PROGRAMMATIC EVALUATION - Cordaid · _Synthesis Report Programme 9 Evaluation _ i...

SYNTHESIS REPORT

PROGRAMMATIC EVALUATION

SME SUPPORT IN RELATION TO SMALL

PRODUCERS AND VALUE CHAIN DEVELOPMENT

(PROGRAMME 9)

FINAL VERSION

DECEMBER 2009

_____________________________________Synthesis Report Programme 9 Evaluation _________________________________________

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Acknowledgements

This evaluation is the product of a team effort during several months between end of 2008 and

November 2009.

Wilfred Mushobozi was in charge of the field case studies for Lima Ltd (Tanzania), Quality Food

Products (Tanzania), Biosustain (Tanzania), UCIL (Uganda), and the Tanzania part of BEEPZ. He

also supported the field work for the CCPK field case study.

Rafael Rojas was in charge of the field cases for SAITE (Bolivia), COSURCA (Colombia) and

PROASSA (Peru).

Roy Parizat did a desk review of financial aspects of all field cases and desk cases studies.

Frans Geilfus was in charge of coordinating the whole study and final redaction of all reports. He was

also in charge of field case studies for Cheetah (Malawi), CCPK (Tanzania), Honey value chain

(Zambia), Bezamar (Ethiopia) and BEEPZ (Kenya).

We are thankful for the whole team in Cordaid who made this study possible, especially Jose Ruijter

who was in charge of supervising the study and had many quality inputs at each stage of the work. y

input. A Cordaid reference committee with support of Mr Giel Ton, of Wageningen University,

allowed for a process of quality control and reflection through the course of this evaluation.

We would like also to thank all managers and field teams for the partner SMEs involved in the field

case studies for their support in recollection of information and encounters with beneficiaries and

stakeholders.

While the considerations in this report reflect the independent views of the evaluation team and not

Cordaid official position, we are fairly confident that the level of feedback and validation has ensured

that the factual sustaining our analysis has been verified as far as possible and at all levels.


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EXECUTIVE SUMMARY

This internal evaluation was implemented between January and October 2009 with three objectives:

1. To assess the results and indications of development impact of the various experiences among

small producers (in terms of direct poverty alleviation, civil society development and policy

influence.)

2. To assess the effectiveness and efficiency of Cordaid support package (through the

combination of loans, equity and donations) from the SME perspective and the perspective of the

small producers including synergies realized between various organizations and instruments.

3. To provide inputs into Cordaid policy on SMEs (in the context of small producers and

agricultural value chains) that will further the fine tuning of Cordaid support to SMEs and the use of

the various financial instruments in the agricultural value chain taking into account development

needs, phase of development of the specific actor, short term and long term capital and other needs.

The evaluation proceeded with a combination of policy review and a series of 12 field case studies in

Africa and Latin America. It was also completed by a desk review of another 11 relevant projects.

The field and desk case studies were made following the standard criteria for project evaluation

(quality of design, efficiency, effectiveness and relevance) as well as considering issues of

sustainability and replicability. The findings were then consolidated in this synthesis report, in order to

assess the relevance and effectiveness of the current policy framework used by Cordaid and to

generate important recommendations.

The evaluation has devoted much attention to the issues of quality of design, since for a funding

agency they are the main entry point for ensuring effectiveness and relevance. On the whole, the

evaluation confirms that Cordaid has indeed developed an innovative approach to support key chain

actors and supporting structures with a mix of financial instruments such as grants, seed capital for

investments, loans and guarantees. In order to ensure verifiable effects on the position of small

producers the screening system used by Cordaid still presents important loopholes and weaknesses.

The main issues identified at the level of project proposals funded by Cordaid are:

Project selection is consistent with policy but too haphazard although the composition of the

portfolio is also diverse and innovative;

Presentation and internal logic of proposals generally lacks coherence;

Feasibility aspects of proposals present some important gaps, the most critical relating to the

financial viability of the supply chain. Generally in combination with optimistic assumptions

as to agronomic feasibility, there is a frequent lack of precision about how the supply chain

will be organized and what are the inherent costs.

Service delivery proposals are often too vague and do not respond to some important needs

There is not enough attention to the importance of supply coordination arrangements to build

sustainable collective commitments

Cross-cutting issues (gender, environment, HIV-AIDS) are generally poorly addressed.

The assessment and quality of Cordaid support to the approved proposals are globally quite robust and

innovative. There is an improving assessment framework, and creative combination of financial

instruments. The following issues will need attention:

Cordaid risk assessment is of good quality and relatively thorough, but there are some

important gaps and some aspects to be improved related to the feasibility aspects earlier

mentioned;

Cordaid is not in a position to do internally, a cross checking of assumptions behind proposals;


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The parallel mechanisms for assessing grants and loans are weakening coherence of Cordaid

support strategy;

The combination of grants and loans responds very well to the needs of partners but the

contracts favour short term and lack gradual approaches.

Efficiency as seen from Cordaid policy framework supposes that support to specific projects, has

allowed to improve the delivery of technical, financial, BDS, organizational and marketing services to

smallholder farmers through participation in contract farming and chain partnerships with SMEs and

service providers. The efficiency of the reviewed projects has been good on the whole, at least

considering outreach achieved and the delivery of the most critical services financed by Cordaid.

Of the 23 projects reviewed, all but a few that faced early collapse have at least, started delivering

services and setting up their schemes, achieving on the whole a good outreach of 85% in average,

compared to plan. If we consider the total investment made by Cordaid, an approximate average of

127 € has been invested per farming household per year.

Some important issues need to be addressed in priority:

Quality and frequency of reporting is consistently under standards, with few exceptions.

Although many companies maintain basic records of farmers registered and sales, reporting on

outreach and achievement of planned outputs when available is often superficial and lacking

substance so that it is difficult for Cordaid to monitor from afar, the actual degree of

advancement of projects.

The use of only financial indicators may obscure the real degree of advancement of projects

towards development outcomes.

As for effectiveness the support of Cordaid has proven to be effective so far at least to improve

incomes of more than 62,000 farmers by developing new types of market linkages, even if the

majority of the schemes involved is still in the growth stage or encountering financial difficulties.

Project effectiveness varies widely from one to another. A few projects appear poised to achieve both

complementary outcomes expected from the schemes, that is, significant income generation for

farmers and progression towards profit for the company. Some projects have achieved good results in

terms of organizing the supply and generating incomes to farmers, but are still struggling to achieve

break even. Two cases are commercially successful so far, but generating very small profit for the vast

majority of participating farmers. Some companies have found themselves better off by quitting.

Finally, poor design, poor management and lack of commitment by farmers combined in some cases

to provoke failure. The rate of complete failure is high (6 out of 23 projects included in the study) but

if seen in historical perspective, it also shows improvement because most failures were seen amongst

the first such projects approved, as well as the ones most critically struggling at the moment. A high

rate of failure is also to be expected when most concerned ventures are start-ups.

To overall objective of Cordaid policy is to increase the income of small producers in developing

countries through their integration in (agri) chains with positive or neutral effects on their food

security. The portfolio of projects, as seen, has been globally relevant to the increase of incomes for

around 62,000 participating farmers and their families. Whether effects on food security have been

positive or neutral can be assessed as achieved in most cases. Of the successful cases, none can be

considered as threatening food security through negative trade-offs because they were either based on

existing livelihood systems, or introduced new crops that fit well into the same systems. Only some of

the failed schemes might have had issues (safflower with QFP) as well as the Artemisia scheme to

some extent for poorest farmers.

The main observations to be made as to relevance are:


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The evaluation shows that a significant part of Cordaid portfolio of projects supporting

farmers access to markets through financing SMEs, has proven relevant to the general

objectives.

The fact that a significant number of projects, even some facing currently serious financial

problems, may be considered as successful in terms of improving the livelihoods of thousands

of poor farmers and (even though to a lesser degree) empowering them in the chain, validates

the fact that SMEs may be considered as a relevant “entry point” to achieve Cordaid´s

objectives, provided due attention is given to proper design and implementation.

Even some projects that have failed have provided a wealth of experience to stakeholders,

including Cordaid, allowing improving further initiatives. This allows concluding that the

process as a whole has allowed a rich learning curve, which must be capitalized now to

produce much more efficient, effective and relevant interventions.

Income per se is not a sufficient development outcome. The fact that few projects have made

significant headway in empowering farmers beyond the immediate needs of operating the

supply chain reflects a structural limitation of the approach. SMEs as drivers of the process

would not have a stake in strengthening farmer organizations to the point where they become

strong actors in the chain and policy dialogue. Nor would they be the adequate channels for

the kind of support needed to achieve that. This explains why only three projects, working

with high level farmer organizations (OPTCO and Liberation Nuts) may actually support

higher level profile of farmers within the chain. These build on earlier yearlong investment in

strengthening farmer capacities and building local institutions. Cordaid should always include

empowerment of farmers as a development outcome.

As for sustainability of the projects, the evaluation has come to rather contrasting conclusions:

Financial, institutional and social sustainability of projects do not necessarily evolve in

harmony.

Sustainability of specific schemes is linked to sustainable business and livelihoods strategies.

The project approach limits the possibility of looking at the bigger picture.

While Cordaid closely monitors financial performance and hence sustainability, there is too

little focus on the issues of social and institutional viability of the schemes. Without assessing

feasibility aspects and measuring progress towards improved institutional and social capital,

Cordaid loses important insights into the quality of its portfolio

A global analysis of critical factors behind relative success or failure of projects confirms, if need be,

the critical importance of the organization and viability of the supply chain, and the institutional,

financial and social factors leading to the building of stable commitments between the sponsoring

company and participating farmers.

As for the relationship between project performance and Cordaid´s policy framework and support

package, the evaluation shows that the mix of loans and grants used as input by Cordaid has been

instrumental in improving the delivery of services, especially because it has been delivered in most

cases to companies operating in a difficult environment, with limited or no access to alternative

funding. In many cases it has been even the critical factor that allowed the schemes to operate, as often

recognized by the companies’ management. The combination of grants for service delivery and loans

for working capital has been appropriate for most cases.

The success of the partner SMEs in achieving planned outcomes depended on their capacity and

willingness to develop real long-term partnerships with farmers, based on objective conditions for

mutual commitment and the development of institutional and social capital. Thus Cordaid support

package was highly effective in empowering farmers within the chain, where real partnerships were

procured as the way to achieve mutually compatible business and livelihood objectives. It was

ineffective in achieving desired outcomes where companies had no stable commitment, or farmers

could not be induced in trusting that participation could strengthen their livelihood strategies.


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The support package through SMEs sponsoring contract farming schemes and chain supply

partnerships with farmer organizations, was highly relevant for increasing or stabilizing farmers

incomes in a relatively short time provided the schemes were correctly designed and adequately

implemented. Whenever proposed schemes threatened food security or showed limited incentives,

farmer participation was likely to be limited. As for fostering wider chain partnerships and policy

dialogues with active participation of farmers, the support package fell short in that it did not provide

adequate support to these aspects, for which marketing SMEs were obviously not the most adequate

vehicle since they have no objective stake in farmer empowerment further than needed for the viability

of the supply chain. This in-built weakness can only be addressed by embedding such initiatives in

other support mechanisms on chain wide participation and policy dialogue. This would also allow

Cordaid to realise not only objectives related to direct poverty alleviation, but also fostering civil

society development and policy influence linked to value chains.

A series of lessons may be drawn from the findings of the evaluation. The most important from the

point of view of Cordaid are:

Quality of proposals is the key parameter of final relevance on which Cordaid has any real

influence. Therefore the screening, assessment and negotiation stage has to ensure that

approved proposals, even if Cordaid accepts high levels of risk, meet the fundamental criteria

of feasibility and that issues of capacity building are correctly addressed.

Cordaid has presently but limited means to assess the efficiency of its support package in

ensuring improved delivery of technical, financial, BDS, organizational and marketing

services to smallholder farmers through participation in contract farming and chain

partnerships with SMEs and service providers.

Cordaid has little bearing on the effectiveness of individual projects beyond screening design

and monitoring implementation, so that it is necessary to streamline the quality of proposals

and the adequateness and efficiency of the support package.

The relevance of projects to Cordaid´s programme overall objectives go beyond ensuring

improved incomes to empowerment of farmers in the chain. One sided entry point through

SMEs is relevant on the market aspect but structurally deficient to push for full farmer

empowerment.

Project sustainability is the final measure of their success but Cordaid lacks the means to

assess it and clear criteria about how and when to phase out its support. As a result, Cordaid

finds itself entangled into further support of struggling projects without always having clarity

about whether this is prolonging the agony of a doomed scheme or giving it a second chance.

In the case of successful projects, (Latin America), institutional capacity building mechanisms

for transferring local institutions to local banks, or allowing the project to incorporate new or

more farmer organisations, was not part of the design.

The recommendations to improve Cordaid policy framework and support package for small producers

and value chain development through SMEs have been summarized under the following headings:

Streamline Cordaid policy for value chain development;

Improve the screening and assessment of proposals;

Introduce gradual funding and increase accountability of partners;

Move from project approach towards chain-wide programmes;

Integrate financial support and capacity building;

Improve the monitoring and support to implementation;

Incorporate sustainability and exit strategies;

Develop more effective learning mechanisms and identify good practices.


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Table of contents

1 BACKGROUND OF THE EVALUATION ................................................................................ 1

1.1 INTRODUCTION ........................................................................................................................ 1 1.2 FOOD SECURITY AND SUSTAINABLE AGRICULTURAL DEVELOPMENT ..................................... 1 1.3 ACCESS TO MARKETS .............................................................................................................. 1 1.4 SUPPORT TO SMALL PRODUCERS WITHIN A VALUE CHAIN APPROACH .................................... 2 1.5 COOPERATION WITH PRIVATE SECTOR (SMES) ....................................................................... 3 1.6 ORGANISATIONAL SET UP ........................................................................................................ 4 1.7 RELEVANCE OF THE EVALUATION FOR INTERNAL LEARNING ................................................. 5

2 OBJECTIVES AND STRUCTURE OF THE EVALUATION ................................................ 7

2.1 OBJECTIVES OF THE EVALUATION ........................................................................................... 7 2.2 TWO LEVELS OF EVALUATION ................................................................................................. 7 2.3 METHODOLOGY AND SOURCES OF INFORMATION ................................................................... 9

2.3.1 Portfolio of projects ......................................................................................................... 9 2.3.2 FIELD CASE STUDIES ................................................................................................ 11 2.3.3 DESK CASE STUDIES .................................................................................................. 12

2.4 EVALUATION CRITERIA AND RESEARCH QUESTIONS ............................................................. 14 2.5 LIMITATIONS ......................................................................................................................... 14

3 EVALUATION: QUALITY OF DESIGN AND METHODOLOGY..................................... 15

3.1 INTRODUCTION ...................................................................................................................... 15 3.2 OVERVIEW OF PROJECT PORTFOLIO ....................................................................................... 15 3.3 PROJECTS PLANNED OUTREACH, OUTPUTS AND OUTCOMES ................................................. 17 3.4 OBSERVATIONS ON THE FEASIBILITY OF THE PROJECTS STUDIED ......................................... 19

3.4.1 Viability of the market strategies ................................................................................... 19 3.4.2 Agronomic and livelihood feasibility of the proposals .................................................. 20 3.4.3 Management capacity of the sponsoring firm: .............................................................. 22 3.4.4 Management capacity of farmers and their organizations ............................................ 23 3.4.5 Financial viability of the supply chain .......................................................................... 24 3.4.6 Conditions for balanced risk sharing and coping strategies ......................................... 26 3.4.7 Objective conditions for building stable commitments .................................................. 27 3.4.8 Reasonably enabling environment ................................................................................ 29 3.4.9 Conditions for adapting to changes in the risks and assumptions: ............................... 30

3.5 OBSERVATIONS ON PARTNERSHIP DESIGN ............................................................................ 31 3.6 OBSERVATIONS ON SERVICES DELIVERY DESIGN .................................................................. 33 3.7 REVIEW OF SUPPLY CONTRACT DESIGN ................................................................................. 35 3.8 CROSS CUTTING ISSUES IN PROJECT DESIGN .......................................................................... 37 3.9 REVIEW OF CORDAID RISK ASSESSMENT ............................................................................... 37 3.10 REVIEW OF CORDAID SUPPORT DESIGN ................................................................................. 38 3.11 GENERAL CONCLUSIONS ON QUALITY OF PROJECT DESIGN AND CORDAID SUPPORT ........... 39

4 EVALUATION: EFFICIENCY ................................................................................................. 42

4.1 AVAILABILITY OF INPUTS AND QUALITY OF MONITORING AND REPORTING ......................... 42 4.2 PROJECT OUTREACH COMPARED TO PLAN ............................................................................. 43 4.3 ACHIEVEMENT OF PLANNED OUTPUTS .................................................................................. 45 4.4 GENERAL CONCLUSIONS ON PROJECT EFFICIENCY ................................................................ 46

5 EVALUATION: EFFECTIVENESS ......................................................................................... 48

5.1 FARMERS INCOMES AND COST-EFFECTIVENESS .................................................................... 48


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5.2 COMPANY OUTCOMES ........................................................................................................... 50 5.3 GENERAL CONCLUSIONS ON EFFECTIVENESS ........................................................................ 51

6 EVALUATION: RELEVANCE ................................................................................................ 54

6.1 FARMER LIVELIHOOD IMPACTS ............................................................................................. 54 6.2 CHAIN COORDINATION AND SOCIAL OUTCOMES ................................................................... 55 6.3 BUSINESS IMPACTS ................................................................................................................ 56 6.4 GENERAL OBSERVATIONS ON RELEVANCE ............................................................................ 57

7 EVALUATION: POTENTIAL SUSTAINABILITY ............................................................... 59

8 CRITICAL FACTORS IN PROJECTS PERFORMANCE ................................................... 64

9 SUMMARY OF CORDAID POLICY EVALUATION........................................................... 66

10 REPLICABILITY AND LESSONS LEARNT ..................................................................... 68

10.1 CONDITIONS FOR ORGANIZATIONAL LEARNING .................................................................... 68 10.2 MAIN LESSONS DRAWN FROM THE EVALUATION .................................................................. 69 10.3 IDENTIFICATION OF GOOD PRACTICE ..................................................................................... 72

11 RECOMMENDATIONS ........................................................................................................ 73

11.1 STREAMLINE CORDAID POLICY FOR VALUE CHAIN DEVELOPMENT ...................................... 73 11.2 IMPROVE THE SCREENING AND ASSESSMENT OF PROPOSALS ................................................ 74 11.3 INTRODUCE GRADUAL FUNDING AND INCREASE ACCOUNTABILITY OF PARTNERS ............... 76 11.4 MOVE FROM PROJECT APPROACH TOWARDS CHAIN-WIDE PROGRAMMES ............................ 77 11.5 INTEGRATE FINANCIAL SUPPORT AND CAPACITY BUILDING ................................................. 79 11.6 IMPROVE THE MONITORING AND SUPPORT TO IMPLEMENTATION ......................................... 79 11.7 INCORPORATE SUSTAINABILITY AND EXIT STRATEGIES ........................................................ 81 11.8 DEVELOP EFFECTIVE LEARNING MECHANISMS AND IDENTIFY GOOD PRACTICES ................. 81

ANNEXES DATA

Annexes contain summary tables of evaluation data for each field and desk case that were too

voluminous to be included in main text.

1 BACKGROUND OF THE EVALUATION

1.1 Introduction

Cordaid practice in supporting SMEs over the last years has evolved. While the 2003 Cordaid policy

on ‘Collaboration with the private sector’ focuses primarily on the promotion of contract farming

initiatives, over the years Cordaid understanding of the value chain concept has evolved. Over the

years a wider SME portfolio has developed, also including support for SMEs specialized in processing

or (export) trade of agricultural products. Part of Cordaid SME portfolio consists of SMEs that have

no direct link with small producers, and SME fund structures, which are less relevant within the

context of this evaluation.

Cordaid´s development policy in general has remained consistent in terms of general principles,

organized around three pillars: direct poverty reduction, strengthening of the society and advocacy.

Cordaid´s specific policy framework for smallholders’ agricultural development has been built over

the years. Three fundamental axes may be recognized; they have appeared at different stages of policy

development, while the emphasis has been progressively shifting. They are food security, access to

markets & value chain development.

1.2 Food security and sustainable agricultural development

Cordaid has a long history of supporting initiatives for economic development initiatives in Africa,

Asia and Latin America that endeavour to build a more just and equal society through direct poverty

alleviation, civil society building and networking, advocacy and lobby.

Before 2003 Cordaid (a merger of Mensen in Nood/Caritas Netherlands, Memisa and Bilance) focused

its poverty reduction intervention in rural areas on the concepts of food security and integrated rural

development. Food security was to be achieved by increasing the coping capacity of farming systems,

mainly through low external inputs forms of sustainable agriculture. Income generation was

approached either in indirect form (generating marketable surplus) or through income sources

diversification (including non agricultural livelihoods). Most of Cordaid partners in Latin America,

Africa and Asia followed the same approach.

Even though since 2003 focus has moved to the issue of markets, improving agricultural production in

a sustainable way has remained an important element of Cordaid´s policy towards smallholder

farmers. The focus has shifted explicitly from self sustained production for food security, towards the

improvement of production systems in the context of access to market, with emphasis on quality

standards and good management including cost control (combining technological and business

development support). In general, although many of the “traditional” agricultural development

partners of Cordaid have put increasing stress on economic dimensions and access to markets, the

perception is that too few have shown verifiable impact in this aspect with a real potential for scaling

up.

1.3 Access to markets

From 2003 Cordaid started changing radically its vision from sustainable farming to a focus on

income generation. The agency developed a policy on access to markets. In the Strategy 2003-2006, a

new objective related to Access to Markets was expressed as: support initiatives that lead to a

sustainable improvement in the income position of poor men and women. The overall objective of the

access to markets approach was to achieve an increase in income (in money or kind) and overall

livelihood of poor people (particularly women) and a reduction in their vulnerability.


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This new strategy implied a move towards a more market-oriented approach based on three concepts:

Organization of income-generating activities: the improvement of economic enterprises

included management capacities, product and services quality improvement, ecologically and

socially responsible approaches and the development of basic instruments such as cost-benefit

analyses and business plans. The main indicators were the number of small enterprises that

could present good business plans and produce in an environment-friendly way.

Access to markets for products, services and labour: here was implied an optimisation of the

possibilities offered by existing markets as well as trying to remedy some market

imperfections and lobby at all levels. Indicators were the number of people selling their

products on local markets and the number of contracts with local authorities.

