have the freedom to opt out of a business arrangement.
- A successful business collaboration cannot be measured with profit indicators only. Sustainability -economic, social, environmental- is key.
- Photo Gallery: See engaged people eager to learn more!
- Agenda: The programme of the day.
- Speakers: Read up on speakers’ background.