Michael Roberts is country director of International Development Enterprises (IDE) Cambodia. This year, the non-profit organisation was awarded the first Nestlé Prize in Creating Shared Value for its innovative Farm Business Advisor (FBA) project, which aims to improve the living standards of the country’s rural population by increasing agricultural productivity and income. Here, he explains the idea behind it:
Agriculture in Cambodia is at a very basic level with some of the lowest yields in the region. Consequently even very simple improvements in the quality of inputs or cultivation practices can have a big impact on productivity. Since the mid-1990s, we have been working to help Cambodian farmers increase their incomes. We began by introducing small-plot irrigation devices like foot powered treadle pumps and low-cost drip irrigation systems.
Incomes improved but even when their water constraint was solved, farmers would quickly run into another wall, which would limit profit. We spent a lot of time listening to them and found that to get the maximum benefit from better water control they needed to be able to access a more integrated package of agricultural inputs and advice.
Originally, we used our staff to deliver these services but then we realised that if a few inputs and a little advice could create significant value for small farmers then there must be a viable business in there somewhere. In 2005, we began to train and support a network of small rural entrepreneurs to become Farm Business Advisors (FBAs), selling a range of products and services to help small-scale farmers improve their farming techniques and income.
The surveys we have conducted with FBA clients demonstrate that on average, their income has increased by about USD 150 per year. This is a significant change in areas where cash income in an average household is only about USD 30 per month. The average monthly income for an FBA is currently about USD 60. This has been increasing month by month but is still too low given the amount of work they do. For now, most FBAs are content with this because of the high value that they place on the training that they receive. In the long-term, we estimate that FBAs will be able to make more than USD 200 per month as their client base, range of products, and experience grows.
IDE differs from the traditional NGO model in that we take a market-based approach to all of our projects. We treat people as customers, not beneficiaries. This simple change in perspective has profound implications on how we work. If I have to convince someone to purchase something, then my success is absolutely dependent on listening to them, understanding them, and responding to their highest priority needs.
This also means that we don’t provide direct subsidies to our customers. If we have done a good job of listening to their needs (including that for affordability) then even very poor people will be able to purchase items that improve their well being.
The Nestlé CSV Prize will help us to expand the current project, adding an additional 36 FBAs toward our ultimate goal of more than 500. We will also be leveraging the Prize to attract additional funding from several donor agencies that are planning substantial investment in the agriculture sector in over the next several years.
Once the project reaches the scale of 500+ FBAs, we expect that the franchise enterprise will be able to operate independently without additional donor funding. As we move from a successful pilot into a scale up phase we expect a number of challenges.
For instance, the FBAs have seen a rapid growth in clients over the past dry season. To ensure that most of these become repeat customers, the FBAs must find the right balance between client numbers and the amount of follow-up service that can be provided to ensure that the clients are successful.
Creating Shared Value is the very heart of this project. FBAs work with their farmer clients to increase agricultural production and improve incomes. If the farmers are successful, the FBAs are successful. If the FBAs are successful, the franchise enterprise is successful. The system flourishes only if there is real value being created at the farm level.