Access to financial mechanisms: access of poor people to credit, savings, commercial

financing and guarantees through existing structures would be strengthened. Indicators were

the number of people that had received credit with local institutions or number of guarantees

emitted.

The introduction of the access to markets theme did have a bearing in terms of the selection of local

partners organizations. Cordaid sought to re-orient its partner portfolio, heavily skewed towards NGOs

and diocesan organizations, toward a greater balance with enterprises (local and Dutch), and financial

institutions willing to collaborate with NGOs and farmer associations in order to foster the kind of

alliances needed to push forward its access to markets agenda. The main idea was that Cordaid would

encourage existing NGO partners to assist farmer organisations in reviewing the quality and type of

the offer in view of the market demand, and enter into alliances with other actors of the economic

sphere. Some initiatives were undertaken to sensitise NGO partners to issues of access to markets and

value chain development. In 2003 companies would also emerge as project initiators.

These changes stemmed from a broadening of the focus from the farmers livelihoods and

organizations towards the value chain and other stakeholders, when the first experiences of involving

directly private sector actors started and became the focus of more interest.

1.4 Support to small producers within a value chain approach

In 2007 the Access to Markets policy evolved into the Small Producers Programme, with puts more

emphasis on the value chain approach. In the Small Producers Programme the various components of

the Access to Markets programme are further integrated, financial instruments combined, and the

value chain concept used as the basic analytical model. However, Cordaid is aware that the Small

Producers Programme and activities for value chain development have to build on and foster the

livelihood strategies of the poor.

This also implies that ultimately the decision making on which products and markets to invest in,

should be taken by producers or companies themselves, based on understanding of the livelihood

options, the organizational capacities of producers or companies, the geographical and climatic

conditions and various market options. Cordaid therefore has not decided to foster some

products/commodities only, rather leaving that type of decision making to local producers and

companies.

From 2007 the focus lies on value chain actors. Internal documents show better understanding within

Cordaid of a value chain approach. Furthermore the interface between value chain actors and support

facilities, and the importance of a good enabling environment are underlined.

The objective of value chain support through contract farming or vertical coordination was defined as

“strengthen the position of smallholder farmer households in the value chain leading to improve

income from primary production”.


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All programmes relating to economic and financial sector development fall now within the sector

Entrepreneurship. The Small Producers Programme which is relevant for this evaluation, has a yearly

budget close to 20 million Euro, of which about 4,6 million Euro in Loans, Guarantees and

participations using SMEs as entry point for support, and the remainder as grants.

Cordaid support is focused on a limited number of countries: Asia (India, Vietnam, Indonesia and

Philippines); Latin America (Bolivia, Peru, Honduras and Dominican Republic) and Africa (Sierra

Leone, Zambia, Malawi, Tanzania, Uganda, Cameroon, Ethiopia). The partner portfolio consists of

over 200 partner organisations, consisting of producer organizations, NGOs, Business Development

Services.

The 2007-20010 logical framework for the Small Producers Programme is divided in three main

horizontal lines: direct poverty reduction, society building and policy lobbying.

The overall objective of the Programme is: small producers in 19 countries are in a position to

increase sustainably their income while ensuring their food security and purchasing power. There is a

contribution to creation of employment opportunities for the poor. Organizations of small producers

and micro entrepreneurs have a say in the management and policy of value chains and a better position

in local and regional markets. The principles of financial and ecological sustainability are upheld in

several value chains.

The specific objective for Direct Poverty Reduction is: small producers have improved their incomes

through access to markets or non-agricultural economic activities; they work together in producers

associations; they have food security or food purchase capacity.

For the Society Building aspects the specific objective is: stronger producers’ organizations with good

commercial position; linkages between authorities, enterprises, supermarkets, banks, NGOs and

organizations of the poor, working towards the sustainability of value chains (soya, coffee etc).

In terms of Policy Advocacy the specific objective is: for small producers and their organizations at

local and national level, it has become possible to speak of an enabling environment that has stakesian

interest of micro entrepreneurs and farmers and allows an increase of their say in specific value chains.

1.5 Cooperation with private sector (SMEs)

Focusing on access to markets could not be done without bringing the private sector into the picture.

Cooperation with SMEs had been defined in the document ‘Samenwerking met de private sector’

[Cooperation with the private sector] (Finance Knowledge Centre, 14-08-2003). The policy

framework remained poverty reduction, seeing support to private partners as an instrument to achieve

improvement in the income of poor people by providing financial instruments (loans, guarantees,

grants), technical assistance and contacts in order to:

Improve the companies´ operational management and/or capital equipment;

Develop cooperation with a commercial (trading) company;

Organise access to relevant markets for small producers.

An important strategic choice was made of not focusing exclusively on “niche” markets such as Fair

Trade and Organic, but also, whenever relevant, to target mainstream markets.

Particularly for the Africa region, this led to the promotion of contract farming/ outgrowers

programmes in Ghana (2), Tanzania (3), Uganda (4), Malawi (1) and Sierra Leone (1). In most cases

Cordaid provided a combination of loan (for input investment at the level of the small producers) and

a grant for the organization and technical assistance to the producers. Assumption underlying the


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collaboration between selected SME and small producers was that this would be a win-win for both

parties.

Over the years a wider SME portfolio has developed, also including support for SMEs specialised in

processing or (export) trade of agricultural products. In Latin America the drive was already much

onto vertical cooperation between cooperatives and trading companies. (The investments were also

more directed to the SMEs themselves and less to onward investment at farmers’ level). Thus support

to private sector became more explicit with private companies as an entry point for aid, through

diverse arrangements: contract farming but also supply systems through vertical coordination (coffee).

Since 2007 Cordaid Sector Entrepreneurship has also invested in three SME funds providing private

equity: Aavishkar (Asia), InReturn (Africa), and PYME Capital (LatAm). In PYME and InReturn,

Cordaid is the lead investor.

Many of the SMEs particularly in Africa initially supported by Cordaid were identified through

previous linkage to Dutch cooperation, mainly via the programme entitled 'Cooperation Emerging

Markets (PSOM) financed by the Ministry for Development Cooperation, and supporting sustainable

investments by Dutch companies in developing countries.

In practice actions implemented fell into three categories:

Trade financing of agricultural products.

Investments in the small farming businesses, mainly to increase quality of products.

“Match-making” between farmers’ organizations, NGOs, financial institutions and companies.

1.6 Organisational set up

In the 2003-2006 period the Cordaid regional units (in charge of administering grants) and the Finance

Unit (responsible for management of loans and guarantees) made efforts towards more coherence as

part of the Access to Markets policy, striving for more synergy between the use of the various

financial instruments and in the partner and country policies.

With the establishment of the Cordaid Sector Entrepreneurship in January 2007 all staff (investment

officers responsible for loans and guarantees, and more exceptionally equity) and programme officers

in charge of grants were incorporated in the Entrepreneurship sector.

Since January 2007 staff with these different specializations work together within the Sector on

specific proposals, which is to foster the administration of tailor made financial packages, based on the

specific needs and development stage of an initiative, and the synergy between the loan and donation

instrument, and between SMEs and other actors both within and in support of the value chain.

In order to ensure professional credit management, specific assessment criteria and monitoring

mechanisms have been developed for the loan mechanism. New credit proposals are furthermore

assessed by an external credit committee, which functions as a further quality mechanism. Whereas

the standard time frame for donation projects is three years, loan agreements may take up to 6 or 10 (?)

years, which also explains why some loan programmes are still receiving funding while the countries

they are in are no longer Cordaid focus countries. Currently the minimum loan size that can be

administered by Cordaid is 100.000 Euro. This may be justified from the perspective of operational

costs. It has however been recognized that this amount is too large for small local SMEs and start ups

to absorb. Local SMEs and the so-called ‘ missing middle’ may need between 20.000 Euro and the

100.000 Euro.


5

1.7 Relevance of the evaluation for internal learning

The above paragraphs demonstrate a gradual evolution of Cordaid thinking and expertise from access

to markets to value chain development and increased attention for collaboration with the private

sector. The organisation recognised that its support to private sector was experimental, and was also to

be seen as a learning experience allowing the organisation to improve its strategies and support

mechanisms.

The main lessons learnt from the evolution towards access to markets and value chain development, as

drawn from Cordaid partner consultations and evaluations, are the following:

The change towards access to market has been well accepted by most partners but is a radical

change for organizations (both farmer organizations and NGOs) used to approach the

problems through a supply-driven and food security based vision of agricultural development;

it takes time and requires a specific know-how;

Access to good information on markets and understanding of pricing mechanisms is essential

for this change of vision to be made;

Investment in chain development opens opportunities but also presents new risks that call for

more sophisticated assessment;

Ensuring the participation of women in chain development requires specific efforts;

Business Development Services need to be adapted to the needs and development levels of

specific target groups;

The role of NGOs must be clarified; while many end up trying to become chain actors

themselves, there is a need for a clear separation between being a chain actor and a supporting

actor, otherwise sound economic decisions cannot be ensured. In most cases the best for

NGOs is to remain service providers with a clear exit strategy;

The combination of loans and grants is promising, but Cordaid needs to develop new financial

instruments more adapted to start up businesses and producers organizations;

Development of market linkages for small producers operating at local and regional markets

also requires the promotion and support for local traders and traders associations. In more

developed economies such as Asia and Latin America the push for mainstreaming Corporate

Social Responsibility issues is important.

In addition in 2008 an external evaluation took place for two of the contract farming experiences, the

Kasese Smallholder Income and Investment Programme (KSIIP) in Uganda, and the Integrated

Tamale Food Company (ITFC) in Ghana. Comparison of both cases allowed for the following

learning especially at intake phase:

The interest of a SME to work with small producers must be based on objective facts/necessity

likely to generate long term commitment; demand driven schemes, preferably based on

previous collaboration between partners, are more likely to be successful than supply driven

ones where proposals are more driven by the opportunity of financial support;

A thorough financial and organizational feasibility study (both at company’s and farmers

level) has to be made before planning of the project as over optimistic projections and

assumptions commonly used to justify projects are a first cause of failure;

Clear roles have to be defined for all partners from the start, with responsibilities in the right

hands from the start

A business plan must be rather a road map than a rigid framework, as evolution of the

situation and context will require frequent adjustment;

Risks and plausible scenarios must be taken into account before designing loan and repayment

schemes;

Business Development Services (BDS) must be delivered to farmers according to an

assessment of needs and against verifiable indicators;


6

Companies are also likely to need some BDS support..

In 2008 Cordaid has identified the need to further refine its SME policy based on a practice that has

evolved over the last couple of years. From the perspective of this evaluation it is important to note

that the SME policy is to:

1. Foster the policy coherence of Cordaid SME support to overall policy objectives of the Small

Producers Programme;

2. Foster the performance of SMEs in the field and of Cordaid SME portfolio by developing

additional screening, contracting and monitoring tools that can be used;

3. Foster the adaptation of Cordaid SME support to the development cycle (phase) of a particular

SME;

By diversifying the delivery mechanism (direct support to individual SMEs; promotion of

SME funds; supporting SME packages by local banks or MFIs);

By strengthening the local monitoring of initiatives,

By systematically identifying SME needs for technical assistance;

By further detailing needs for donations, equity, loans or guarantees;

(Within the Small Producers Programme) fostering the synergy with other chain actors and

support structures.

Most recently Cordaid has started to discuss the distinction between micro, small and medium

enterprises and to determine specific development and investment needs per category. This analysis is

still in the process of finalization.


7

2 OBJECTIVES AND STRUCTURE OF THE

EVALUATION

2.1 Objectives of the evaluation

The global objective is to assess the relevance and effectiveness of Cordaid support to SMEs as an

entry point to enhance the income and position of smallholder farmers in agricultural value chains.

Specific objectives are:


small producers (in terms of direct poverty alleviation, civil society development and policy

influence.)


combination of loans, equity and donations) from the SME perspective and the perspective of the

small producers including synergies realized between various organizations and instruments.

3. To provide inputs into Cordaid policy on SMEs (in the context of small producers and

agricultural value chains) that will further the fine tuning of Cordaid support to SMEs and the use of

the various financial instruments in the agricultural value chain taking into account development

needs, phase of development of the specific actor, short term and long term capital and other needs.

2.2 Two levels of evaluation

According to its objectives the evaluation is conceived at two levels.

The first level of the evaluation (policy analysis) is to provide feedback from practice as to the

strengths and weaknesses of Cordaid approach to supporting SME-driven projects, so as to respond to

the third specific objective of the study:

3. To provide inputs into Cordaid policy on SMEs (in the context of small producers and agricultural

value chains) that will further the fine tuning of Cordaid support to SMEs and the use of the various

financial instruments in the agricultural value chain taking into account development needs, phase of

development of the specific actor, short term and long term capital and other needs.

The policy level of the study will address the following aspects:

a preliminary review of state of the art knowledge on the issues of contract farming and value

chain partnership development in general to serve as background reference;

a preliminary review of the state of Cordaid policy framework on contract farming and related

themes. This scoping study will serve as background to the evaluation of the specific projects;

through the synthesis study an overview of lessons learnt from the project case studies with

inputs to improve Cordaid policy, criteria and management instruments.

The basic framework at the policy level is a simple logical framework resuming the state of Cordaid’s

policy.


8

Table 1. Policy logframe for Cordaid chain partnership development

Level of

intervention

Formulation Targets (global) Indicators Main policy

assumptions

Overall

objective

(impacts)

To increase the income of

small producers in developing countries

through their integration in

(agri) chains with positive or neutral effects on their

food security

Contribution to creation of

employment opportunities for the poor. Organizations of

small producers and micro

entrepreneurs have a say in the management and policy of

value chains and a better

position in local and regional markets. The principles of

financial and ecological

sustainability upheld in value

chains.

Number of poor small

producers and their families) who have

improved their livelihood

security and food security/purchase capacity

Incomes of women

producers increased by 20 to 50%

Income of people living with HIV-AIDS improved

Specific

objective

(outcomes)

Improve the conditions and

integration of small

farmers in value chains

Producers organizations able

to provide products to markets

with increasing quality and quantity

Producers’ organizations, have

improved their negotiation capacity

Some are in a condition to

participate in the relationship between chains, banks and

authorities.

Value shares

Improved institutional

mechanisms (regulations, contracts, grading, quality

control, etc)

and chain partnerships (organizational capacity,

trust, long term

commitments)

Possible to maintain

competitiveness of chain

partnerships increasing allowing adaptation and

diversification

Possible to ensure external conditions favoring mutual

long term commitments

Possible to foster institutional support and

policy dialogue openings

Outputs Improve the delivery of technical, financial, BDS,

organizational and

marketing services to smallholder farmers

through participation in

contract farming and chain partnerships with SMEs

and service providers

Contract-farming and value chain partnerships allow

delivery of adequate services

and connect farmers to markets

Outreach of schemes to small farmers

Transfer of knowledge

Increased capacities of farmers organizations to

link with chain partners

Win-win partnerships between farmers and private

sector can be developed

even with limited institutional framework

Minimal enabling external

conditions

Inputs Support to chain actors and

supporting structures with verifiable effect on the

position of small producers with a mix of financial

instruments such as grants,

seed capital for investments, loans and

guarantees;

Basic preconditions for

viable contract farming schemes

SMEs with sustainable

market outlets and long term

commitments to work with

small holder farmers can be reliable partners

Cordaid support may solve

bottlenecks


9

The second level of the evaluation will be constituted by case studies of a set of Cordaid supported

projects. In this particular case “projects” may be a combination of several contracts between Cordaid

and the Contract Farming/Value chain development partnership: SME, farmer organization, service

provider. This level of evaluation answers the first two specific objectives of the study:


small producers (in terms of direct poverty alleviation, civil society development and policy influence.)


combination of loans, equity and donations) from the SME perspective and the perspective of the small

producers including synergies realized between various organizations and instruments.

The following figure resumes the logical model for the evaluation.

2.3 Methodology and sources of information

2.3.1 Portfolio of projects

The Cordaid SME portfolio eligible for evaluation at the onset of this study, consisted of 44 SMEs

(some with several contracts) that can be divided into the following categories:

A total of around 16 SME, mainly in Africa - involved in contract farming/ outgrower

programmes, that provide seeds/ plants material and other inputs to small producers on credit

basis, provide technical assistance (embedded or non-embedded) and provide market access to

farmers .The agricultural product range is broad. In several cases Cordaid supports with both a

loan and a grant, the grant sometimes being channelled through a separate BDS structure;

SMEs that are specialized in export trade, and get credit for working capital or to finance

purchase of harvest from small holders. The majority of these SMEs operate in Latin America

and invest in coffee trade, several of them focusing on the fair trade and organic niche

markets; some producer organizations that supply coffee, may also get Cordaid support

through donations.

SME funds (newly established in 3 regions) that invest in MSME. No direct link with the

small Producers Programme.

Individual SMEs – involved in (non agric trade or product processing)

4 SMEs in Asia particularly focused on rehabilitation of SMEs after the tsunami.

The yearly outstanding commitment of the loan portfolio relevant for the Small producers Programme

was about 17 millions Euro (2008 figure). Average loan size may generally range between 100.000

Euro and about 500.000 Euro.

The evaluation of this portfolio was divided in two levels of analysis:

Field case studies: a detailed evaluation of the set of criteria and OVIs was applied to a

representative sample of 12 field case studies, including field visit to the partners, stakeholders

and a sample of beneficiaries. Triangulation of information was ensured by the diversity of

sources: project documents, company records, interviews with Cordaid officers, company

management and field staff, other stakeholders, focus groups with farmers, individual visits to

participating farmers.

Desk cases review: among the remaining eligible projects a set of 11 cases was retained for a

desk review based on available secondary information. Desk analysis was based on secondary

evidence plus feedback from Cordaid officers.


10


11

2.3.2 FIELD CASE STUDIES

The following criteria were applied for the selection of case studies:

The sample should cover a variety of situations in terms of commodities, markets, external

institutional and legal conditions

The sample should cover a variety of combinations of partners and arrangements (centralized,

nucleus, multipartite contract farming; trade finance, working capital, grants; embedded and

subcontracted services; private companies, cooperatives, NGOs)

The sample should cover diverse situations in terms of farmer organization levels

The sample should include some clusters with similar commodity and market conditions but

different organizational settings

The project should have generated already some results (or the scheme should pre exist before

the contract with Cordaid) so that a minimum body of statistical evidence is available

The study should be practically feasible given budget and time limitations (in terms of travel

costs and others).

Contracts were eliminated from the list due to non-representative character (a cluster of post-tsunami

projects in Indonesia) or the lack of sufficient results to date; others were eliminated because they have

been object of specific evaluations in 2007-2008. This selection retained 33 out of 44 projects. A list

of 12 field case studies was selected.

Table 2. List of field case studies

Case Country Partner name

F1 Malawi Cheetah Malawi Ltd

F2 Tanzania Central Coffee Pulperies Kilimanjaro (CCPK)

F3 Tanzania Lima Ltd

F4 Zambia Northwestern Bee Keepers association (NWBKA)/ Meshearles Enterprise

Limited (MESH)/Zambia Agri-Business Forum – (ABF)

F5 Tanzania Biosustain Tanzania Ltd

F6 Tanzania Quality Food Products

F7 Ethiopia Beza Mar Agroindustry Plc

F8 Kenya/Tanzania East Africa Botanicals/Botanical Extracts EPZ

F9 Uganda Uganda Crop Industries Ltd (UCIL)

F10 Bolivia Sociedad Agropecuaria Industrial y Técnica SAITE

F11 Colombia Organic Products Trading Company (OPTCO)/COSURCA

F12 Peru Organic Products Trading Company (OPTCO)/ PROASSA

Field case studies consisted in a review of the project design and performance so far, and its pertinence

within Cordaid general policy objectives.

The reference framework for each field case study evaluation was a “proxy” logical framework. The

application of a consistent evaluation methodology called for a structured reference framework of each

intervention’s expected outputs, outcomes and impacts. The use of the “proxy” logframe is justified on

several counts:

“projects” may consist of a combination of several contracts, each with its specifics;


12

Cordaid is not using a logframe approach as such;

SMEs partners are not likely either to use this kind of management instrument on a day-to-day

basis, and reporting will be of unequal depth and quality;

Specific project objectives must be linked to indicators of Cordaid policy.

The “proxy” logframe was established for each case, based on the expected products stipulated in the

contract, and the strategic consideration included in the feasibility analysis for credit.

2.3.3 DESK CASE STUDIES

Desk studies followed basically the same framework but on a much reduced scope, with only available

information from project documents and reports. 11 projects have been reviewed essentially with the

objective of checking whether they confirm or infirm conclusions and lessons learnt from the field

case studies, or generate new hypotheses.

Table 3. List of desk case studies

Case Country Partner name

D1 Ghana Tongu Gold Farms Ltd

D2 Sierra Leone Cotton Tree Foundation Ginger Enterprises

D3 Tanzania Vasso Agroventures Limited

D4 Tanzania TANPRO

D5 Uganda Gouda Gold Limited

D6 Malawi (part of

worldwide project)

Liberation Foods Community Interest Company/ National Smallholder

Farmers Association of Malawi (NASFAM)

D7 Ethiopia Apinec Agro Industry Plc

D8 India Zameen Organic Private Ltd

D9 Philippines Foundation for Agrarian Reform Cooperative in Mindanao

(FARMCOOP)

D10 Bolivia Sociedad Agrícola Cafetalera Buena Vista S.A. (Agrica BV)/ El Cafetal

D11 Honduras Central de Cooperativas Cafetaleras de Honduras (CCCH)

.


13

Localization of case studies Field cases Desk cases

ASIA

F 3

F 4

F 6

F 8

F 9

F 10

F 11

F 12

F 2

D 1 D 2

D 3 D 4

D 5

D 6

D 7

D 8 D 9

D 10

D 11

F 1

F 5

F 7

__________________________________Synthesis Report Programme 9 Evaluation Cordaid______________________________________

14

2.4 Evaluation criteria and research questions

The evaluation at project level used six basic criteria for each of which, a set of research questions was

established:

A. Quality of design and methodology

B. Efficiency

C. Effectiveness

D. Relevance

E. Potential Sustainability

F. Replicability

The application of these standard evaluation criteria to the development interventions concerned,

supposed the establishment of a simplified causal relationship put in a linear way as illustrated in the

following diagram.

Inputs are the financial (and to a lesser degree) technical means provided by Cordaid and

partners in order to build a new strategic partnership on a pilot basis, or strengthen and

diversify or amplify an existing one.

Outputs are the intermediate services delivered through the partners in order to build the

partnership: they can include a variable mix of financial, technical, business development and

organizational services contributing to the partnership mechanisms.

Outcomes are the parameters by which the construction of the chain partnership may be

assessed: financial (through the flow of goods channelled to markets), social (through

increased and strengthened networks of chain actors) and institutional (through regulation

mechanisms and their monitoring and enforcement instruments).

Impacts are the benefits derived through the outcomes, in terms of the partners longer term

livelihood and business strategies.

The research questions are referred to for each stage of the following main chapter resuming the

results and observations of the evaluation.

2.5 Limitations

The main focus of this evaluation was to assess the linkages between agri SMEs and smallholder

farmers. This implied that the evaluation had to focus, and with the limited time frame for each field

case there was no in-depth assessment of aspects such as the internal systems of the SMEs concerned.

The focus was on the elements of viability of the schemes proposed, for which a complete set of

criteria was established and followed for each evaluation. The ex-ante elements were evaluated in

terms of quality of design, and then compared with the performance of the project (efficiency,

effectiveness and relevance). Field evaluations combined documentary review with meetings and

interviews with SME management and team, a sample of farmers and other chain stakeholders (service

providers, government agencies etc). In some selected case due to time limitations or incompatible

schedules, local consultants did not have time to fully interview all management of local SMEs and

discuss draft findings locally at SME and farmer level. Drafts were sent to SMEs and feedback

integrated whenever relevant.


15

3 EVALUATION: QUALITY OF DESIGN AND

METHODOLOGY

3.1 Introduction

The first criterion to be evaluated is the quality of design and methodology: we have defined it as the

extent to which the Cordaid aid package was responding adequately to the needs of the partner SME

and final beneficiaries (farmers) and taking into account opportunities and risks from the market and

policy environment. The assessment took into account both the quality of the design of the partnership

strategy to address internal and external constraints and opportunities, and the pertinence of the

Cordaid package to support it.

We have developed this aspect in as much detail as possible. Indeed, being in the position of a

financing agency, it is foremost through improving its project screening and appraisal process that

Cordaid may have a positive influence on the outcomes and impact of the initiatives it decides to

support.

The core research question for this criterion was stated as follows:

Was the proposal for contract farming or chain coordination scheme reasonably feasible and well

designed, consistent with Cordaid policy objectives, and was Cordaid support to the scheme

adequately responding to needs and taking into account risks and assumptions?

This core question was approached through different aspects as defined in the methodological

framework (see Inception and Methodological Framework Report April 2009). The analysis included

two levels:

1. The quality of design of the partners projects: this was analysed through a framework of research

questions on basic conditions of feasibility (based on a review of relevant literature), the quality of the

SME-farmers partnership design, the adequacy of services design, the conception of the farmer-SME

contract design, and the formal quality of the project proposal (internal logic).

2. The quality of Cordaid assessment of proposals and the adequacy of its support package from

the needs assessment. Cordaid supports SME-farmer collaborative schemes by a combination of

financial instruments: grants (mostly for service provision, equipments, training etc), loans (for

investments or working capital) and guarantees (to cover loans in the financial sector, for instance pre

shipment trade loans to buy production).

3.2 Overview of project portfolio

The 12 field case studies and 11 desk cases reviews cover 23 projects financed by Cordaid through 43

contracts celebrated between 2002 and 2008. Some of the projects are supported by more than one

contract (see table 1 in annex).

The amounts of financial investments by Cordaid add up to 15,747,266 €, with the following

repartition:

3,290,907 € in grants;

5,779,749 € in direct loans (including successive loan renewal or rescheduling);


16

6,376,610 € in bank guarantees (including successive renewal or rescheduling);

300,000 € in shares.

Due to overlapping of successive projects, over more than 6 years, it is difficult to calculate exactly the

proportion of the yearly total financial portfolio of Programme 9 covered by this evaluation. The field

cases studies and desk cases reviewed covered about 75% of the Cordaid SME portfolio that had a link

with agricultural development and small holders.

The types of partners enter into three categories (see details in Table 2 in annex):

1. Small and Medium Enterprises (SMEs): 15 cases (Cheetah, CCPK, Lima, MESH, Biosustain,

QFP, Bezamar, BEEPZ, UCIL, SAITE, Tongu, Vasso, TANPRO, Gouda Gold, Agrica bv ).

2. NGOs or foundation-led enterprises: 4 (Cotton Tree, Apinec, Zameen, FARMCOOP).

3. Farmer organizations/cooperatives: 5 cases (NWBKA in linkage with MESH, COSURCA and

PROASSA in linkage with OPTCO, NASFAM in linkage with Liberation, CCCH);

4. Marketing ventures: 2 (OPTCO, Liberation Nuts).

Some general characteristics can be drawn from the information on the following table:

Eight of the fifteen enterprises could be considered as start-ups backed by some Dutch

shareholders and/or PSOM funded project, a characteristic at the start of Cordaid’s SME

funding experience;

Six companies are fully owned by local shareholders in target countries, most are also recently

created ventures.

Virtually all are concentrating on the export market, generally Fair Trade and organic niches,

only a few of them combine or only target the local market; only 3 of the schemes target

partially at least, the local market (Bezamar, Apinec, Gouda Gold);

The majority in Africa and some in Latin America are contract-farming schemes, while others

mostly in Asia and Latin America are more of the chain coordination type due to the higher

profile of farmers’ organizations and chains targeted.

Several contract-farming companies have a nucleus farm with their own production, which

may be an important factor towards weak company commitment to the outgrowers in case of

teething problems.

In terms of core business, all the projects were selected within the agricultural portfolio. As the

following table shows, Cordaid is supporting a diversity of commodities (13), with only two “clusters”

recognizable in the cases of coffee and honey.

Table 4. Commodities and types of markets targeted by projects

Commodity Total

partners

Only one

commodity

Conventional

market

Specialty

market

Export Local

Coffee 6 6 4 6 6 3

Honey 3 3 3 2 2 3

Cotton 2 1 2 2


17

Sesame 1 1 1 1

Peanuts 2 1 1 2 2 1

Paprika 1 1 1 1

Safflower 1 1 1

Artemisia 1 1 1 1

Cardamom 1 1 1 1

Pineapple 1 1 1 1 1

Ginger 1 1 1

Flowers, seeds 1 1 1

Dairy 1 1 1 1

Banana 1 1 1 1

TOTAL 23 17 14 17 21 9

The majority (17) of companies involved in the projects have only one commodity, while 4 of them

pursue other crops but generally not supported directly by the same project. Projects are thus, in any

case, commodity-specific. Again, the same proportion target specialty markets (organic, Fair Trade

and others) but many of them combine some marketing on the conventional markets.

Accordingly, almost all projects target the export market, only 2 target only local markets, and 7 both

export and local markets.

The analysis of this portfolio indicates that there has been no deliberate, specific strategy in terms of

selecting commodities or types of market strategies.

Indeed, this reflects the fact that the way proposals are selected by Cordaid is mostly informal at the

onset: the Dutch related companies contacted Cordaid mostly through PSOM linkages, or SNV

partnerships, while many others have contacted the organization through some other existing Cordaid

partner. There is no systematic, public pre-selection mechanism such as call for proposals or shortlists.

Once put to consideration proposals are nonetheless submitted to a systematic appraisal process.

Most of the projects, where a loan or guarantee was the main financial instrument used, concern

primarily the promotion of international agricultural value chains, particularly in fair trade and organic

niche markets. It has been rarely used for experiences with mainstream markets and local, regional

scale markets. Most of the grant funding goes to local and regional markets of mainstream products, as

Cordaid finds it difficult to find an entry point and methodologies to apply loans and guarantees for

local and regional market initiatives.

Some of the general characteristics of the proposals are linked to the pre-selection process: the high

number of Dutch-linked companies is an outcome of how the selection of partners functioned initially.

The informal character of the pre-selection process might be considering as leaving too much to

chance: the lack of publicized calls for proposals might leave indeed many interesting potential

candidates out of focus. Cordaid has no systematic way to ensure that the best available candidates are

selected, although it must be said also that long-term relationships with stakeholders in most countries

reduces that risk.

3.3 Projects planned outreach, outputs and outcomes

All project documents indicate a planned outreach in terms of number of farmers or households

participating in the scheme (see table 3 in annex). This outreach varies widely, from small scale (120

outgrowers in Tongu Gold Farm project) to large, regional scale (50,000 coffee producers in Lima

coffee marketing scheme). This high variation, apart from differences in the precision of planning,


18

covers also great differences in the intensiveness of service provision. In all, planned outreach for the

23 projects reaches approximately 110,000 farmers.

In terms of outputs and outcomes, project proposals generally lack anything like a logical framework

and confusion between inputs, short-term outputs and outcomes is common, and private companies

may not be familiar with this planning methodology. Through revision and reorganization of “proxy”

logframes we were able to set out the main outputs and outcomes for each project (see table 3 in

annex).

Planned outputs are the short-term results expected to be achieved through the delivery of the services

included in the projects. The main inputs refer in general to:

Production improvements: the projects generally include extension and related services

supposed to allow increases in the quantity and quality of production. These increases are

precisely spelled out only in a minority of projects, specifically those who include explicit

extension services.

Marketing outputs: most proposals have a business plan or a basic strategic planning based on

planned volumes of products to be marketed. These projections are in general specific and

used to illustrate the business strategy and calculate break-even point, based on assumption of

market prices.

Chain organization outputs: in a minority of cases, there are clearly spelled out outputs in

terms of improvements in the organization of the supply chain.

Outcomes are the parameters by which project effect on the participants is to be measured. The two

main types of outcomes more or less specified for each project are:

Financial outcomes for farmers: all projects include as planned outcomes, additional incomes

for participating farmers thanks to access to (generally preferential) markets. These expected

outcomes are not precisely planned except in a minority of cases.

Financial outcomes for sponsor companies: company financial results expected from the

marketing outputs are generally specified in cash projections and business plans with relative

precision.

Chain partnership outcomes: the building of new, stable partnership in the value chain is an

important outcome. It is seldom spelled out in clear, verifiable parameters.

Loan performance is a major indicator of outcomes since successful schemes should put the

sponsoring SME in a position to repay Cordaid credit.

Details of planned outcomes are synthesised in table 3 in annex.

The observations that can be made at this level are:

The 23 projects all have in common, expected outcomes of improving access to markets for a

total of up to 110,000 small farmers in targeted developing countries through increase, and

diversification of income portfolio and are therefore consistent with Cordaid objectives

through its Small Producers Programme;

Outreach in terms of participating farmers and outputs in terms and production and marketed

volumes are generally precisely quantified according to the proposal;

Intermediate outputs (training etc) are generally only vaguely indicated.


19

Outcomes in terms of income for farmers are not generally very precisely set out, while

projections of returns for the sponsor company are always more or less precisely spelled out,

since they constitute one of the basic criteria for risk assessment and approval (see ).

The intervention logic of most projects is not organized along a common framework such as a

simple logframe with vertical and horizontal logic; indicators are generally incomplete, not

always precisely quantified or verifiable; assumptions are not often spelled out clearly.

3.4 Observations on the feasibility of the projects studied

The feasibility analysis is centred on the partners’ proposals, which constitute the starting point of

Cordaid´s decision to support a project. These proposals may or not be amended in the course of the

negotiation.

This is a broad overview of the initial proposals that were forwarded to Cordaid to serve as a

framework for the project in terms of the general feasibility of the project proposal. It does not follow

the exact framework of Cordaid analysis instruments, although of course there are some basic criteria

in common.

Feasibility was assessed against what, in the literature review and methodological framework, were

determined as the main preconditions for a successful contract farming or chain coordination scheme

(see Inception and Methodological Framework Report April 2009):

1) Market preconditions;

2) Agronomic and livelihood preconditions;

3) Management capacity of the sponsoring firm;

4) Management capacity of farmers and their organizations:

5) Financial viability of the supply chain;

6) Conditions for balanced risk sharing and coping strategies;

7) Conditions for building stable commitments;

8) Reasonably enabling environment;

9) Conditions for adapting to changes in the risks and assumptions.

3.4.1 Viability of the market strategies

A viable market strategy including the supply dimension is invariably the first critical factor. The

viability of market strategies can be assessed by the capacity to achieve the objectives in terms of

ensuring sustained profit for both parts (company and farmers).

It is often based only on an assessment of demand. While the existence of an accessible market is a

fundamental prerequisite, it is not in itself sufficient.

The viability of the market strategy depends also on several other factors considered further, such as

adaptability of production systems and cost effectiveness of the supply chain required to satisfy the

market requirements.

All proposals refer to a more or less specific market niche. We have analysed, for each proposal,

whether a reasonably viable market strategy was included. The research questions were as follows:

Did the project sponsor identify a market for the commodity with long-term outlets for the

production?


20

Were the general conditions and the trends of relevant markets for the commodity concerned,

correctly assessed and considered when the proposal was made, and was there reasonable

ground for the assumptions made as to the evolution of these markets?

Did the project sponsor have already identified clients, or only tentative contacts?

The repartition of market strategies is shown in table 3. The following table shows that virtually all

companies already established some years before the project, had pre-existing market linkages /

customers. Indeed, in many cases sales contracts were used as collateral in loans and guarantee

contracts.

Among the 8 companies that could be considered as start-ups at the onset of the project nevertheless,

some had already established linkages.

Table 5. Initial state of proposed market strategy

Commodity Clearly identified

market opportunities

Only general

characterization of

target market

Pre existing market

linkages

Tentative or

undefined linkages

Established companies 12 3 11 4

Start ups 4 4 3 5

This information shows that, although Cordaid had no specific targeting of commodities or type of

market strategy, the screening was at least ensuring that most projects started with some well-defined

market strategy and linkages.

Logically, among the few projects that may be considering as seriously lacking at the onset in terms of

market strategy, all are experiencing serious difficulties. The most extreme case is the Sierra Leone

ginger project (one of the first to be financed by Cordaid) where the start-up business was even

unaware of the basic requirements of the expected export market.

Aspects of Cordaid’s assessment of market viability are discussed later (see 3.9).

3.4.2 Agronomic and livelihood feasibility of the proposals

Developing new market linkages, almost invariably supposes some adjustments of the production

system in order to respond to the market requirements in terms of quality, quantity and opportunity of

production. The viability of contract farming and marketing schemes is also linked to the agronomic

challenges involved. Major adaptations, or the introduction of new crops, are obviously more costly

and risky than minor adjustments of existing crops and production practices.

The research questions that were considered at that level were as follows:

Were the conditions in the areas selected for the project, adequate for the production

objectives of the project?

Were agronomic constraints properly assessed and addressed?

Was land tenure structure adequate for farmers participation?

Were basic utilities, infrastructure and communication available? Was access to necessary

inputs feasible?

Were farmers supposed to become outgrowers in the project, susceptible of being interested in

participating from a livelihoods point of view? Did the proposed production fit well in their

activity schedules without disrupting other important activities, especially regarding food and

income security?

Were the technical innovations proposed compatible with the current livelihoods strategies?

Was the profitability of participation by farmers correctly assessed and demonstrable?


21

Table 5 in annex resumes the agronomic challenges of each project and its adaptiveness to existing

livelihood systems. An overview can be seen in the following table.

Table 6. Viability of agronomic and livelihood strategies

Commodity Already well

known by

farmers

New crop Organic

conversion

Low

external

inputs

Medium

external

inputs

High

external

inputs

Coffee 6 6 6

Honey 3 3

Cotton 2 2 2

Sesame 1 1 1

Peanuts 2 2 2

Paprika 1 1

Safflower 1 1

Artemisia 1 1

Cardamom 1 1

Pineapple 1 1

Ginger 1 1

Flowers, seeds 1 1

Dairy 1 1

Banana 1 1 1

TOTAL 16 7 12 14 6 3

Note: one case may score in more than one category

The projects with lowest challenges are those, who contemplate crops well known by farmers, with

relatively simple adaptations like, for instance, organic conversion of coffee plantations already

managed with low levels of eternal inputs.

At the other extreme are those projects that propose the introduction of a new crop, with high

requirements in terms of external inputs. This normally implies technical and organizational

challenges, as well as a new structure of costs for the farm. Not surprisingly, in those cases this

element of feasibility may prove fatal to the scheme, as has been already the case for all three of them

(Quality Food Products with safflower, Tongu with pineapple and Vasso with flowers).

Intermediate situations occur with projects proposing some degree of intensification of existing

production systems (honey projects), the use of some external inputs and training for a new crop

(Cheetah Malawi, BEEPZ) or the intensification of dairy systems (Gouda Gold).

Organic conversion in most cases is more an organizational than a technical challenge.

The most common feature from the agronomic viability point of view is excessive optimism as to the

feasibility of organizing farmers to ensure production, quality control and bulking so as to satisfy the

requirement of international export. While agronomic feasibility per se, is a serious issue only in a few

cases as seen before, technical challenges are seldom stated precisely in the proposals.

The consequence of this is that, even if most projects recognize the need for some kind of training and

(more seldom) agronomic trials, training and extension programmes are rarely well defined in terms of

their outputs.

All proposals also assume that, given some incentive in terms of crop price, most targeted farmers

would become quickly adopters of a new crop. No proposal, with the exception of Cheetah has

included a consistent analysis of the feasibility for smallholders to introduce a new crop in their

livelihood systems, and the implications for other sources of income and food security. This is also

largely overlooked in Cordaid screening.


22

3.4.3 Management capacity of the sponsoring firm:

The inherent capacity of an agribusiness cannot be taken for granted. A start-up will not perform as a

consolidated firm. Neither does former success in a venture necessarily mean that the firm will have

the capacity to tackle with an altogether different arrangement, or to scale up existing activities beyond

some point.

The main capabilities needed for an agribusiness to be successful are those directly related to its

commercial function. Without entering in details this entails important aspects such as:

Market know-how and linkages: a firm with solid and diversified linkages in the targeted

market is more likely to develop a viable strategy (see point 3.4.1);

Negotiation capacity in order to achieve profitable and viable contracts;

Financial capacity: the firm needs a minimum financial capacity to be able to sustain its

activities through the cash flow cycles specific to the targeted arrangements, and show a

healthy financial balance;

Management capacity: the firm must have the business know how necessary to run the specific

commercial activity targeted;

Self regulation capacity: the firm must be able to monitor and control its own financial

performance and heed signals of the need of adaptation, otherwise it is likely to run

blindfolded into serious problems; it also needs to be capable of being accountable to financial

providers;

Capacity to deal with many small holders. And capacity to provide credit in kind and

administer training.

Farmers-agribusinesses linkages include generally more than purely commercial activities: the firm

has also to tackle with development issues such as farmer training, organization, promotion, advocacy

etc. These activities may be performed as embedded services or delegated to other stakeholders.

Information available on management capacity at the onset is always limited. In its risk analysis,

Cordaid looks mainly at the financial situation, the experience of the firm and the human resources

available. This is the information computed in table 6 in annex. Other management aspects have been

overlooked.

As mentioned, 8 of the 23 companies were start-ups. Most of the other companies were not very old

either. In most cases, they had well experienced managers or good linkages that led Cordaid to assess

management risk as low or moderate.

Financial situation at onset is a tricky issue. While Cordaid screened potential partner for indicators of

good management, its role was also set as finance source for a new or innovative scheme that did not

present the usual guarantees necessary to access formal credit in their country. Logically, with this role

in mind Cordaid supported project sponsors (SMEs) that had financial constraints and presented very

few solid collateral.

Some issues may be mentioned:

Several start up companies were assessed as being experienced because of their management

or links to established companies but the sponsor company itself had very little business

experience and some had only token financial assets.

NGO-backed schemes were sometimes very experienced in organizing and training farmers

but not at all in business; some had created offshoot companies for opportunistic reasons.

Some new companies were directed by people from the development sector with no business

background.

Cooperatives suffered from structural weaknesses, inefficient management systems and

decision-making mechanisms.


23

While the case of cooperatives must be set apart, it can be considered that in general, Cordaid screened

projects with good initial indications of management capacity, except in a few older cases (Cotton

Tree Foundation, TANPRO or, more recently, MESH). These specific cases had obvious question

marks about the profile and experience of management, that might have called for closer scrutiny.

Lack of management capacity is an inherent risk that can be addressed by an assessment of training

and strengthening needs and by risk mitigating measures. The most important issue at this level is not

approving risky proposals, but rather, the fact that due to the process used for screening and selection,

Cordaid was in most cases, not able to introduce BDS services addressing weaknesses of the sponsor

company where it would have been needed.

The most recent case of contracting Agri Business forum (ABF) in Zambia for support to the honey

value chain not only from the needs of farmers organizations but also of private companies, shows an

important adaptation capacity from Cordaid.

3.4.4 Management capacity of farmers and their organizations

Participation of farmers in new marketing schemes may be done on an individual or a group base;

grouping participating farmers is a basic strategy to achieve economies of scale in production and

service delivery. Increased capacities are required of existing organizations, depending on the degree

of complexity and formalization of the scheme:

Basic social management capacities are needed in order to motivate and organize farmers

around the delivery of services and the negotiation of linkages.

Technical capacities must be developed whenever the organization is called to intervene in the

grading and quality control of the production.

Financial managements capacities are needed to administrate collective resources, groups

sales, access to credit, grouped input purchases etc.

Institutional capacities are needed to develop and enforce internal regulations, liaise with

external governance stakeholders and participate in contract negotiation and policy advocacy.

Strong leadership is needed to carry on the commitments of the group, balanced by

cohesiveness and internal accountability and transparent decision-making.

The main questions addressed in the research were:

Were the needs for organizing farmers and linking them to the other stakeholders, properly

assessed an addressed?

Were social and cultural practices prevalent in the area, favourable for the feasibility of the

scheme?

Table 7 in annex, resumes the characteristics of each scheme from the point of view of levels of

organization and role delegated to farmers and their organizations. The following table shows an

overview of existing strategies in terms of involvement of producers.

Table 7. Viability of farmers’ involvement strategies

Commodity Work with

existing

organizations

Creates new

organizations

Works with

individual

farmers

Transfers

management

capacity

Farmers groups involvement

Production Quality

Control Bulking

Coffee 4 2 4 4 4 4

Honey 3 3 3 2 2

Cotton 1 1 2 2 1 2

Sesame 1 1

Peanuts 1 1 1 1 1 1


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Paprika 1 1 1

Safflower 1 1 1

Artemisia 1 1 1

Cardamom 1 1

Pineapple 1

Ginger 1

Flowers 1

Dairy 1 1 1 1

Banana 1 1 1 1

TOTAL 10 7 8 15 15 9 10

17 of the 23 schemes proposed to work with some level of farmer organization. Only 10 proposed to

use existing organizations, and 7 to create new, ad-hoc structures. 6 projects worked only with

individual farmers and 2 with both groups and individuals (QFP, BEEPZ).

As for farmer group involvement, the majority of group-related projects proposed to use those groups

for organizing production activities and training, while it was les frequent to involve them in quality

control and bulking of the product.

Schemes building on pre existing groups with already some built in social and institutional capital are

more likely to succeed than those built on ad-hoc groups. Of the 8 schemes based on individual

farmers, half have failed and two have very limited impact on livelihoods. Only one (SAITE) may be

considered fully successful while the last one (BEEPZ) is still struggling. An extreme case was Tongu

where would-be outgrowers were actually company employees working on company’s land.

On the other hand, of the 10 projects working with pre existing groups, only three may be considered

failed or in serious difficulty (Gouda Gold, Agrica, CCCH) for unrelated reasons, and of these two are

second level cooperatives with structural problems. Of the 7 projects working with new groups, three

have failed (TANPRO, QFP, FARMCOOP), two are struggling (Cheetah and BEEPZ) and UCIL is

too recent to judge but slow to start.

While most projects contemplated some transfer of capacities to groups, this was generally less

specific than technical training. A few schemes involved a partner organization providing support to

farmer organization, at least at the onset (QFP with FAIDA MALI, BEEPZ with Technoserve, etc).

Organizations cannot jumpstart complex management systems from scratch either.

Training and strengthening needs assessment, simplified procedures and technological packages,

progressive upgrading are risk-mitigating measures against farmer and organizational failure. These

considerations are seldom considered in details in proposals.

The risks of involving costly, complex organizational schemes are not considered explicitly and

systematically in Cordaid assessment of proposals.

3.4.5 Financial viability of the supply chain

Ensuring supply from a high number of small farmers supposes increased costs as compared with

sourcing from a few large-scale suppliers, if the alternative exists. In any case, the financial viability of

the supply system will depend heavily on its inherent costs, and many a venture fails despite a

potentially profitable market, because of high and unsustainable costs. Some critical aspects may

include:

Inefficient supply systems: cost of post harvest management and transport of product may

reduce the marketing margins beyond profitability and inefficiency increase the risk of losses


25

and quality problems; supply chain mistakes can be extremely costly in the very best of times,

leading to excessive cost, confusion and losses.

Highly subsidized service provision, often favoured by initial external donor support,

invariably threatens the viability of marketing schemes: hidden costs appear only after

subsidies dry up.

Underestimated marketing costs: it is quite common for inexperienced firms to underestimate

or forget altogether some components of their costs, such as produce preparation and

packaging, handling, transportation, losses, storage, processing, capital and overhead costs.

An inefficient or costly supply system will invariably increase the risks involved in the scheme.

Table 8 in annex resumes the issues related to the organization of the supply chain in all projects

reviewed.

The research questions associated are as follows:

Was the structure and organization of the supply chain clearly defined at onset?

Was the organization adequate for the objectives of the scheme in terms of ensuring quantity,

quality and opportunity of supply?

Was the organization proposed as cost effective as possible, or at least was cost effectiveness

discussed in the proposal? Were the cash flow/ cost-benefit projections complete and based on

realistic estimates in order to assess the financial feasibility of the scheme? Are the projections

holding true against realistic scenarios in terms of production and market conditions? Is there a

clear and realistic assessment of break-even point?

In some cases the project documents are surprisingly lacking of details regarding this fundamental

aspects of viability.

Some business plans do include some basic costs of the supply chain, but this is mostly incomplete.

The projects can be grouped according to a few significant characteristics as in the following table.

Table 8. Characteristics of proposed supply chain models

Commodity Vertically

integrated

Multipartite Cost structure

of supply

chain explicit

SME break

even volumes

calculated

Alternative

scenarios

Coffee 2 4 2

Honey 3 2

Cotton 1 1 1

Sesame 1 1

Peanuts 1 1 1

Paprika 1 1 1

Safflower 1 1 1

Artemisia 1 1 1

Cardamom 1

Pineapple 1 1

Ginger 1

Flowers 1

Dairy 1

Banana 1

TOTAL 13 10 2 11 1

Of the 23 projects, 13 propose a vertically integrated supply chain, where the marketing company

assumes most functions from farm gate to final marketing. Another 10 propose a more multipartite


26

model, where other actors have important roles: farmer groups ensure quality control and bulking,

other actors participate in processing or final marketing. Whatever the reasons for vertical integration,

it is generally more costly and more risky for the sponsor company.

The case of Cheetah illustrates how costly this kind of integration can be, to the point of increasing

considerably break-even levels and sending the whole scheme in a spiral of financial risk.

In terms of quality of proposals, it is striking to note that we have found only two proposals where a

detailed cost structure was explicit for the whole chain from farmer to final marketing. The cost

structure of the chain is never fully analysed (sometimes farmer production costs projections are

included) and several steps are always missing. In the vast majority of cases, the sponsor only

computes its main operation costs and the bottom of the chain is a “black box”. Not only does this

leave farmer cost-benefits and role in the chain unspecified, but also very often, important costs are

omitted. In chain coordination proposals such as OPTCO or Liberation Nuts, the bottom of the chain is

often a “black box” and supply organization or quality control issues at that level are only cursorily

mentioned. Part of that is caused by the fact that, in particular at the onset of this process, Cordaid has

looked at SMEs and at SME-farmer interface, without a full understanding of the value chain logic.

Almost half of the cases presented some basic calculation of break-even volumes in their proposal

or/and business plan. In most cases the data appeared without much supporting data. Cheetah Malawi

is notable for its transparency at that level.

Finally, another very important observation concerns the almost systematic occurrence of overly

optimistic projections of production volumes. This has been noted time and again in most proposals.

Only one business plan had clearly different alternatives in terms of production and prices. Many

projects suppose a spectacular and swift jump in traded volumes, obtained through working capital,

like the lack of capital was the only bottleneck in increasing volumes. Coupled with overlooking some

or many “hidden costs” in the supply chain, this phenomenon leads to strong distortions in the

appreciation of financial risk.

As will be noted further, the current format of risk assessment used by Cordaid, leads to overlook

these issues of the supply chain and take for granted most of the assumptions on production. Proposals

are understandably optimistic, since nobody expects to be financed for an overly risky venture.

Nevertheless, there is a lack of consideration of supply issues that is creating an unrealistic focus on

the strictly financial aspects, even if everybody seems aware in Cordaid of those “hidden” issues and

nobody pretends that they can be solved only by “throwing” money at them.

The importance of these issues is well illustrated by the fact that out of 23 projects, at least 13 may be

considered as having seriously inflated or unrealistic projections, out of which we find most of the

failed or seriously imperilled schemes.

3.4.6 Conditions for balanced risk sharing and coping strategies

A marketing scheme involves some kind of more or less formal agreement between farmers, the

marketing firm and possibly other stakeholders. Any agreement involves a definition (explicit or

implicit) of the risk sharing between participants. The main inherent risks of an agricultural marketing

scheme are well known:

Production risks: the loss or failure of a crop due to climatic conditions, pests and diseases or

the lack of a necessary input at the right moment. They may be partially mitigated according

to available technology and resources.

Market and price risks: the changes in market conditions linked to decreases in prices or total

loss of the market access. They are external to the scheme and may only be mitigated by

alternative arrangements.


27

Post harvest risks: they are the risks of loss and degradation linked to the storage,

transportation and grading of the crop.

Competition risks: if competition is very high, or poorly regulated, aggressive practices are

likely to be followed by competing buyers.

External financial risks: changes in the financial markets as well as currency exchange rate

risks may be important.

Socio-political risks: social disruption and conflicts are the extreme form, while different

kinds of social tensions and antagonisms may affect as seriously.

Some risks are known previously while other may be unexpected. The arrangement between farmers

and marketing firm must be objectively fair in terms of risk sharing, and perceived as such in order to

build trust. Schemes based on unbalanced risk sharing, where for instance the farmers bear all the

production risks or on the contrary, where the firm bears all the market risk for instance, are unlikely

to be sustainable in the long run. Coping strategies must exist to face stress and shocks on the system.

As far as possible with available information, we have tried to assess how the proposed schemes could

address the most likely risks. This information is resumed in table 9 in annex.

The most significant issues to be raised are the following:

Many proposals understated supply risks linked to uncertainties in the production system,

risks in post harvest and reticence of farmers to commit; this is linked to the overoptimistic

projections mentioned previously;

Farmers almost invariably shoulder production risk, while very few projects had proposals for

risk reducing investments in aspects such as irrigation, post harvest management. Unplanned

for production risks mean less profitability for farmers and early defection from schemes (the

case of QFP is exemplar).

Competition risks are generally underestimated initially. They are borne fully by the company.

Some (sometimes unfair) competition arises from the initial success of a scheme (Cheetah

Malawi, honey in Zambia) or can be a structural feature of the sub sector (cotton and flowers

in Tanzania).

Market risks are often initially addressed by specialization (coffee market niches, organic

niches for other crops) or diversification (of markets and less often, of products). There are too

often, assumptions about the risk reduction potential of such strategies without well-

documented scenarios.

Side selling risks in contract farming schemes, which are prevented by trust building and

institutional mechanisms (see further), are seldom addressed explicitly in proposals. It is

through experience that companies start to respond. On the other side the risk of seeing a

company sideline farmers to procure from other providers or its own production is more

structural and is addressed in the following point.

3.4.7 Objective conditions for building stable commitments

The basic overall objective of a farmer-agribusiness linkage is always, to increase the gross value of

product marketed with mutual benefits for all parts. What mutual benefits will mean to each part of the

partnership depends on each actor’s own strategy. It is only through common objectives and growing

mutual commitment that ad hoc relationships may grow into institutional arrangements.

It is therefore essential that the linkage considered responds to the fundamental strategy of each

partner:

The business strategy of a SME or cooperative will always include, at least, ensuring growth

and profit in a sustainable way. The basic milestone of any such strategy is to ensure

consistently, returns over the break-even point. The strategy may entail, in its more generic


28

form, either product/market diversification, or product/market specialization according to the

management perception of opportunities and risks.

The livelihood strategy of any smallholder farmer will include foremost, the livelihood

security of his/her household, including food security, through a combination of income

generating and self-consumption activities. Similarly to a business strategy, but through very

different ways, the farmer has to make decisions between diversification or specialization.

No linkage will be able to function in a stable form if both parts do not perceive that it strengthens

their respective strategies of balancing profit making and risk reduction. Marketing and contract

farming schemes can be viable only if both partners (meaning basically producers and marketing

body) can be sustainably committed to each other.

The first condition for that is for both parts to need each other objectively, and find it difficult to walk

away from the venture at the first difficulty. This is linked to two very simple conditions:

Objective commitment of the marketing company: if the company needs supply from the

small farmers to achieve its business strategy, because it cannot be easily substituted, then it is

likely that all possible efforts will be made for the scheme to be successful. Companies that

can rely on a nucleus plantation or commercial large-scale suppliers and seek only additional

supply from smallholders, are likely to be much less committed.

Objective commitment of farmers: farmers will adhere to a venture if they see objective

interest in it, deem it feasible through experience and cannot substitute the crop of the partner

too easily. Farmers, who have a diversified portfolio of reliable cash crops, will have low trade

offs.

The second condition for stable commitment is that mutual obligations can be institutionally enforced,

by a formal or informal contract.

Table 10 in annex review the characteristics of each project. The most important features are resumes

below.

Table 9. Characteristics of farmers-company commitment

Commodity Nucleus estate

or large scale

suppliers

Only supply

from small

producers

Informal

contract

socially

enforced

Formal

contract

Coffee (cooperatives) 3 3 3

Coffee (companies) 1 2

Honey 3 2 1

Cotton 2 2 2

Sesame 1

Peanuts 2

Paprika 1 1

Safflower 1 1

Artemisia 1 1

Cardamom 1 1

Pineapple 1

Ginger 1

Flowers 1 1

Dairy 1

Banana 1

TOTAL 7 16 8 11


29

The majority of projects (16) source its product only from small farmers; in some cases, supply from

own farm of commercial suppliers has failed (Cheetah Malawi, BEEPZ) and the commitment of the

company to contract farming has increased.

In 7 projects, the sponsor company has its own nucleus farm or supplies from large-scale commercial

producers. Interestingly, 5 of these have failed and the company has backed off or diversified, and one

(CCPK) shows little in terms of livelihood impacts for farmers.

Only 11 projects use formal contracts, 6 of them individual (only the 3 Latin American coffee projects

with cooperatives and Bezamar and Apinec in Ethiopia use contracts with cooperatives and

associations).

There is no direct link between formal contract and project performance. Indeed, some failed schemes

were using very sophisticated contracts. This aspects calls for a more detailed analysis, which is to be

developed further (see 3.7).

3.4.8 Reasonably enabling environment

No enterprise functions in a void. A marketing scheme involving such different stakeholders is

unlikely to succeed if the economic, social, business and political environment are too unfavourable.

What is generally called an “enabling environment” is composed of the following elements:

The regulatory and enforcement environment: the sector concerned must be submitted to a

series of laws and regulations, and these must be enforced to be effective. The extent of

relevant regulations may be extremely wide, involving input regulation, product regulation,

marketing, contract, financial and credit regulations, etc;

The business environment is constituted of a series of factors outside the control of

individual businesses, conditioning the way private business is conducted, linked to policy and

regulations but also to specific aspects such as taxation, innovation support, business

development services, information management, competition etc;

The public infrastructure including communication and energy, is of course an important

determinant;.

The institutional environment determines the presence and capacity of different institutional

stakeholders susceptible of having a role in production and marketing of agricultural products.

This includes, in particular, able institutions capable of providing specific services.

The policy environment is constituted by the framework of policies implemented by the state

and has a strong bearing on all the previously mentioned elements of the environment.

Another important aspect of the environment is the presence of embedded regulation systems:

allowing activities at local level to be included in larger-scale systems for monitoring, enforcement,

conflict resolution, and governance both from the farmers and the firm side so that issues at local level

may be addressed in order to adapt and improve the system at large. Examples of embedded systems

are:

Traders associations, marketing boards developing and enforcing codes of conducts and rules

specific to a commodity or a sector, allowing to reduce unfair competition and develop

economies of scale and advocacy capacities;

Regional and National level Farmers organizations, providing support to local level

organizations and achieving economies of scale and greater bargaining power.


30

Any marketing scheme developed in an unfavourable environment must adopt special coping

strategies accordingly; otherwise it is unlikely to succeed.

The proposals generally have little information on the elements of the institutional and legal

environment. While for some cases this reflects very self-contained schemes with insufficient

linkages, in others it may reflect the lack of importance given to these issues in the documents.

Observations on these aspects of each case are resumed in table 11 in annex. By reviewing elements in

the context, mainly for the field case studies, some important comments can be made

Regulatory and enforcement environment: this is often found lacking in terms of the

possibilities of enforcing formal contracts between farmers and traders. Regulation of

competition and codes of conduct are also lacking especially in Africa. While some

commodities have a fairly well developed regulatory framework (coffee and cotton) others

lack any (honey in Zambia, spices in Uganda, etc). For organic and fair Trade markets

voluntary regulation framework are in place but similarly lack corresponding regulatory

support at national level.

Business environment: some aspects are generally very weak in Africa such as access to

credit, setting up of business, too many laws, by-laws, regulations and administrative

procedures, lack of commercial dispute resolution, high levels of local taxes etc.

Public infrastructure is generally an important bottleneck since most projects tend to be active

in rather remote rural areas. It has a direct bearing on supply chain cost effectiveness.

Institutional environment: most projects work in centrally managed or very simple

partnerships with BDS providers but rarely, with any permanent collaborative relationship

with local institutions. Interesting exceptions can be found such as Biosustain in Tanzania,

which has developed important partnerships with district authorities. Chain wide coordination

is also very seldom seen in Africa; there are promising incipient efforts in the honey chain in

Zambia and Ethiopia.

Policy environment: lack of specific support policy may affect the potential for development

of specific chains (see honey in Zambia).

Appraisal of projects by Cordaid considers some country-level risks rather from currency and general

political situation point of view. More specific aspects like those mentioned here are only occasionally

considered.

The lack of linkages with the institutional environment and aspects of chain coordination are also not

properly considered as elements of project feasibility.

3.4.9 Conditions for adapting to changes in the risks and assumptions:

The marketing scheme evolves in a changing environment. The high number of external risks and

internal weaknesses susceptible of becoming critical factors suggests the importance of adaptive

capacities on the part of all stakeholders. For instance, contracts for a specific situation must be

adapted through trial and error. Marketing strategies must evolve. Supply systems must be constantly

improved. Adaptation is only possible if the stakeholders develop and share the following capacities:

Monitoring capacity: the performance of the arrangements must be regularly monitored

against indicators.

Analysis capacity: the stakeholders must be able to analyse and understand the information

Arenas for dialogue and conflict resolution: stakeholders must be able to dialogue on the

performance of the arrangement and discuss ways forward.


31

At design level, adaptation should relate to clear assumptions about the conditions of development of

the scheme. There should be monitoring of the state of these assumptions and risk management

provisions for predictable risks.

All proposals lack a full logical framework or similar reference system including clearly stated

assumptions. The review of cases allows however to observe some recurrent features (see table 12 in

annex):

As mentioned already, assumptions are not explicit behind the supply projections, which are

more than often way too optimistic. The lack of such assumptions explains why alternative

scenarios are not considered, and adaptive strategies not explicit.

Assumptions behind market conditions are generally clearly stated with range of price used for

financial projections. However, provisions for market and price fluctuations beyond

projections are not stated so that there is generally no explicit risk management strategy.

Adaptive strategies used by companies to face supply or market failure are often relevant

(diversification of markets and product, combination of supply sources) but often fall beyond

the scope of the project and are poorly discussed and reported on.

A striking characteristic of several schemes is that, in response to the unforeseen difficulties

encountered in organizing the supply, they either backed off completely from the scheme

(QFP and Vasso reorganized their supply sources, Tongu was sold, Gouda Gold withdrew

support to the scheme), or fell back on their own production. The most committed sponsors

procure diversification or/and added value. FARMCOOP seems to have fallen back on

something that is not quite convincing in terms of social outcomes (farmer empowerment).

There is an obvious need of more explicit assumptions and risk management strategies at the design

stage.

3.5 Observations on partnership design

Each partnership supposes a distribution of roles between the participating stakeholders. We can

distinguish primary stakeholders (actors taking direct part in the linkage) from secondary stakeholders

(taking indirect part).

Primary stakeholders constitute the nucleus of any scheme:

The sponsor company acts as marketing facilitator ensuring the linkages of producers to the

market targeted. It will be either a private company (trading, processor, exporter or a

combination) or a cooperative assuming this role. We do not consider here State-sponsored

marketing structures.

The producers, either on an individual or more or less organized form, are assuming the role

of product supplier to the market, through the market facilitator (agribusiness or cooperative).

Secondary stakeholders provide a series of services necessary for the good performance of the linkage:

Input providers ensure producers access to the inputs necessary to production

Financial services providers ensure access to financial support (credit, guarantees etc) to both

producers and marketing facilitator.

Technical assistance and Business Development Support providers ensure advisory and

training services to both primary actors.


32

In some of the projects one or more of the aforementioned services are provided by the marketing

facilitator as embedded services. They are less visible or tangible but offer some answer in situations

where the limitations of other mechanisms becomes clear:

Failing public services generally, and particularly in rural areas;

Areas with thin markets and low economic activity limiting incentives for fee-for-services;

Information within social networks getting stale and not re-invigorating;

Tightly controlled media reducing competition for innovation.

In case of SME-farmer collaboration involving high quality products-markets requires tailor made

BDS services taking into account production/market requirements, embedded provision may constitute

an advantage. Whether embedded services are preferable to external services depends on the specific

characteristics of the chain and the capacity and expertise of stakeholders.

Cost effectiveness and sustainability are central issues; in some cases embedded services are far more

cost efficient, reducing transaction and other costs, while in others private companies would be better

off passing this role to some other actor.

Another kind of secondary stakeholders are those who provide the elements for the policy and

regulation environment in which the market linkage is operating:

Internal governance actors are those who ensure the representation of primary actors at

superior level (for advocacy and policy purposes) and also enforcement of basic codes of

conduct within their sector (traders associations, marketing boards, higher level cooperative

and farmers organization levels) and product specific multi stakeholder associations (?)

External governance actors are those who ensure the development and enforcement of the

regulatory framework for production, service delivery, and marketing, from local enforcers

(inspectors etc) to policy-making bodies.

The partnership design proposed in each project has been reviewed and mapped. Basic features have

been resumed in table 13 in annex.

Table 10. Main characteristics of partnership design

Commodity Centralized

purchasing

system

Centralized

contract

farming

Multipartite

contract

farming

Multipartite

chain

coordination

Embedded

services

Coordinated

services

Coffee (cooperatives) 3 3

Coffee (companies) 3

Honey 1 2 2 1

Cotton 2 2

Sesame 1 1

Peanuts 1 1 2

Paprika 1 1

Safflower 1 1 1

Artemisia 1 1

Cardamom 1 1

Pineapple 1 1

Ginger 1 1

Flowers 1 1

Dairy 1 1

Banana 1 1 1

TOTAL 4 10 4 5 11 10


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The schemes can be classified in 4 different types:

Centralized purchasing systems where trading company organizes supply without specific

contract from individual farmers with only a limited role for farmer organizations and other

stakeholders (case of CCPK and Lima in Tanzania, MESH in Zambia)

Centralized contract farming systems are the most common (10 cases): the sponsor

company organizes supply from individual or organized farmers through supply contracts.

Multipartite contract farming are a variation where supply involves more stakeholders, like

producers organizations ensuring initial quality control and bulking (case of Bezamar in

Ethiopia, Biosustain in Tanzania).

Multipartite chain coordination where the chain actors organize supply with different stages

without a central role for the trading company in organizing supply (the coffee cooperatives,

Liberation Nuts enter in this category).

As for the organization of services, fully embedded services are the most common organization for

centralized contract farming schemes. Multipartite partnerships logically involve more service

providers. Centralized purchasing systems not necessarily provide support services to producers

(CCPK and Lima do provide only extremely limited services).

Considering that embedded services have been observed to put a high strain on companies’

management capacity and supply chain financial viability, there is an issue with the fact that the

organization of such services is very seldom questioned from proposals. Stronger justification and

more specific costing should be the norm.

3.6 Observations on services delivery design

Support to agricultural development has mainly relied on technical support and extension, meaning the

development and transfer of technologies as well as provision of inputs, as well as credit supply for

production.

The emphasis on business approaches and market access has changed drastically the central role of

technology as it seen also from a market driven point of view, especially in terms of responding to the

market requirements and standards.

Business Development Services (BDS) are now at least as important, if not more, than agricultural

extension and may target not only the agribusiness itself but also farmers and other primary

stakeholders. They may include some aspects such as:

Product development services (product design)

Market access services

Quality management services (including internal control systems for organic certification)

Input supply services

Management advice services

Financial services

A third kind of support services involves all aspects of organizational support in terms of

strengthening the capacity of farmer organizations to deliver their intended services to their members

efficiently, and to develop negotiation and advocacy capacities.


34

In order to ensure effective service provision, the provider needs to have a real capacity and expertise.

If not, something that happens in many weak value chains, investing in and building capacity across

the chain in order to offer better and more reliable services becomes a central need.

There is generally a problem of financial dependency of BDS on donors, weak performance

orientation, and weak financial sustainability.

The situation regarding support services has been reviewed for each case. The main observations are

resumed in table 14 in annex.

The following table resumes the distribution of the main services.

Table 11. Main characteristics of support services provision

Commodity Training

and

extension

Production

credit and

prefinance

Input

provision

BDS support

to farmers

BDS support

to company

Organization

al support

Coffee

(cooperatives)

3 3 3 3 3

Coffee (companies)

Honey 3 1 2 1 3

Cotton 2 1 1 2

Sesame 1 1 1 1

Peanuts 2 1 1 1

Paprika 1 1 1 1

Safflower 1 1 1

Artemisia 1 1

Cardamom 1 1

Pineapple 1

Ginger 1

Flowers 1

Dairy 1

Banana 1 1

TOTAL 20 6 12 6 1 12

As shown in the synthetic table, most schemes provide some level of technical training and extension

to producers. The scope and importance of these services vary widely from one project to the other.

Many projects also include some provision of credit or prefinance to producers, or direct provision of

inputs (generally pre financed also and deducted from purchase price).

BDS services to farmers’ organizations are mentioned only in six cases. While some initial BDS

support has been provided with Cordaid financing to some partners for business plan preparation,

longer term BDS support is only found as a recent innovation with the ABF contract to support the

honey chain in Zambia.

There is some level of organizational support to farmers groups in 12 cases. In most cases it is rather

limited to the immediate needs of the supply chain.

Technical assistance needs of the company are not systematically assessed.

The proposals do not include any specific assessment of support needs of the farmers. As mentioned

already, support services are often cursorily described. Since the support services are generally

supported through grants, their bearing on the cost effectiveness of the supply chain are overlooked in


35

the financial risk analysis. Also the analysis of management capacity of the sponsor company, in the

case of embedded services, does not consider this aspect.

This reflects the general lack of attention given to the challenges of the supply and quality control

systems in proposal screening.

3.7 Review of supply contract design

We have earlier reviewed preconditions of mutual, objective commitment between companies and

small farmers. In order to achieve the scheme objectives, this commitment has to be regulated and

strengthened by building it into the system. A scheme involving a firm, numbers of farmers and other

stakeholders around common objectives will not become viable if the stakeholders do not consolidate

a sustainable commitment. This, like in any other kind of collaborative mechanism, requires

stakeholders to “play by the rules of the game”. It is obviously a gradual process.

Commitments are sustained by social capital (the collective support and trust allowing mutual

monitoring and enforcement) and institutional capital (the set of collectively accepted rules and

regulation of behaviour). Social capital and institutional capital do not grow independently in such

schemes. Trust is built through collective commitment to a set of rules. This is true between farmers

themselves and between them and the private firm and other stakeholders.

Characteristics of robust and sustainable collective commitment including rule making, may be

characterized by a definite set of six fundamental parameters:

1. A clear definition and delimitation of scheme membership: the stakeholders with rights to

participate in the scheme are clearly defined and recognize each other. Farmers know clearly what

distinguish a member from a non-member. This enables them to monitor each other in the common

interest, to build social capital between themselves and to understand and defend the comparative

advantages of participation. This means that a company setting up such a scheme must agree specific

criteria for farmer participation.

2. Clearly defined mutually understood and transparent rights, roles and responsibilities: the

participants must understand and internalise their rights and responsibilities in the partnership. These

rights, roles and responsibilities may be specified in a more or less formal document (a contract or/and

internal rules). If benefits are accessible to everybody without respecting this set of rules the viability

of the scheme is unlikely.

3. A favourable cost-benefit ratio of participating in the scheme builds an economic rationale for

commitment: the cost of abiding by the rules of the scheme is perceivably compensated by benefits

derived from it. Comparative advantages against spot market or side selling or other alternatives must

be clearly perceived by farmers. The advantages of working with smallholders through the scheme

must be equally obvious for the agribusiness. For service providers also there must be some clear

benefit out of participation. In particular, transaction costs of participation must not be perceived as

too elevated.

4. Possibility of monitoring the application of rules and the state and quality of the crop: both

partners, farmers and agribusiness, must be able to easily monitor indicators of compliance and agree

on the indicators of quantity and quality of the crop output. This in its turn must be linked to mutually

agreed pricing mechanisms.

5. Accountability of all partners: stakeholders who violate rules and contract (side selling, cheating

on quality and quantity and on payments) are likely to be detected and submitted to graduated

sanctions enforced in a transparent way, depending on the seriousness and context of the offence.


36

6. Effective negotiation and conflict-resolution mechanisms: there must be efficient and well

known channels for negotiation on price and contract conditions, as well as for complaints, and low-

cost, local arenas to resolve conflict between farmers, agribusiness and other stakeholders.

We have reviewed in detail such aspects for each field case; for desk cases information was sketchier

but a general characterization could be made for most. Table 15 in annex groups the main observations

in comparative form and is resumed hereby.

1. Definition of scheme membership: this was adequate in all cases were farmers were members of

already existing organizations. Membership criteria were internalised. Organic certification also set up

a selective criterion. It was more problematic when ad-hoc groups were set up without adequate social

cohesion criteria (case of Cheetah). In the coffee purchasing schemes (CCPK and Lima) all farmers

willing to sell coffee cherry, whatever quantity or quality, were accepted.

2. Clearly defined rights, roles and responsibilities: for all schemes including established

organizations and a supply contract, whether individual or institutional a basic set of rules was

established for both parts. In general it specified, for producers, the requirements of supply and for the

company, the pricing and payment obligations as well as service provision. In quite a few cases these

contracts were complex and not fully understood by the average farmer.

3. A favourable cost-benefit ratio: while all proposals review in more or less details the cost

effectiveness from the business point of view, cost effectiveness for farmers is more an assumption. It

is rarely sustained by any consistent crop budget and baseline (Cheetah is an outstanding exception).

Similarly the quality-linked incentives, which may increase the willingness of farmers to play by the

rules, are present in many schemes but poorly explained and sustained. These fundamental aspects are

equally given too cursorily attention in Cordaid appraisal most of the time, although recent proposals

are much improved (Golden Fruit proposal in Tanzania has a farmer margin analysis).

4. Possibility of monitoring: most schemes include quality control at harvest time and some crop

supervision in the field, whether embedded or delegated to farmers organizations. Some have a

traceability system (BEEPZ is exemplary on this aspect with its monitoring of artemisinin contents).

When quality control criteria are well known and monitored early in the process, incentives work

better. If traceability is low (like in the case of cherry coffee purchasing schemes), the incentives will

likely not work.

5. Accountability of all partners: this is one of the weakest aspects. Farmers may be held

accountable by refusing below standards products. Internal control systems work better than externally

enforced ones due to the weak legal environment. Side selling is difficult to control and punish

especially if participation criteria are ill defined (see case of Cheetah). Contract enforcement at legal

level is virtually impossible for companies, out of the question for farmers (in a few cases local

authorities are used as overseers). The cases where companies have walked away (QFP) hurting

farmers show deficiency in accountability. Cordaid itself has also suffered that with several defaulting

partners early in the process (Tongu, Vasso).

6. Effective negotiation and conflict-resolution mechanisms: this is another weak aspect. In the

majority of cases of centralized contract farming, there is one-sided pricing and farmers are only

informed. Similarly conflict resolution opportunities are limited. The situation is much more balanced

when established farmer organizations are the partners. Bezamar offers a good practice reference

because pricing is discussed with partners based on transparent calculation of margins.

The importance of these aspects cannot be understated. Marketing schemes fail when farmers drop

out, sell to other buyers, and when the firm reneges on its obligations. The measures for building

mutual trust around the regulation system constitute thus a critical factor. As we will see further, it

explains partly at least, the most serious issues of failures or serious difficulties.


37

3.8 Cross cutting issues in project design

Three crosscutting issues stated as central by Cordaid are very relevant for the projects considered:

gender, HIV-AIDS (particularly for eastern and Southern Africa), and environment.

We have reviewed how these issues are integrated in proposals. Cordaid takes it systematically into

account in its assessment.

Table 18 in annex shows observations on these issues from field case studies.

Table 12. Cross-cutting issues in project design

Commodity Specific gender

aspects and actions

Specific HIV-

AIDS aspects and

actions

Specific environment

aspects and actions

Specific 4 3 2

General reference or implicit 8 1 8

No reference 0 8 2

As seen from the table the profile of these three issues is actually quite low in the majority of projects.

For gender, the only fully specific actions are those included in the Café Femenino project, a

specific initiative launched by OPTCO and its partners in order to develop a specific brand of

coffee for women producers. Otherwise some other projects make reference to intended

coverage in terms of numbers of participating women, although this is seldom reported later.

For HIV-AIDS, some projects like Cheetah include specific training and awareness activities

to their staff and/or farmers, generally implemented by external service providers. Otherwise

there is little consideration.

Environment is more satisfactorily approached, especially because many schemes include

transition to organic production and certification. The honey projects also have forest

management implication more or less explicit. A few projects neglect to consider explicitly

potential negative impact (coffee pulperies).

There is obvious room for improving the mechanism to ensure that these cross-cutting issues are really

addressed beyond lip service.

3.9 Review of Cordaid risk assessment

Through the analysis of project design and preconditions for feasibility we have already discussed

some aspects of Cordaid risk assessment and proposal screening. We will further review it here and

point to some relevant issues that may lead to improvement of the existing framework.

Loans and bank guarantees are approved depending on a risk assessment. This is done through a fairly

well developed and standard framework. It includes a market analysis, institutional analysis,

management analysis, and financial analysis including the review of business plans. The framework

ends with a risk analysis, which includes the following assessments:

Land risk (socio political factors)

Currency risk

Market risk

Management risk

Financial risk


38

We have reviewed each risk analysis and also compared it to our own framework, which, as has been

mentioned, includes some aspects not systematically included in Cordaid´s framework. Table 16 in

annex includes the most significant observations from each case.

The following general observations can be made:

On the whole risk assessment is thorough and has improved steadily with time.

Risk analysis relied too often only on the proponent sources, because Cordaid lacks the means

for third party analysis, with the exception of company backgrounds and financial assets. To

some point there is even some cut and paste from proposals in critical aspects, which should

not be allowed.

Most common weaknesses of the assessment are linked to underestimated supply risk and

poorly challenged assumptions by the company about the possibility of developing a new

scheme and increasing volumes to break even point.

As mentioned at length internal risks of the supply chain organization are not adequately

assessed. This is linked to the fact that everything is bundled in the financial risk and if the

supply chain is not well defined in the business plan, hidden costs are seldom challenged.

Social/institutional risks are not included.

Market risks are assessed too often based on very broad characterization of market conditions,

not on specific conditions and linkages of the firm. Price risk is underestimated in some cases

like specialty coffee.

Managerial risks are difficult to assess and more often than other risks, off the mark. When

managerial risks are noted no solution is provided (BDS support to the company).

As for grants, the management system of Cordaid supposes a different system of screening depending

on different officers. Whether there is a combination of loans and grants, a procedure is used to

delegate monitoring either to the grant or loan officer.

Grant appraisal is based on a simpler model (considerations) including a review of the partner

background, its focus on capacity building, relationship to Cordaid core principles, and quality of the

proposal. Thoroughness of the analysis is much more dependent on the officer critical sense.

A major issue arises when interrelated grants and loans support a project, as is the most common case

here. The interrelations between grant and loan are not correctly assessed: embedded services have a

bearing on the cost effectiveness of the supply chain and management risk, and grant outcomes may

mitigate some of the risks. The lack of integrated assessment makes it difficult to discuss correctly the

intended synergies. The feasibility of a scheme should be assessed in an integrated way, even if

different financial instruments are to be combined.

3.10 Review of Cordaid support design

The financial support by Cordaid in the case of the Small Producers Programme with SMEs tends to

combine different instruments:

Loans or bank guarantees are used mainly to support working capital for purchase of

commodity, less often for some investments and in some limited cases, for service provision.

Grants cover needs mainly for provision of services at farmer level, and sometimes some

investments that the company cannot shoulder though loans. They normally include some

counterpart from the company (a rule of thumb has been often applied where the company

supports 50% of service provision costs).

Cordaid has purchased equity only in the case of Liberation Nuts.


39

The combination of loan/guarantee and grant is applied in 14 of the 23 cases considered. The others

have only loans and bank guarantees.

Table 17 resumes the main observations from case reports on the Cordaid support design. Some

important general observations can be drawn from this exhaustive review:

The combination of loan and grant is well adapted to the needs of the marketing schemes and

is an innovative practice by Cordaid. On the whole Cordaid is filling a void by supporting

innovative and start-up schemes, mostly considered “non-bankable” by the formal financial

system.

Reflecting the lack of questioning the assumptions and sometimes-unwarranted ambitions of

many proposals, in too many cases Cordaid concedes amounts solicited without a gradual

approach. While this is completely justified for investments, in the case of working capital,

assumptions are often that “one shot” loans will solve the cash flow issue. So that working

capital loans are mostly granted at one go and for a short-term period (one year or less).

Similarly with grants there is no graduality and amounts are transferred in one go. This does

not allow Cordaid any leverage in case of poor reporting and other common issues (see later).

Some of the grants can be quite large for a seemingly small number of beneficiaries being

reached, while for others it is the reverse. No input/outreach ratio seems to be considered,

reflecting also the lack of inquisitive review of many service provision proposals.

Some issues have been identified with securities. Sales and supply contracts are often the only

security involved when the company lacks assets. Obviously when supply projections are

overblown there is a vicious circle at work with this kind of security.

3.11 General conclusions on quality of project design and Cordaid support

The evaluation has reviewed one by one, the criteria defined for quality of project design.

On the whole, the evaluation confirms that Cordaid has indeed developed an innovative

approach to support key chain actors and supporting structures with a mix of financial

instruments such as grants, seed capital for investments, loans and guarantees. In order to

ensure verifiable effects on the position of small producers the screening system used by Cordaid

still presents important loopholes and weaknesses.

The fact that the conclusions focus on issues does not signify that the general quality of proposals is

poor. The issues identified should rather be seen as the gaps that need to be filled, in order to move

from an innovative and promising, but risky project portfolio, to a more solid and consistent one.

The following concluding remarks can be done about this aspect of the evaluation, which lead

logically to the recommendations spelled out in the final chapter:

1. Project selection is consistent with policy but too haphazard: Cordaid has supported a variety of

initiatives by SMEs and cooperatives, covering 13 different value chains in three continents, with good

coherence as to the overall objectives of Programme 9. The lack of systematic framework for proposal

selection does not allow to determine whether Cordaid has selected the most promising proposals in

the corresponding value chains and countries, or on the contrary, has bypassed other initiatives that

could have had a higher quality.


40

2. Composition of the portfolio is diverse and innovative: the portfolio of projects is diverse in its

stakeholders, and targeted commodities and business models as well as geographical coverage. This is

obviously an advantage from the point of view of improving the strategy through trial and error.

3. Presentation and internal logic of proposals lacks coherence: intervention logic of most projects

is not organized along a common framework such as a simple logframe with vertical and horizontal

logic; intermediate outputs (training etc) are generally only vaguely indicated; outcomes in terms of

income for farmers are not generally very precisely set out; indicators are generally incomplete, not

always precisely quantified or verifiable; assumptions are not often spelled out clearly. There is also

often confusion between inputs, outputs and outcomes. This makes monitoring of performance

difficult, and comparison of projects even more so. The contribution of each project to Cordaid policy

cannot either be consolidated.

4. Feasibility aspects of proposals present some important gaps: the analysis of 9 preconditions for

feasibility show that, despite being mostly interesting and worthy proposals, there was a series of gaps

in feasibility assessment, some proving critical. Initial market feasibility appears rather good in most

cases, except for a few proposals presented by start-ups with no previous experience or linkages.

Agronomic and livelihood feasibility on the other hand, is rather too often based on very superficial

assessment or optimistic assumptions about farmer response. Technical assistance and training

proposals were often poorly substantiated. Management capacity was also an issue because Cordaid

supported many new initiatives and start-ups; there was in general a lack of response to the needs for

BDS support to the companies, beyond funding initial study or business proposal in some cases. As for

the management capacity of farmers and their organizations, it was too often treated as a black box in

most proposals, and many risky approaches such as creating ad-hoc groups were proposed. The most

critical feasibility aspect of all, relates to the financial viability of the supply chain. Generally in

combination with optimistic assumptions as to agronomic feasibility, there is a frequent lack of

precision about how the supply chain will be organized and what are the inherent costs. Logically,

such proposals also understated risks in the supply chain, not only as crop failure, but also farmer

drop-off or side-selling. The objective conditions for commitment between SMEs and farmers were in

general good save for a few exceptions, because the majority of schemes depend on small producers

for all or most of their supply. There was a diversity of issues linked to the business and institutional

environment, which were poorly addressed by centralized and poorly connected schemes. Finally, the

lack of realistic assumptions and alternative scenarios in many proposals, is reflected in poor

definition of risk mitigating strategies.

5. Partnership design is generally well defined but there is a prevalence of centralized contract

farming schemes, which may present difficulties for evolution towards more open chain partnerships.

Roles of stakeholders are not always clearly defined. Centralized models are those where the SME

assumes coordination with most services embedded, which constitutes a strain on financial viability

and management capacity.

6. Service delivery proposals are often too vague and do not respond to some important needs:

there is an emphasis on technical training and extension, and too little BDS support to farmer

organizations; as to the needs of strengthening capacities of SMEs, this has only very recently started

to be addressed. In most proposals, the needs assessment is not systematic, and contents and expected

outcomes of support services poorly defined.

7. There is not enough attention to the importance of supply coordination arrangements to build

sustainable collective commitments: only 11 of 23 projects used formal supply contracts, and fewer

used institutional contracts empowering farmer organizations. The aspects of built-in incentives,

transparent pricing and negotiation arenas, and mutual accountability, are often weak and may

undermine the proposed schemes by keeping farmers away or allowing companies to back off too

easily in case of difficulties.


41

8. Cross-cutting issues are generally poorly addressed. Despite their importance and relevance,

gender, HIV-AIDS and even environment are too superficially addressed in most proposals, despite

their importance within Cordaid policy framework. Too much is implicit or taken for granted, making

assessment very difficult.

The assessment and quality of Cordaid support to the approved proposals are globally quite robust

and innovative. There is an improving assessment framework, and creative combination of financial

instruments.

The following issues will need attention:

1. Risk assessment is of good quality and relatively thorough, but there are some important gaps

and some aspects to be improved: as mentioned in feasibility, the aspects of financial risk linked to

the supply chain are often overlooked or cursorily analysed. Assumptions in the proposals in the

aspects of agronomic, livelihood and supply chain feasibility, and the conditions to build sustainable

commitments, are too often taken for granted. While Cordaid is bent on approaching proposals from a

value chain approach, it has not yet adapted its screening and monitoring satisfactorily.

2. Cordaid is not in a position to do internally, a cross checking of assumptions behind

proposals. This is a serious issue linked to budgetary and human resources bottlenecks. Cordaid

officers travel often to meet potential partners, but do not have the time for thorough field visit and

cross checking of data. Nor are all the officers seasoned matter specialists. In some cases local partners

have done that; however if consultants are hired to prepare a business plan they may have also an

interest in being optimistic (nobody is keen to come to the conclusion that a business is not feasible).

The role given to ABF in the Zambia honey chain may give a clue as to how to solve this issue but is

not applicable to all cases.

2. The parallel mechanisms for assessing grants and loans is weakening coherence of Cordaid

support strategy: while financial instruments are highly interrelated in many proposals, contractual

procedures lead to separate assessments with different criteria and levels of detail, although of course

there is a lot of consultation within Cordaid. This weakens the overall quality of assessment and

consequently also monitoring even if one officer is put in charge.

3. The combination of grants and loans responds very well to the needs of partners but the

contracts favour short term and lack gradual approaches. Loans for working capital are short term

reflecting unrealistic proposals based on the assumption that finance will solve all bottlenecks in the

supply chain. Money is transferred at one go, instead of more careful gradual approach. This is not

only too risky, but also reduces Cordaid leverage in case of poor reporting and other contractual

failures. This remarks applies also to grants.


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4 EVALUATION: EFFICIENCY

In the context of this evaluation, we have defined efficiency as the extent to which Cordaid inputs to

partner SMEs (in form of loan, equity, grant, advisory services and information) are converted in

outputs (the delivery mechanisms and instruments within the partnership strategy supported by the

pilot investment), and that at reasonable cost

4.1 Availability of inputs and quality of monitoring and reporting

Availability of inputs from Cordaid has been very good for all cases. Funds were transferred according

to contracts in all cases. Delays were linked to negotiations of bank guarantees with local banks (very

difficult in the case of Ethiopia). Details of funds are resumed in table 19 in annex.

Internal monitoring of partners has been assessed from three elements: the existence of baseline

studies and data, the management of proper records, and the quality and frequency of reporting. Main

observations are recorded in table 20 in annex.

Although an important methodological decision by Cordaid was to implement systematically, in all

contract farming schemes, baseline studies of socio economic, financial and institutional indicators,

this has been seldom implemented. Very few projects count with an adequate baseline. Cheetah

Malawi developed one during the implementation phase. Baselines were also done in the cases of

Vasso (Tanzania) and for ITFC (Ghana) and AMA/Highlow (Uganda), not included in this evaluation.

Most SMEs maintain at least a basic record of volumes purchased from farmers. Some have more

complete records including farmer registers, individual sales, and some socio economic data. BEEPZ

has very complete records on individual production with artemisinin content, which is used to monitor

quality and implement price incentives. Cheetah Malawi and SAITE have more or less complete

computerized data.

Unfortunately, very little of whatever is recorded ends in reports. Whatever data are generally

consolidated, for production as well as for financial results. While it can be expected that enterprises

will not produce lengthy narrative reports, many of the reports that were made available for this

evaluation are incomplete, superficial and do not even cover the few indicators or targets included in

the initial proposal.

Table 20 shows that the evaluation did not find one set of reports covering the whole implementation

period according to contractual compromise of producing six-monthly financial and narrative reports.

This situation is due to several factors:

The lack of a clear framework for monitoring the progress of projects in most proposals and

previous specification of indicators;

The lack of leverage and (possibly) commitment on the part of Cordaid, to exact at least

minimum proper reporting as stated in the contracts. The transfer of funds in their total at the

onset of projects, differs from the practice of most financing agencies who manage successive

instalments against reporting. The project reports are full of messages reminding projects of this

obligation, but in many cases, obviously to little avail.

The poor organization and management of Cordaid filing system. Many reports are filed as

attachment of e-mails. Paper files are often not available. Files are not always properly updated.

Obviously these are serious issues impairing the capacity of Cordaid to monitor properly the progress

and performance of projects. Given the workload and responsibilities of officers, and financial and

time constraints for in-country monitoring, the internal monitoring by projects is an essential source of


43

information. Poor enforcement of reporting obligations may affect the overall quality of the portfolio

and its management by Cordaid.

4.2 Project outreach compared to plan

The delivery of outputs was aimed at a more or less predefined number of beneficiaries. The outreach

in terms of farmers benefited with the different services provided through the projects, is generally

available in the reports. For the field case studies detailed records could be reviewed when available,

while for desk case review last available data from reports was the only source.

Table 21 in annex compares actual outreach of services compared to intended. Data were not available

for 7 cases. Percentage of planned outreach is indicated in the following table.

Table 13. Percentage of planned outreach achieved

Case Partner name &

country

% of planned

outreach

achieved

Case Partner name &

country

% of planned

outreach achieved

F1 Cheetah Malawi 133% F10 SAITE Bolivia 130%

F2 CCPK Tanzania 64% * F11 COSURCA Colombia 97%

F3 Lima Tanzania 89% * F12 PROASSA Peru 107%

F4 Honey Zambia 19% D1 Tongu Gold Farms Gh 25%

F5 Biosustain Tanzania 146% D3 Vasso Tanzania 5 %

F6 QFP Tanzania 35% D4 TANPRO Tanzania 132%

F7 Bezamar Ethiopia 58% D5 Gouda Gold Limited 6%

F8 BEEPZ Ken. Tanz. 90% D9 FARMCOOP Phil. 22% Only farmers registered as selling at least 100 kg cherries

As can be seen from the table, out of 16 projects 5 have overreached their targets in terms of outreach,

although this in itself is not a measure of success, since one has failed completely (TANPRO) and

other are experienced serious difficulties. CCPK and Lima have overreached formally but we have

retained only 40% of farmers who, according to register, sold at least 100 kg of coffee cherries in the

last season, the rest having achieved no significant income from the projects.

In general, outreach was slower to achieve than planned. Some successful projects are still well under

planned outreach due to the gradual process of establishing the supply system.

In all, the total verifiable outreach is 63,605 farmers, or 84% of the 75,352 initially planned for the

same projects. If we take off the list the projects that failed in their outcomes, the outreach of the

remaining active 12 projects is 62,222 farmers, or 85% of the outreach planned by the corresponding

projects. If we assume that other 3 currently active projects (UCIL, Apinec, Zameen) for which we

lack reports have a similar degree of outreach, then the total number of households benefited would be

around 71,300 households.

This latest figure could be used as an estimate of the real outreach of 15 projects supported by Cordaid

and which currently can be considered as active and having at least some significant outcomes in

terms of farmers’ incomes and livelihoods.


44

This number can be increased to if we chose to include all of the 117,054 farmers reported as

accessing markets though CCPK and Lima projects but that would include farmers with very

insignificant participation.

Another measure of efficiency is comparing planned investment per targeted farmer, to actual

investment. We have made an approximate calculation based on available data.

The investment is calculated in average €/per farmer per year (total investment being the grants for

services plus the average amount of loan or guarantee available any year, thus avoiding to account

several times for renewed or rescheduled loans).

The results, as shown in the following table, although they can be taken only as indicative, show

interesting information:

For most contract farming schemes, planned investment is for most cases, between 100 and

200 € per farmer per year, with the exception of obviously extremely costly (and hitherto

failed) schemes such as Tongu farms or Vasso. This for schemes including delivery of

embedded services. Actual investment was generally higher due to outreach lower than

planned.

Schemes without services included are either very cheap (cases of CCPK and Lima) or

investment does not reflect additional support not included in the project (cases of PROASSA

and COSURCA) and the calculation cannot be compared with other cases.

Success of failure of schemes is obviously not directly linked with the amount of money

invested per farmer, although initially very expensive schemes should have raised questions,

as well as very low levels of investment such as the CCPK and Lima cases might have raised

other questions about potential development impact.

Table 14. Approximate investment per farmer per year

Case Partner name

& country

Planned

investment

€/farmer

Actual

€/farmer

Case Partner name

& country

Planned

investment

€/farmer

Actual

€/farmer

F1 Cheetah Malawi 157 189 F10 SAITE Bolivia 375 1500

F2 CCPK Tanzania 33 55* F11 COSURCA

Colombia 166 172

F3 Lima Tanzania 9 16* F12 PROASSA Peru 300 474

F4 Honey Zambia 75 402 D1 Tongu Gold Farms

Gh 8600 Failed

F5 Biosustain

Tanzania 193 229 D3 Vasso Tanzania

922 4214

F6 QFP Tanzania 44 169 D4 TANPRO Tanz 185 N.a.

F7 Bezamar

Ethiopia 74 167 D5 Gouda Gold

Limited 599 9985

F8 BEEPZ Ken.

Tanz. 125 139 D7 Apinec Ethiopia

173 N.a.

F9 UCIL Uganda 100 N.a. D8 Zameen India 81 N.a.

F8 BEEPZ Ken.

Tanz. 125 139 D9 FARMCOOP

Phil. 684 3085

Only farmers registered as selling at least 100 kg cherries


45

4.3 Achievement of planned outputs

Assessing the achievement of outputs requires a careful comparison of planned outputs versus actual

achievements. The poor quality of internal monitoring and reporting in many projects, makes this

exercise difficult and imprecise. We have managed to improve by cross checking during field cases

visits, but this was not possible for desk cases review. The following discussion is thus limited to cases

where sufficient information was available.

Table 22 in annex includes the main observations. Using a grading system may summarize the level of

efficiency in delivering outputs:

A All outputs likely to be delivered as planned and even overreaching in some aspects

B Most outputs are delivered as planned, some problems detected

C Outputs seriously under what was planned

D Project failed altogether to deliver outputs

The following table resumes the grading.

Table 15. Grading of efficiency in delivering outputs

Case Partner name Level of

efficiency in

outputs


efficiency in

outputs

F1 Cheetah Malawi B D1 Tongu Gold D

F2 CCPK A D2 Cotton Tree C

F3 Lima A D3 Vasso C

F4 Honey Zambia C D4 TANPRO C

F5 Biosustain B D5 Gouda Gold D

F6 QFP D D6 Liberation- NASFAM C

F7 Bezamar B D7 Apinec C

F8 BEEPZ B D8 Zameen B

F9 UCIL B D9 FARMCOOP C

F10 SAITE A D10 Agrica BV C

F11 COSURCA A D11 CCCH C

F12 PROASSA A

The main observations that can be drawn for the overview are the following:

All planned services have been delivered at the onset except when early failure of the scheme

impeded it (case of Tongu in Ghana); although some projects failed after one season (QFP,

Gouda Gold).


46

For most projects unexpected teething problems delayed the delivery of outputs. They can be

due to external factors such as financial problems (bank guarantee delayed in Ethiopia) and

social disruptions (post election violence in Kenya annihilated many efforts made by BEEPZ).

More often delayed or reduced efficiency is due to internal problems: the most common is the

slower than expected establishment of services and growth of outreach. This reflects the issue

of overoptimistic projections mentioned in quality of design.

In some cases budget projections were incorrect or outdated, and scale of investments had to

be reduced (honey bulking centres for NWBKA).

While most schemes have delivered outputs at least partially, some have completely failed

early (Tongu, Gouda Gold) or even after a more promising start (QFP, TANPRO, Vasso) and

thus produced disappointing results which, with lack of conditions for long term commitment

of partners to outgrowers schemes, were set to produce the collapse of the project.

4.4 General conclusions on project efficiency

Efficiency as seen from Cordaid policy framework supposes that support to specific projects, has

allowed to improve the delivery of technical, financial, BDS, organizational and marketing services to

smallholder farmers through participation in contract farming and chain partnerships with SMEs and

service providers.

The efficiency of the reviewed projects has been good on the whole, at least considering outreach

achieved and the delivery of the most critical services financed by Cordaid.

Of the 23 projects reviewed, all but a few that faced early collapse have at least, started delivering

services and setting up their schemes, achieving on the whole a good outreach of 85% in average,

compared to plan. If we consider the total investment made by Cordaid, an approximate average of

127 € has been invested per farming household per year.

However some important issues need to be addresses in priority:

1. Quality and frequency of reporting is consistently under standards, with few exceptions. This

is due to the combination of a lack of a common framework for planning and monitoring the projects,

with previously agreed indicators, lack of experience and/or disposition of some partners, and low

leverage and authority from Cordaid, to enforce reporting obligations.

2. Although many companies maintain basic records of farmers registered and sales, reporting

on outreach and achievement of planned outputs when available is often superficial and lacking

substance so that it is difficult for Cordaid to monitor from afar, the actual degree of advancement of

projects.

3. The use of only financial indicators may obscure the real degree of advancement of projects

towards development outcomes. External audits do not substitute coherent financial and narrative

reports. Monitoring centred on repayment of loans without cross checking physical performance, as

has happened often because some companies only report what is needed for audits, may lead to

overlook important issues. For instance, projects may be financially successful and poor in

effectiveness (case of CCPK and Lima) while other get into financial quagmires while achieving

promising outcomes (case of Cheetah). Cordaid has reduced means to monitor correctly such issues by

itself.

The following figure resumes how projects may be assessed according to the two main parameters of

efficiency: achievement of outputs and outreach compared to plan.


47

L

evel

of

ou

trea

ch c

om

pa

red

to

pla

n

Achievement of outputs compared to plan High Low

Hig

h

Low

Fig.3 Synthesis diagram of project efficiency

CHEETAH

CCPK

Lima

QFP

Biosustain

UCIL

PROASSA

COSURCA

SAITE

BEEPZ

Bezamar

Tongu Gouda

Gold

FARMCOOP

Zameen

Apinec

TANPRO VASSO

MESH


48

5 EVALUATION: EFFECTIVENESS

We have used as definition of effectiveness, as the extent to which the project outputs have allowed

achieving the planned outcomes.

Outcomes have been defined mainly in terms of two dimensions:

Farmers incomes and cost-effectiveness derived from the projects

Company financial results compared to business plans and break-even levels, including the

status of loans pending with Cordaid.

5.1 Farmers incomes and cost-effectiveness

All projects included in their expected outcomes, increases in participating farmers incomes. This

constituted the main rationale behind Cordaid support.

It is therefore essential to be able to verify whether these outcomes are being achieved.

The evaluation faces the difficulties linked to the mentioned deficiencies in project internal monitoring

and reporting. The first difficulty was that many projects had no quantified targets at this level.

For field cases, information could be verified from companies records, specific case studies done by

some partners, and farmers individual and focus groups interviews. For desk cases, information was

sketchy at best. There was no information on 5 desk cases.

We have resumed available information in table 23 in annex. A similar scale of grading has been used

to resume the assessment in the following table.

A Farmers incomes generated according or better than planned

B Farmers incomes generated significantly but so far not to the level planned

C Income generation facing serious limitations in scope or coverage

D Project failed altogether to generate significant incomes.

Table 16. Grading of effectiveness in generating incomes for farmers


effectiveness in

increasing

incomes


effectiveness

in increasing

incomes

F1 Cheetah Malawi B D1 Tongu Gold D

F2 CCPK C D2 Cotton Tree D

F3 Lima C D3 Vasso D

F4 Honey Zambia C D4 TANPRO D

F5 Biosustain B D5 Gouda Gold D

F6 QFP D D6 Liberation- NASFAM B

F7 Bezamar A D7 Apinec N.a


49


effectiveness in

increasing

incomes


effectiveness

in increasing

incomes

F8 BEEPZ B D8 Zameen N.a

F9 UCIL C D9 FARMCOOP N.a

F10 SAITE B D10 Agrica BV N.a

F11 COSURCA B D11 CCCH N.a

F12 PROASSA B

The situation regarding outcomes achieved so far may be resumed as follows:

So far only one project (Bezamar) appears to be generating increases in incomes to a level equal or

superior to expectations, despite outreach growing slower than planned, thanks to the results of

production improvements and access to market.

7 projects have achieved so far convincing results in terms of generating incomes although problems

may subsist in terms of outreach, competitiveness with other crops or simply, reliable data.

5 projects have found serious problems to generate significant incomes. The cases of CCPK, Lima in

Tanzania and MESH in Zambia are linked to the fact that the majority of farmers sell very small

amounts of product while maintaining the bulk of their marketing to other channels. Margins are

reduced and farmers have social linkages they do not wish to sever with other markets. UCIL has

recently started with cardamom and farmers have so far planted only very small amounts.

6 projects have failed to generate significant incomes, provoking massive drop-off of registered

farmers after a short time, and/or the disengagement of the company.

As usual, it is easier to learn lessons from failure than from success as can be seen:

QFP failure was due to a combination of drought and failure of the company to provide

mechanization services.

Tongu Gold failed as soon as the company discovered unplanned production difficulties and

had to locate new land; in any cases the so-called outgrowers were actually labourers on

company land.

Cotton Tree failed with ginger processing and quality control failed, and because farmers sold

most production to other markets.

Vasso never attracted significant numbers of outgrowers because crops were not cost-

effective; investments were high and technology complex, and the company switched

constantly from one crop to another.

TANPRO failed because conditions were not attractive and prices not competitive with other

cash crops.

Gouda Gold failed because milk producers could not see profitability in bringing their reduced

production of milk long distances while they had ready markets nearby.


50

5.2 Company outcomes

Company outcomes were assessed by financial results from the project marketing scheme. Obviously

they reflect closely, in many cases, the results of farmers. Indeed, a diverging outcome, as will be seen,

can be taken as an indicator of a serious problem for future commitments.

Data on financial performance are more consistent, if only because there are more financial than

narrative reports, and in any case problems and renegotiation of loans cannot fail to generate

information to this respect.

Targets were generally quantified in proposals or business plans. Break even point calculation were

not always. Results are resumed in table 24 in annex. Again, we have summarized with a similar

system of grading:

A The scheme has achieved break even level or is already generating profit

B The scheme is progressing towards break even although problems subsist

C The scheme is facing serious financial woes

D Project failed altogether to generate significant incomes

Table 17. Grading of effectiveness in achieving break even


effectiveness in

break even


effectiveness

in break even

F1 Cheetah Malawi C D1 Tongu Gold D

F2 CCPK A D2 Cotton Tree D

F3 Lima A D3 Vasso D

F4 MESH C D4 TANPRO D

F5 Biosustain C D5 Gouda Gold D

F6 QFP D D6 Liberation- NASFAM N.a.

F7 Bezamar B D7 Apinec N.a.

F8 BEEPZ C D8 Zameen B

F9 UCIL N.a. D9 FARMCOOP C

F10 SAITE B D10 Agrica BV C

F11 COSURCA C D11 CCCH C

F12 PROASSA C

So far 5 companies out of 23 appear on the way to achieve their financial objectives. 9 have serious

difficulties and 6 have failed completely, at least as far as the outgrowers scheme goes (QFP and

Vasso have mostly fallen back on their own production).

Two companies generating profits are nonetheless not achieving their development impact due to

reduced income of farmers (CCPK and Lima). They work with large numbers to achieve break even so

that impact for the majority is very low.

The companies that are facing serious problems are all suffering from supply issues:

Cheetah is suffering mostly from side-selling and high operational costs, worsened by climate

issues and the loss of a whole shipment in 2005;


51

MESH has not been able to organize sustainable supply so far;

Biosustain is facing serious processing and marketing problems even if supply was good at the

start;

BEEPZ has suffered losses in Kenya after post election violence, and is struggling to stabilize

production clusters over a wide region;

While OPTCO is doing fine, COSURCA and PROASSA are still far from being self reliant

because of high operational and financial costs;

FARMCOOP has achieved limited supply and fallen back partially on its own farm;

Agrica bv and CCCH have suffered from serious institutional inefficiencies and are in the

process of major restructuration.

The following table resumes the current situation of the 23 projects in terms of Cordaid loan recovery.

Table 18. Situation of Cordaid loans

Case Partner

name

A B C Case Partner name A B C

F1 Cheetah X D1 Tongu Gold X

F2 CCPK X D2 Cotton Tree X

F3 Lima X D3 Vasso X

F4 MESH X D4 TANPRO X

F5 Biosustain X D5 Gouda Gold X

F6 QFP X D6 Liberation X

F7 Bezamar X D7 Apinec X

F8 BEEPZ X D8 Zameen X

F9 UCIL X D9 FARMCOOP X

F10 SAITE X D10 Agrica BV X

F11 COSURCA X D11 CCCH X

F12 PROASSA X

A: no default so far B: default, rescheduling or restructuration C: failure, written off or major restructuration in

negotiation

5.3 General conclusions on effectiveness

Effectiveness varies widely from one project to another.

1. A few projects appear poised to achieve both complementary outcomes expected from the

schemes, that is, significant income generation for farmers and progression towards profit for

the company. The cases of Bezamar and SAITE are probably the most convincing so far while

OPTCO/COSURCA/PROASSA. face financial issues at the level of the cooperatives.

2. Some projects have achieved good results in terms of organizing the supply and generating

incomes to farmers, but are still struggling to achieve break even, like Cheetah, Biosustain,

BEEPZ, UCIL. Cheetah suffers from side selling and high costs, Biosustain from market failure.

3. CCPK and Lima are commercially successful so far, but generating very small profit for the

vast majority of participating farmers.


52

4. Some companies have found themselves better off by quitting. QFP is doing profit now that it

has fallen back to its own production and commercial providers, but the outgrowers scheme collapsed.

Vasso is in a similar situation.

5. Poor design, poor management and lack of commitment to farmers combined in some cases to

provoke failure. Tongu, Cotton Tree, FARMCOOP and Gouda Gold failed to organize supply to a

level that could even approach break even.

The cases of Agrica and CCCH are not linked so much with supply failure as with bad financial

management; both organizations are struggling through major restructuration.

This overview of individual project effectiveness can lead to the following general observation about

the effectiveness of Cordaid support package:

The support of Cordaid to a portfolio of 23 projects attempting to build partnerships between

SMEs and small farmers to access markets, has proven to be effective so far at least to improve

incomes of more than 62,000 farmers by developing new types of market linkages, even if the

majority of the schemes involved is still in the growth stage or encountering financial difficulties.

Cordaid support though SMEs has been reasonable effective in improving the conditions and

integration of small farmers in value chains whenever schemes have been at least partially

successful.

The rate of complete failure is high (6 out of 23 projects included in the study) but if seen in historical

perspective, it also shows improvement because most failures were seen amongst the first such

projects approved, as well as the ones most critically struggling at the moment.

Effectiveness should also be assessed related to the indicators included in Cordaid policy logframe:

Producers’ organizations able to provide products to markets with increasing quality and

quantity: all working schemes have improved in one way or another, farmers’ connections to

markets. This includes learning how to adjust to market requirements in quantity and quality

of products.

Producers’ organizations, have improved their negotiation capacity: this is only verified for

schemes where farmer organization was supported and real partnership fostered between them

and the sponsoring SME: this is certainly the case for at least 9 cases but most dubious for

others.

Some are in a condition to participate in the relationship between chains, banks and

authorities: this outcome may be seen only in the most institutionally developed schemes such

as OPTCO/PROASSA and OPTCO/COSURCA. In the African cases farmers, even where

organized, are still a long way from being full fledged chain partners.

The following figure shows how projects can be rated according to the two main parameters of

effectiveness: achievement of break-even levels for companies, and significant increases in incomes

for participating farmers.

By comparing with the previous figure it shows clearly that efficient projects are not necessarily

effective.


53

Incr

ease

in

in

com

es f

or

farm

ers

Financial performance of the company against break-even High Low

Hig

h

Low

Fig. 4 Synthesis diagram of project effectiveness

CHEETAH

CCPK

Lima

QFP

Biosustain

UCIL

PROASSA COSURCA

SAITE

BEEPZ

Bezamar

Tongu Gouda

Gold

FARMCOOP

Zameen

TANPRO

VASSO

MESH

Cotton Tree


54

6 EVALUATION: RELEVANCE

This level of evaluation corresponds to the Cordaid policy framework at the highest level since

Programme 9 Overall Objective has been stated as “Small producers in 19 countries are in a position

to increase sustainably their income while ensuring their food security and purchasing power. “

Relevance is the contribution of outcomes to impact assessed at two levels:

in terms of improvements in livelihood quality and security of the intended target groups,

defined as improving income portfolio sustainably while maintaining food security.

in terms of improvements in the functioning and articulation of value chains, especially from

the point of view of empowerment of small farmers and linkages.

In terms of impact on the sponsoring SME business position in the chain and sector.

6.1 Farmer livelihood impacts

Impacts on farmer livelihoods are generally not stated specifically as objectives in partner’s projects.

In order to be able to discuss the impact of projects on livelihoods we have analysed the following

aspects:

Whether the new sources of income generated by the projects were susceptible to improve on

the whole, the portfolio of income sources by not only increasing total income, but also

improving its regularity and reliability, and also spreading income sources within the

household.

Whether food security was not affected negatively by the new source of income.

Whether other aspects of livelihood security such as access to land and other resources, were

affected positively or at least not impaired by the introduction of new income sources.

Finally, the characteristics of the new activity should be analysed through the lenses of social

equity, to check whether their requirements do not exclude the sectors that are key target

groups for Cordaid, that is, small farmers in general, women and vulnerable groups in

particular.

Obviously, the discussion at that level is more qualitative. Table 25 in annex resumes the most

important observations to that aspect.

We have retained the four most important parameters in the following table. Since these are

assessments at relevance and not feasibility levels, projects who failed to achieve outcomes are not

relevant, even if the livelihood feasibility appeared good.

Table 19. Relevance in terms of farmers livelihoods

Case Partner

name

1 2 3 4 Case Partner

name

1 2 3 4

F1 Cheetah X X X D1 Tongu Gold

F2 CCPK X X D2 Cotton Tree

F3 Lima X X D3 Vasso

F4 MESH X X X D4 TANPRO


55

Case Partner

name

1 2 3 4 Case Partner

name

1 2 3 4

F5 Biosustain X X X X D5 Gouda Gold

F6 QFP D6 Liberation X X X X

F7 Bezamar X X X X D7 Apinec X X X X

F8 BEEPZ X X X D8 Zameen X X X X

F9 UCIL X X X X D9 FARMCOOP

F10 SAITE X X X X D10 Agrica BV X X X

F11 COSURCA X X X X D11 CCCH X X X

F12 PROASSA X X X X

1: integrates well within existing farming systems 2: competitive with alternative sources of income 3: does not affect food

security negatively even for smaller farmers 4: improves globally livelihood security for most farmers

Nine out of 23 projects can be assessed as wholly relevant in terms of livelihoods impacts. They are

Cheetah, Biosustain, Bezamar, BEEPZ, UCIL, SAITE, OPTCO/COSURCA, OPTCO/PROASSA,

Liberation/NASFAM, Apinec and Zameen.

While there is conclusive evidence for six of them, our assessment of the last three is based rather on

assumption since outcome information is not yet available.

It is interesting to note that projects currently encountering serious financial difficulties, like Cheetah

and Biosustain, are nevertheless fully relevant. On the reverse, CCPK and Lima, while commercially

profitable, and good clients for Cordaid loan system, are only partially relevant.

It is difficult to assess Agrica and CCCH; while they have failed so far financially as Cordaid partners,

they have invested loans in marketing coffee and it could be assumed that they were as relevant as

COSURCA or PROASSA, but we lack evidence of it.

The six “failed” projects of course cannot be counted as relevant anymore.

In terms of outreach, we can estimate, from the data from each project, that Cordaid support has

allowed relevant projects to improve the livelihoods of at least 62,000 households.

6.2 Chain coordination and social outcomes

The second dimension of Programme 9 objective is to improve the position of farmers in value chains.

It supposes that their levels of organizations, knowledge, linkages and bargaining power have

improved through the project.

These outcomes were not explicit in the project planning. An analysis of partnership model, services

provided and outcomes in terms of linkages and organization of the chain, allowed us to compare the

different projects. No quantitative measure of such complex issue was possible. Data were sketchy in

most cases, and even in field cases not always easy to verify.

Nevertheless, observations were made that are collected in Table 26 in annex and are resumed in the

following table according to three criteria:

1) The project improves organization of farmers within the chain

2) The projects contributes to developing new linkages between farmers and other actors besides

the company


56

3) The project improves global coordination of chain.

As can be seen readily from the table, the number of projects fully relevant in terms of chain

coordination and empowerment of farmers, is less than those relevant in terms of livelihoods. This is a

reflection of the number of projects that are centralized contract farming schemes, with the sponsor

company supporting the majority of services with relatively few linkages. It is also a reflection of the

preference of many SMEs to deal with loosely organized, or individual farmers. The projects fully

relevant on this aspect are Biosustain, Bezamar, OPTCO/COSURCA, OPTCO/PROASSA, and (again

assuming from available information), Apinec and Zameen.

Table 20. Relevance in terms of chain coordination

Case Partner name 1 2 3 Case Partner name 1 2 3

F1 Cheetah X D1 Tongu Gold

F2 CCPK D2 Cotton Tree

F3 Lima D3 Vasso

F4 NWBKA/MESH X X D4 TANPRO

F5 Biosustain X X X D5 Gouda Gold

F6 QFP X D6 Liberation X X

F7 Bezamar X X X D7 Apinec X X X

F8 BEEPZ D8 Zameen X X X

F9 UCIL X D9 FARMCOOP X

F10 SAITE D10 Agrica BV ? ? ?

F11 COSURCA X X X D11 CCCH ? ? ?

F12 PROASSA X X X

1: improves organization of farmers within the chain 2: develops new linkages between farmers and other actors

besides the company 3: improves global coordination of chain

It is important to note that in the case of QFP, even if the scheme with the company failed, farmer

groups formed by the BDS provider Faida Mali diversified to other crops than safflower and improved

their empowerment. In other cases, rather unsuccessful projects have nevertheless contributed to

improve somewhat farmer capabilities: in particular, where organic certification is involved. Also in

the cases of some failed schemes, many farmers will have learnt something about what it takes, to deal

with more demanding markets.

6.3 Business impacts

It has been difficult, with the information made available, to measure the progress in terms of the

sponsoring SMEs business strategy and their position in the chain. In general terms it can be said that:

Some companies have consolidated their position in the chain and in the sector through the

project because it has allowed them to enlarge their market shares and in some cases, diversify

their outputs: it is certainly the case with CCPK, Lima Ltd, Bezamar, Saite and OPTCO.

Because the companies are not expected to deliver information on their global business

beyond the project this is based on companies statements and partial data.

Some companies are still struggling to consolidate their hold and it is not possible at this level

to ensure that future evolution will be positive (Cheetah, Biosustain, MESH).


57

Even if some companies have backed off from the scheme, none is blaming Cordaid and there

are no indications that Cordaid´s loans and grants might have encouraged reckless investment

beyond the own company’s unrealistic expectations and projections.

In terms of desirable development outcomes the best case is obviously where the sponsoring SME has

consolidated its commercial position while at the same time, contributing to the empowerment of

farmers and the coordination of the chain. In that view Bezamar and OPTCO seem to be the most

encouraging cases.

6.4 General observations on relevance

The overall objective of Cordaid policy is to increase the income of small producers in developing

countries through their integration in (agri) chains with positive or neutral effects on their food

security. The portfolio of projects, as seen, has been globally relevant to the increase of incomes for

around 62,000 participating farmers and their families. In most cases effects on food security have

been positive or neutral.. Of the successful cases, none can be considered as threatening food security

through negative trade-offs because they were either based on existing livelihood systems, or

introduced new crops that fit well into the same systems. Only some of the failed schemes might have

had issues (safflower with QFP) as well as the Artemisia scheme to some extent for poorest farmers.

The main observations to be made as to relevance are:

1. The evaluation shows that a significant part of Cordaid portfolio of projects supporting farmers

access to markets through financing SMEs, has proven relevant to the general objectives. The

successful projects that can be considered as fully relevant may be only 9 at most out of 23, but this

reflects, as shall been seen in chapter 8, the quality of their design, and the capacity of their sponsors

in implementing them and in adapting to changes.

2. The fact that a significant number of projects, even some facing currently serious financial

problems, may be considered as successful in terms of improving the livelihoods of thousands of poor

farmers and (even though to a lesser degree) empowering them in the chain, validates the fact that

SMEs may be considered as a relevant “entry point” to achieve Cordaid’s objectives, provided

due attention is given to proper design and implementation.

3. Even some projects that have failed have provided a wealth of experience to stakeholders, including

Cordaid, allowing improving further initiatives. This allows concluding that the process as a whole

has allowed a rich learning curve, which must be capitalized now to produce much more

efficient, effective and relevant interventions.

4. The fact that few projects have made significant headway in empowering farmers beyond the

immediate needs of operating the supply chain reflects a structural limitation of the approach. SMEs

as drivers of the process would not have a stake in strengthening farmer organizations to the

point where they become strong actors in the chain and policy dialogue. Nor would they be the

adequate channels for the kind of support needed to achieve that. This explains why only three

projects, working with high level farmer organizations (OPTCO and Liberation Nuts) may actually

support higher level profile of farmers within the chain.

The following figure shows how project relevance can be assessed against the two main factors of

impact on livelihoods and empowerment of farmers in the value chain.The figure shows clearly that

only a few projects are so far relevant on both counts; and that their relevance may well be different

from the efficiency by which they are implemented (again the case of CCPK and Lima is illustrative).

SAITE, which was both efficient and effective, scores somewhat poorly in farmers’ empowerment.


58

Em

pow

erm

ent

of

farm

ers

in t

he

chain

Improvement of farmers livelihoods High Low

Hig

h

Low

Fig.5 Synthesis diagram of project relevance

CHEETAH

CCPK

Lima

QFP Biosustain

UCIL

PROASSA

COSURCA

SAITE

BEEPZ

Bezamar

Tongu Gouda

Gold

FARMCOOP

Zameen

TANPRO

VASSO MESH

Cotton Tree


59

7 EVALUATION: POTENTIAL SUSTAINABILITY

Potential Sustainability is the probability, given the measures and approach taken, of continued long-

term services from the SME to their target farmers after Cordaid support has been completed. It is

related to the internal and external conditions needed for partnerships arrangements to be able to go on

delivering outcomes compatible with both business and livelihood strategies. From Cordaid point of

view, it conditions its exit strategies with the projects it is supporting.

Issues of sustainability in farmers-agribusiness linkages are more subject to theoretical discussions

than practical lessons learnt, given the short time span since cooperation agencies have really started

investing directly in value chains from a market driven, commercial approach. Sustainability has to be

approached at least at three levels: financial, institutional, and social.

Financial sustainability refers to the capacity of schemes to achieve break-even levels and a point

where profits allow reducing dependence on external finance, at least for basic services. It requires the

sponsoring company to be able to maintain the offer of services and incentives to participating farmers

after the end of Cordaid external financial support. From the farmers point of view it requires farmers

to be financially/economically able to maintain their commitment to the scheme and provide expected

supply of product. Externally financial sustainability is linked to overall critical assumptions such as

market conditions and the enabling environment. Changes in market conditions may constitute

anything from mild stress to major shocks to the partnership arrangements and there should be

possibilities of adapting.

None of the scheme can be considered completely sustainable financially. This is due to different

factors:

External factors such as evolution of markets do not allow guaranteeing sustainability for

schemes that are all based on one product, even if some degree of diversification and added

value are incorporated;

Financial sustainability for the firm may be threatened if financial sustainability is not as good

for farmers who could walk away and thus jeopardize the scheme (CCPK, Lima) or if farmer

organization themselves have issues of financial sustainability (PROASSA, COSURCA);

Inversely financial profit for farmers may not be sustained if the company is not achieving

break even due to high costs (case of Cheetah).

Institutional sustainability deals with the issues linked to whether internal rules and enforcement

mechanisms developed during the project are likely to remain viable after the end of Cordaid external

financial support. It also links to aspects of external institutions likely to give further support to the

scheme. Institutionally sustainable schemes should be likely to be further strengthened, rather than to

fall back to less structured and more informal levels. Policy dialogue is also an important aspect.

At least half of the projects are not showing sufficient institutional development. Generally internal

sustainability is weak for lack of contract and enforcement mechanisms between the stakeholders.

More common is the stand-alone character of many schemes lacking support in the institutional

framework (cases of Cheetah, BEEPZ). Policy dialogue is only possible in well-structured chains with

representativeness of key stakeholders. The case of Bezamar is exemplary because of the link of the

company to chain wide organizations and government agencies. Again Cheetah is the other extreme

with great isolation and lack of policy linkages.

Social sustainability deals with trust building between the primary stakeholders. It is the cement that

would allow linkages between actors of the chain to be maintained or strengthened after the end of


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Cordaid external financial support. Social capital within the partnership can be assessed in terms of

organizational levels, multiple commitments and conflict resolution mechanisms. In the best cases

farmers should now in a better situation to negotiate with the company and other actors outside this

particular value chain.

Review shows that social sustainability is good in many schemes that are still struggling financially. A

specific aspect that is gender sustainability, as we have seen, is only specifically addressed in a few

projects.

As for social inclusiveness, this is a tricky aspect, since some schemes have a threshold level in terms

of access to land, labour and other resources for farmers. Pretending to be accessible to all levels of

resource base could impose financial risk much too high for project success. However these threshold

levels are noticeably exclusive only in a few cases, mainly with some newly introduced crops with

some economy of scale (Artemisia, safflower).

We have summarized sustainability issues (see table 27 in annex) with a system of grading:

A The scheme is clearly sustainable

B The scheme is progressing but not yet sustainable

C The scheme is not sustainable in present conditions

D Project failed altogether to generate sustainable outcomes.

Table 21. Grading of sustainability of schemes

Case Partner name Level of financial

sustainability

Level of institutional

sustainability

Level of social

sustainability

F1 Cheetah Malawi C C B

F2 CCPK B C C

F3 Lima B C C

F4 MESH C C C

F5 Biosustain C B B

F6 QFP D D D

F7 Bezamar B B B

F8 BEEPZ C C C

F9 UCIL C C C

F10 SAITE B B B

F11 COSURCA C B B

F12 PROASSA C B B

D1 Tongu Gold D D D

D2 Cotton Tree D D D

D3 Vasso D D D

D4 TANPRO D D D

D5 Gouda Gold D D D

D6 Liberation- NASFAM C B B

D7 Apinec C C B

D8 Zameen B B B


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Case Partner name Level of financial

sustainability

Level of institutional

sustainability

Level of social

sustainability

D9 FARMCOOP C C D

D10 Agrica BV C C B

D11 CCCH C C B

The following general observations can be made on sustainability:

1. Financial, institutional and social sustainability of projects do not necessarily evolve in

harmony. However there are obvious linkages: financially unsustainable schemes are unlikely to

build momentum; lack of institutional build-up threatens scaling up of schemes, and lack of social

capital increases the financial burden and risks of the sponsoring company.

2. Sustainability of specific schemes is linked to sustainable business and livelihoods strategies.

The project approach limits the possibility of looking at the bigger picture. The fundamental

assumption of a “win-win” partnership must also look beyond the raw numbers of a specific proposal.

For instance, diversification strategies from both farmers and SMEs may be important for

sustainability as a whole, but also may limit their commitment to a specific scheme. The

understanding of the most important trade-offs is often lacking.

3. While Cordaid closely monitors financial performance and hence sustainability, there is too

little focus on the issues of social and institutional viability of the schemes. Without assessing

feasibility aspects and measuring progress towards improved institutional and social capital, Cordaid

loses important insights into the quality of its portfolio

Development processes generally seek to move chain linkages from the more informal, ad hoc forms,

to more formal and stable relationships involving increased social and institutional capital. Cordaid

support, although not favouring any specific arrangement, obviously works on the same rationale. The

following diagram using the “Trading up” matrix shows an evolutionary vision of the different kinds

of arrangements. Development is seen as evolution towards more stable and better-regulated

arrangements. The diagram is of course an over simplification of reality for the sake of comparative

analysis. It shows clearly two important aspects:

The most successful schemes are not necessarily the most ambitious in terms of developing

chain partnerships;

This said, moving from informal to formal and from short-term to longer-term linkages is

certainly desirable for development outcomes, and the case of CCPK and Lima again shows

little headway despite being amongst the most successful financially speaking.


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Increasing institutional capital

Incr

easi

ng s

oci

al ca

pit

al

Position of specific projects

Increasing institutional capital

Incr

easi

ng s

oci

al ca

pit

al

Fig. Typology of farmer-market linkages

Informal spot market

Contract farming with individual farmers

Contract farming with farmers organizations

Group sales through leading farmers

Group sales through farmers organizations

Cooperative-exporter supply contracts

Cooperative-led supply contracts, local markets

Farmer-local trader linkages

Farmer-retailer direct linkages

Farmer-processor direct linkages

Farmer-exporter direct linkages

INFORMAL LINKAGES FORMAL LINKAGES

LONG TERM LINKAGES CHAIN PARTNERSHIPS

Cheetah

CCPK

Lima

Biosustain

PROASSA

COSURCA

SAITE

Bezamar

MESH

UCIL

CCCH

Agrica

GoudaGold

Vasso

Liberation

Cottontree

Tongu

QFP

Zameen

Apinec

FARMCOOP

TANPRO BEEPZ

Tongu BEEPZ Ongoing schemes Failed schemes


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In terms of exit strategy for Cordaid the following observations can be made:

1. In most cases Cordaid has been entering the arrangements without clear indications as to

what would be the conditions for phasing out its support. As a consequence, Cordaid has found

itself too often immersed in protracted rescheduling and renegotiation of support to projects that are

struggling without clear time frame for self-sustainability. Worse still, some schemes have ended in

financial rout without Cordaid being able, in general, to do much better than reduce financial losses.

While this has obviously been the price to pay to develop such innovative, high-risk interventions in

value chains not eligible for mainstream financial support, the learning curve should now show a

decreasing rate of total financial failure.

Also in the case of the positive experience of the linkage between OPTCO (trade finance arrangement)

with local farmer cooperatives, absence of a clearly defined exit strategy, or time bound limitation to

the length of support has limited the scheme to a relatively small number of farmers. As no in-built

mechanism was set up to use the Cordaid trade financing through OPTCO as a temporary

arrangement, that should be taken over by local banks, opportunities for expansion to a larger scale

and building local financial institutions were not used to the full.

2. The aforementioned conclusion is tempered by increasing effort of late, to help local partner

SMEs to achieve more sustainable linkages with local financial support. This is no simple affair

and protracted negotiations for local bank guarantees in many countries show the size of the challenge.

On the whole there has not been a systematic approach to financial sustainability across the board.

3. Conditions for institutional and social sustainability have been largely overlooked. This is

linked to the financial focus of the loan portfolio and the aforementioned lack of integration of loan

and grant feasibility assessment. Too many self-standing schemes have been supported without

Cordaid pushing for improved, risk reducing institutional linkages and trust building measures that

might have eased the financial stress of the SMEs (again the Cheetah case is highly instructive to that

regard). This confirms again that Cordaid does not yet have the instruments that should go along with

the desired chain wide approach.Critical factors in the performance of projects

Cordaid being chiefly a funding agency has to focus its efforts on improving the quality of

performance of the projects it supports, at the screening and design stage. Good monitoring and

leverage on projects to improve their design later can only partially compensate for poor design.

We have tried to link the performance of projects to a series of critical factors that may be explaining

to a significant degree why things went the way they did. These factors are linked to the critical

feasibility factors used in our assessment and backed by the review of global literature on the subject

and (most important) common sense.


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8 CRITICAL FACTORS IN PROJECTS

PERFORMANCE

The projects have been classified according to how their global performance can be assessed:

Successful schemes are those that so far, are progressing as expected towards sustainability

and seem in a position to overcome most foreseen difficulties. In this category we may include

Bezamar, SAITE, OPTCO/COSURCA and OPTCO/PROASSA, and Zameen.

Struggling schemes are those still encountering many serious hurdles and difficulties but

cannot be written off as doomed because they are addressing the key issues. They include

Cheetah Malawi, the Zambia honey projects, Biosustain, BEEPZ, UCIL and Apinec.

Near failed schemes are those who are near collapse but still intending major overhauling and

last ditches stands. We include in that category Agrica/El cafetal and CCCH.

Failed schemes are those who could not achieve the main outcomes and have either collapsed

or reverted to an altogether different form not compatible anymore. They include QFP, Tongu

Gold, Cotton Tree ginger scheme, Vasso, TANPRO, Gouda Gold and FARMCOOP.

Inconclusive schemes are such as being so far successfully as to their set financial objectives,

but do not seem poised to bring significant impact in terms of fundamental development

objectives. It is the case of both CCPK and Lim Ltd.

The Liberation Nut/NASFAM scheme was too recent to be globally assessed in that way.

The critical conditions assessed were:

1. Viability of market strategy

2. Agronomic and livelihood feasibility

3. Management capacity of the marketing firm

4. Management capacity of farmers

5. Financial viability of the supply chain

6. Conditions for balanced risk sharing

7. Conditions for building stable commitments

8. Reasonably enabling environment

9. Conditions for adapting to changes.

If we analyse the failed and near failed schemes, we can observe that they are invariably scoring

negatively for most critical factors considered. The factors that are invariably negative to high or

critical degree are 5 (financial viability of supply chain), 6 (conditions for balance risk sharing) and 7

(conditions for building stable commitments). On the other side, the factors 1 (viability of the market

strategy), 2 (agronomic and livelihood feasibility) and 3 (management capacity of the company) were

more often than not rated as positive.


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On the other end of the scale, successful schemes almost invariably score positive on most factors.

The only factor rated negative in many cases is 8 (reasonably enabling environment), which means

that those projects have had to perform in difficult environments, which in a way further stresses the

importance of the other factors. The only project to rate negatively on social cohesion factors is SAITE

but it is a specific case where the company has not been willing to bet on farmer organization because

of the prevalent political turmoil in Bolivia and the often-political connections of farmer organizations

that they deemed as a threat to business.

The inconclusive schemes, as already commented, were successful in achieving the company’s

financial objectives but failed to contribute to farmer empowerment in the chain. Their impact on

farmer livelihoods was marginal for the vast majority of them. It is interesting to see that both CCPK

and Lima scored well on most indicators except 7 (conditions for building stable commitments) where

the score was critically negative.

TABLE 22. Synthesis of critical factors of project performance

Case Partner name 1 2 3 4 5 6 7 8 9

F1 Cheetah Malawi ++ ++ + + --- - --- -- --

F2 CCPK Tanzania ++ ++ ++ + ++ - --- ++ -

F3 Lima Tanzania ++ ++ + --- - ++ --- - -

F4 Honey Zambia +++ +++ --- --- ++ ++ ++ + +

F5 Biosustain Tanzania ++ ++ - ++ ++ -- ++ ++ ---

F6 QFP Tanzania + --- -- + -- --- --- + --

F7 Bezamar Ethiopia +++ +++ ++ ++ ++ +++ +++ ++ ++

F8 BEEPZ Kenya Tanzania ++ ++ +++ + -- + - + ++

F9 UCIL Uganda + +++ ++ -- ++ - - - +

F10 SAITE Bolivia ++ ++ ++ ++ ++ - -- - -

F11 COSURCA Colombia +++ +++ +++ ++ ++ ++ ++ -- +

F12 PROASSA Peru ++ +++ +++ ++ ++ ++ ++ - +

D1 Tongu Gold Farms Ltd + -- + -- -- - --- - -

D2 Cotton Tree Foundation Ginger Enterprises + +++ -- - --- -- - - -

D3 Vasso Agroventures Limited ++ - + - - -- -- + +

D4 TANPRO - ++ -- - - - -- + --

D5 Gouda Gold Limited -- + ++ - --- - -- - ---

D6 Liberation Foods/ NASFAM -- ++ ++ + - ++ +++ + +

D7 Apinec Agro Industry Plc + +++ - - + ++ ++ + +

D8 Zameen Organic Private Ltd + ++ + + + + + + +

D9 FARMCOOP + - - -- - - - + -

D10 Agrica BV/El Cafetal + ++ - - - - -- - -

D11 Central de Cooperativas Cafetaleras de Honduras + ++ -- - -- + - + +

This short analysis confirms, if need be, the critical importance of the organization and viability of the

supply chain, and the institutional, financial and social factors leading to the building of stable

commitments between the sponsoring company and participating farmers.

Positive influence: + moderate ++ high +++ critical Negative influence: - moderate – high --- critical

Successful scheme Struggling scheme Near-failed scheme Failed scheme Inconclusive scheme


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9 SUMMARY OF CORDAID POLICY EVALUATION

One of the objectives of the evaluation was “to assess the effectiveness and efficiency of Cordaid

support package (through the combination of loans, equity and donations) from the SME perspective

and the perspective of the small producers including synergies realized between various organizations

and instruments. This is equivalent to assessing the efficiency, effectiveness and relevance of the

Cordaid support package according to corresponding policy framework indicators (refer to policy

logframe in table 1).

This assessment has been done throughout by linking Cordaid support to the quality of performance of

all considered projects. It can be resumed hereby, adding to efficiency and effectiveness, the relevance

of the support package to the achievement of policy objectives. For this we refer to the formulation of

the policy as per table 1.

Efficiency of the support package is to be assessed against the expected output setting to “Improve

the delivery of technical, financial, BDS, organizational and marketing services to smallholder

farmers through participation in contract farming and chain partnerships with SMEs and service

providers”.

The evaluation shows that the mix of loans and grants used as input by Cordaid has been

instrumental in improving the delivery of services, especially because it has been delivered in

most cases to companies operating in a difficult environment, with limited or no access to

alternative funding. In many cases it has been even the critical factor that allowed the schemes

to operate, as often recognized by the companies’ management. The combination of grants for

service delivery and loans for working capital has been appropriate for most cases.

Effectiveness of the support package is to be assessed against the achievement of the stated policy

outcome formulated as “ Improve the conditions and integration of small farmers in value chains”.

Indicators of effectiveness were that producers’ organizations would be able to provide products to

markets with increasing quality and quantity, would have improved their negotiation capacity with

some of them achieving a condition to participate in the relationship between chains, banks and

authorities.

The evaluation shows that the success of the partner SMEs in achieving stated outcomes depended on

their capacity and willingness to develop real long-term partnerships with farmers, based on objective

conditions for mutual commitment and the development of institutional and social capital. Thus

Cordaid support package was highly effective in empowering farmers within the chain where

real partnerships were procured as the way to achieve mutually compatible business and

livelihood objectives. It was ineffective in achieving desired outcomes were companies had no

stable commitment, or farmers could not be induced in trusting that participation could

strengthen their livelihood strategies.

Relevance of the support package refers to its success in contributing to the overall objective of the

programme, stated as “To increase the income of small producers in developing countries through

their integration in (agri) chains with positive or neutral effects on their food security”.

The evaluation indicates that the support package through SMEs sponsoring contract farming

schemes and chain supply partnerships with farmer organizations, was highly relevant for

increasing or stabilizing farmers incomes in a relatively short time provided the schemes were

correctly designed and adequately implemented. Whenever proposed schemes threatened food

security or showed limited incentives, farmer participation was likely to be limited. As for

fostering wider chain partnerships and policy dialogues with active participation of farmers, the

support package fell short in that it did not provide adequate support to these aspects, for which


67

marketing SMEs were obviously not the most adequate vehicle since they have no objective

stake in farmer empowerment further than needed for the viability of the supply chain.

The following table shows the link between project performance and the evaluation of efficiency,

effectiveness and relevance of Cordaid support package.

Efficient use of Cordaid inputs not always guarantees effectiveness while struggling schemes may be

highly relevant for Cordaid policy.

What is meant here is that, while successful projects may make for a successful policy, success may

not be achieved without risk because Cordaid is targeting poor farmers through companies willing to

bet on schemes in marginal conditions and with difficult challenges. Focusing on the “easy” projects

might not be relevant and produce more cases, like CCPK and Lima, of financially successful projects

with doubtful relevance for Cordaid policy objectives.

Table 23. Link of projects to Cordaid policy efficiency, effectiveness and relevance

Case Partner name Efficiency Effectiveness Relevance

F1 Cheetah Malawi B C B

F2 CCPK Tanzania B B C

F3 Lima Tanzania B B C

F4 Honey Zambia C C B

F5 Biosustain Tanzania B C B

F6 QFP Tanzania C C D

F7 Bezamar Ethiopia B B B

F8 BEEPZ Kenya Tanzania B C B

F9 UCIL Uganda B C B

F10 SAITE Bolivia B B C

F11 COSURCA Colombia B B B

F12 PROASSA Peru B B B

D1 Tongu Gold Farms Ltd D D D

D2 Cotton Tree Foundation Ginger Enterprises C D D

D3 Vasso Agroventures Limited C D D

D4 TANPRO C D D

D5 Gouda Gold Limited D D D

D6 Liberation Foods/ NASFAM C C B

D7 Apinec Agro Industry Plc C C B

D8 Zameen Organic Private Ltd B B B

D9 FARMCOOP C C D

D10 Agrica BV/El Cafetal C C C

D11 Central de Cooperativas Cafetaleras de Honduras C C C

It is only by focusing on the lessons learnt in order to improve Cordaid´s instruments, that the high

rate of failures in the first years of Cordaid´s involvement in value chains through SME financing,

may become the source of improvement for the future.


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10 REPLICABILITY AND LESSONS LEARNT

10.1 Conditions for organizational learning

Cordaid strives to be a learning organization. There is a constant effort to update and adapt policies

and instruments in order to improve efficiency and effectiveness.

The evaluation has allowed highlighting some issues that hinder better learning processes within the

organization; they can be related to what authors define as key characteristics of a learning

organization1:

Systems thinking: this relates to the conceptual frameworks that allow people in the

organization to master the core “business” and share methods and instruments. The evaluation

clearly shows that there is still a considerable lag between Cordaid deciding to use a value

chain approach, and the translation of this into systemic instruments.

Personal learning is the commitment by each individual to the process of learning through

staff training and development. A Learning Organisation can been described as the sum of

individual learning, but it is important for there to be mechanisms by which individual

learning is transferred into organisational learning. An issue observed in this evaluation is that

not enough staff seems to master clearly the risks of agricultural supply chains and be able to

make reasonable assessments of risk and risk management. One thing that continually came

up in all the cases was the problems with the risk of non-performance of the outgrowers’

schemes and the lack of risk mitigating measures.

Mental models/ paradigms are sets of ingrained assumptions held by individuals and

organisations. Cordaid has made serious efforts to challenge paradigms seen as ineffective

such as the supply-driven technological approaches and the NGO paradigms. In order to

develop and update paradigms an organization needs to develop mechanisms for locating and

assessing organisational theories of action. In the case of Cordaid it must be at least based on a

series of “do’s and don’ts” and good practices. There is ample opportunity to improve the

existing process provided the feedback from the partners in the field is improved, the quality

of monitoring at present being a major hindrance to learning.

The development of a shared vision is recognized as an important issue within Cordaid. At

the moment for the thematic covered by this evaluation, there is a serious organizational

barrier for team learning and development of a shared vision because of the dichotomy of

instruments used to assess and monitor loans and grants, even if in practice officers do work

together.

External evaluations are one of the instruments Cordaid uses for organizational learning. However

they cannot substitute for internal learning and as already mentioned, internal learning will not work

adequately without continuous feedback between organizational practice and field results.

The weaknesses observed at the levels of the project design frameworks, reporting, monitoring and

filing of information will need to be addressed in order to improve the process.

1 ARGYRIS, C. 1999. On Organizational Learning. 2nd Ed. Oxford: Blackwell Publishing


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10.2 Main lessons drawn from the evaluation

The final objective of this evaluation has been defined as “to provide inputs into Cordaid policy on

SMEs (in the context of small producers and agricultural value chains) that will further the fine tuning

of Cordaid support to SMEs and the use of the various financial instruments in the agricultural value

chain taking into account development needs, phase of development of the specific actor, short term

and long term capital and other needs”.

Before getting to present specific recommendations we will resume the main conclusions of this

evaluation in terms of lessons learnt.

1. Quality of proposals is the key parameter of final relevance on which Cordaid has any real

influence. Therefore the screening, assessment and negotiation stage has to ensure that approved

proposals, even if Cordaid accepts high levels of risk, meet the fundamental criteria of feasibility

and that issues of capacity building are correctly addressed.

Specific lessons learnt under this aspect of quality of design may be summarized as follows:

1.1 Spontaneous proposals may present interesting opportunities but also put a strain on Cordaid´s

capacity to grasp the complexities of the context of each value chain in each country and check

potential partner’s credentials and real capacity. Availability of independent local expertise is a

bottleneck in most countries.

1.2 Proposals may be interesting and promising but poor intervention logic is an indicator of lack of

strategic understanding of the issues and multiplies the risk of not addressing key issues, while future

monitoring will be made extremely difficult.

1.3 Feasibility and risk assessment need to be improved so as to cover all critical factors of success.

Appreciation of market viability and company management capacity is not sufficient if the supply

chain organization and cost-effectiveness for both company and farmers are not clearly described and

understood. Agronomic feasibility must be understood in the context of livelihood strategies. The

social and institutional dimensions of building long-term commitment between SME and farmers are

at least as important in ensuring success, as any other and cannot be overlooked in the future.

1.4 Schemes that propose to improve existing production systems are more likely to succeed than

those who introduce new crops and technologies; simple innovations are readily adopted. New cash

crops that have to compete with existing ones are not favourable for creating stable commitments on

the part of farmers. At the same time farmers should not be assumed as reticent to innovation and can

recognize good opportunities.

1.5 The organization of the schemes for delivering support services to farmers has a strong bearing on

financial viability; SMEs cannot support the weight of all embedded services without consequence for

the financial sustainability. The exact nature and objectives of support services must be checked

against an assessment of needs of both farmers and SME, and the best available provider should be

sought for each situation. Grants for ill-defined training programmes are likely to be a waste of money

and the viability of the scheme may be jeopardized.

1.6 Screening, assessing and monitoring loans for investment and working capital, and grants for

service delivery must be done by Cordaid in a more integrated way. Those aspects are interlinked and

the organization of Cordaid has to recognize that with adequately integrated instruments and

mechanisms.

1.7 Cordaid is taking too much risk in the way it transfers grants and loans without graduality. Money

should be transferred against mutually agreed milestones. A longer-term approach to the support


70

package is also necessary because one-shot working capital is seldom going to do the trick. This has

also to include clear criteria for phasing-out of support.

1.8 In the prevailing circumstances, this evaluation has not seen much evidence of Cordaid pursuing

security taken against loan default, even when there is security given by a Netherlands company.

Moving to financially safer mechanisms could reduce losses but also the relevance of many of the

projects which are precisely targeting SMEs in difficult circumstances. This suggests a trade-off

between financial risk and relevance is at work here. Therefore Cordaid has to consider other aspects

of project design and contract design that may reduce financial risk while still ensuring the added

value of offering financial support to innovative schemes.

2. Cordaid has presently but limited means to assess the efficiency of its support package in

ensuring improved delivery of technical, financial, BDS, organizational and marketing services

to smallholder farmers through participation in contract farming and chain partnerships with

SMEs and service providers.

In order to improve its monitoring capacity Cordaid has to address a series of issues:

2.1 The quality and frequency of reporting by partners has to be improved and Cordaid needs leverage

to impose that. First of all the intervention logic is often not clearly set out in the proposal and contract

and indicators and milestones of progress are too often lacking. Neither should Cordaid put itself in a

position where it cannot suspend further funding when a partner is taking its contractual obligations

too lightly, as often is the case.

2.2 Cordaid has to improve its filing and documentation system. This evaluation has had to struggle

with the fact that many basic background documents were difficult to locate, especially when there

had been a change in officers in charge. Poor documentation management means also that Cordaid

would be too slow in reacting to monitor project performance and contractual compliance, provide

data for audits, and realize security.

2.3 Partner SMEs have, with few exceptions, no baselines nor adequate records for relevant reporting

on project progress that might also be consolidated into Cordaid’s own programme monitoring.

Monitoring centred on repayment of loans without cross checking physical performance, as has

happened often because some companies only report what is needed for audits, may lead to overlook

important issues.

2.4 Hiring local independent contractors to monitor and support a project in country has only been

considered of late. There is a real need to improve Cordaid’s limited monitoring capacity with some

external support. Cordaid officer are too focused on relying on narratives from partner and only really

actively investigate when things go wrong i.e. when reports are not received and when loans are

defaulted. Waiting till things go wrong to investigate means it is harder to turn things around and

harder for Cordaid to recover funds.

3. Cordaid has little bearing on the effectiveness of individual projects beyond screening design

and monitoring implementation, so that it is necessary to streamline the quality of proposals and

the adequateness and efficiency of the support package.

Some important lessons learnt on effectiveness of projects include:

3.1. Initial assessment of risk and quality of design in its present form has but little relation to the

effectiveness of the project. This is because the most common reasons for failure are not clearly

addressed with the screening system in its actual form: they are faulty and unrealistic design of the

supply chain, and lack of commitment building with long term horizon between farmers and SME.


71

3.2 The specific outcomes of the project have to be seen within the wider strategies of both company

and farmers. If both may easily back off up at the first signs of difficulties there will be little chance of

effectiveness. Companies that only look for outgrowers to increase their own guaranteed supplies are

likely to use Cordaid´s money for something that they would not have ventured to do with their own.

Farmers that may easily switch from one cash crop to another will not be stable partners for the

company.

3.3 Assumptions about external conditions such as the market and institutional support vital for the

success of a project cannot be taken in a generic form. A viable market does not mean that it is easy to

beat competitors or reduce side selling. An attractive cash crop does not mean that all farmers may be

in a position to readily adopt it. External support may not be available and projects do not address this

issue. An internal understanding of how the scheme should work is necessary in order to make the

relevant assumptions and calculate the risks.

4. The relevance of projects to Cordaid´s programme overall objectives go beyond ensuring

improved incomes to empowerment of farmers in the chain. One sided entry point through

SMEs is relevant on the market aspect but structurally deficient to push for full farmer

empowerment.

The main lessons learnt as to relevance are:

4.1 In order to be relevant projects need not only to be successful financially, but also to contribute to

improve the position of farmers in the chain. Farmer empowerment means assuming at least some

important functions in the chain such as bulking of product, quality assurance, and extension. This

kind of empowerment puts farmers in a best position to negotiate win-win agreements. Further

empowerment needs further organizational and management capacities where farmer organizations

become trading partners in their own right.

4.2 Few projects make significant headway in empowering farmers beyond the immediate needs of

operating the supply because SMEs as drivers of the process would not have a stake in strengthening

farmer organizations to the point where they become strong actors in the chain and policy dialogue.

Nor would they be the adequate channels for the kind of support needed to achieve that. This means

that multi-stakeholders support will be necessary where farmer organizational levels are to be further

strengthened.

5. Project sustainability is the final measure of their success but Cordaid lacks the means to

assess it and clear criteria about how and when to phase out its support. As a result, Cordaid

finds itself entangled into further support of struggling projects without always having clarity

about whether this is prolonging the agony of a doomed scheme or giving it a second chance.

Linkages with local financial institutions are not systematically pursued with a view to enhance

the local sustainability and increase capacity of local banks to provide financing to agricultural

SMEs.

Some important insights into sustainability can be drawn from this evaluation:

5.1 Financial, institutional and social sustainability of projects do not necessarily evolve in harmony.

However there are obvious linkages: financially unsustainable schemes are unlikely to build

momentum; lack of institutional build-up threatens scaling up of schemes, and lack of social capital

increases the financial burden and risks of the sponsoring company.

5.2 The project approach is too much centred into medium-term results and limits the possibility of

looking at the bigger picture both in terms of process and strategy. The fundamental assumption of a

“win-win” partnership must also look beyond the raw numbers of a specific proposal. For instance,

diversification strategies from both farmers and SMEs may be important for sustainability as a whole,


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but also may limit their commitment to a specific scheme. The understanding of the most important

trade-offs is often lacking.

5.3 It is not enough to monitor financial performance and sustainability, the conditions for institutional

and social sustainability are at least as important. Financial performance, regulation and support, and

trust building are mutually dependent aspects of each and every scheme.

10.3 Identification of good practice

This evaluation allows identifying some good practice for many of the common issues that have been

identified. We have resumed the most important ones in the following table, by making reference to

specific projects. Further information is to be found in the respective case studies reports.

Identifying good practice and feeding it back into the screening, assessment and monitoring system of

Cordaid should become an important feature of its quality assurance system.

Table 24. Examples of good practices in specific projects

Issues addressed Project with good

practice

Comments

Technical innovations that are costly and

complex are a threat for the success of

marketing schemes

Bezamar The innovations brought to the beekeeping

system are simple, tested on the field and cost

effective; improved beehives can easily be

repaid by average beekeeper from the proceed

of sales.

Many outgrowers projects rely on ad-hoc

farmer groups without internal social capital

and credibility

Bezamar The project works with existing groups only

with support tailored to a needs assessment

Farmer groups should be organized in a way

that builds social capital and encourages

mutual monitoring and trust building. A

system of positive and negative incentives is

necessary.

Cheetah The project has learnt through working credit

with MRFC how the basics of mutual trust and

social control within a group must be used as

criteria for selecting farmers groups

Lack of transparency in price setting creating

distrust amongst farmers

Bezamar Bezamar discusses prices with beekeepers

cooperatives based on the calculation of the

cooperatives and the company’s margins

Farmer groups are not empowered in

participating in the supply chain in a

meaningful way

Bezamar The local cooperatives bulk production from

individual beekeepers and control quality,

perceiving a commission from Bezamar

Lack of proper register of farmers and basic

characteristics of production

BEEPZ The company maintains a record of farmers,

their acreage and production, artemisinin

contents and prices paid.

Lack of predictability of harvests BEEPZ The company makes an assessment of potential

harvest at field stages.

Unethical behaviour of companies, buying of

farmers without pre-investment

BEZAMAR Code of practice among buying companies in

honey to ensure fair buying practices

Local banks insufficiently interested in agri

financing

LIMA Local bank in Tanzania gradually taking over

financing of LIMA with phasing out of Cordaid

guarantee

Weak embedding and poor organisational

capacity of farmers

Proassa/OPTCO Investment in strengthening farmer

organisations, supporting set up of MFI

structure and support mechanism creates

conducive environment for effective investment

in coffee production and trade for exports

Poor insight in feasibility and impact at

farmer level

Cheetah Baseline study and crop budget at farmer level


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11 RECOMMENDATIONS

11.1 Streamline Cordaid policy for value chain development

The formulation of Cordaid policy about support to integration of smallholder farmers into value

chains, should be streamlined to integrate the findings of this and other evaluations and focus its

objectives on what is shown as most relevant. Indeed there is a need to reverse more or less the order

of importance of objectives as stated in the present policy framework.

1.1 Revise the global objective to focus on farmer empowerment in value chains

The overall objective “To increase the income of small producers in developing countries through

their integration in (agri) chains with positive or neutral effects on their food security” should be

revised. Income generation is not the key element of relevance, since we have seen cases of projects

generating incomes for farmers without improving in any way their position into the chain.

An improved formulation should be along the lines of:

“To contribute to the consolidation of smallholder farmers livelihood systems through increasing

empowerment in value chains”

Indicators that could measure consolidation of livelihood systems would be:

Income portfolio of participating farmers more secure and/or diversified;

Food security improved through stable incomes and/or consolidated food supply base.

Indicators that could measure empowerment in the chain would include the like of:

Supply agreements managed by farmer organizations with marketing firms;

Increased bargaining power measured by improvement of value shares of farmers within the

chain;

Increased number of commercial and institutional linkages within the chain;

Participation of farmer organizations in chain wide dialogue.

The assessment of relevance of proposals would then be related clearly to this objective.

1.2 Revise the specific objective of the policy

The specific objective of the policy would then also need to be revised. A proposed formulation is:

“To improve incomes and competitive capacities of smallholder farmers through participation in

partnerships with the private sector, including marketing and financial partners, affording

opportunities to access markets more profitably”.

The indicators at this level would include increased income flows compared to baseline (including

assessment of trade-offs), and increased capacities to provide products in quantities and qualities

required by specific marketing partners in a cost effective manner.


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The key elements of an enabling environment should also be addressed in a way adapted to each

specific chain.

11.2 Improve the screening and assessment of proposals

Cordaid needs to improve the process of screening and assessing proposals in order to increase their

relevance to the policy, the quality of design and hence, the probability of significant impact. The

following recommendations could be easily put in practice in the short term.

2.1 Screen proposals according to their relevance to Cordaid policy

Proposals should contribute significantly to the objectives of Cordaid policy that is, the improvement

of the livelihoods of smallholder families and of their position and empowerment in value chains. The

learnings of this evaluation show that relevant proposals should at least present the following

characteristics of relevance:

Proposals should offer possibilities of significant livelihood improvements to smallholder

families with as little bias as possible in terms of their resource endowment;

The strategy should involve farmers in an organized manner in the supply chain, at least in

organizing bulking, quality control and technology transfer at the base of the chain;

The project should include clear objectives in terms of capacity building of farmers and their

organizations.

By using the overall and specific objectives proposed in 11.1, Cordaid would be in a position to screen

any proposed partnership between private companies and farmers, according to its potential

contribution to such objectives.

Proposals based on individual farmers providing supplies to a company without a process of

organization and specific functions to be developed in the chain, are likely to be largely irrelevant to

Cordaid´s policy objectives, as illustrated by the cases of CCPK and Lima Ltd.

2.2 Use a more comprehensive framework to assess risks and feasibility of proposals integrating

grants and loans

The present framework has to be reviewed and completed so as to include important aspects of

feasibility and risk assessment that have been consistently overlooked so far. That concerns mainly the

features and cost effectiveness of the supply chain and the social and institutional aspects of the

partnership between the farmers and companies.

The assessment should be applied to a whole project as distinguished from specific contracts. This

means that the current Risk Analysis used for loans and Considerations document used for grant,

should be integrated in one Feasibility and Risk Analysis considering the whole proposed scheme.

The structure of the analysis (and the format for proposals) should be amended to include the

following chapters (see our framework for analysis of feasibility in chapter 3):

Viability of the market strategy: the generic analysis of market opportunities generally

included in proposals and reviews should be completed with an analysis of the actual

sponsoring company position in the chain

Agronomic and livelihood preconditions: much as the actual format looks into the SME

business plan to assess the profitability of the proposed business, there should be a review of


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how the proposed activity fits into existing livelihood systems; based on standard crop budgets

the cost effectiveness of the proposals should be illustrated by financial data at farmers level

including farmer break-even levels. Assumptions about harvest volumes should be screened

and challenged.

Management capacity of the sponsoring firm: the analysis should look into the managerial

and financial capacity of the company to deliver the proposed services and also into the

capacity building needs for determining whether and how BDS support should be included.

Management capacity of farmers and their organizations: the proposal should show how

farmers intervene in the chain and what level of organization is necessary (see above remarks

on relevance); capacity building needs should be defined broadly and a BDS programme

proposed accordingly and not in generic terms.

Financial viability of the supply chain: a review of how the proposal considers organizing

the supply chain from individual farmers to the last stage of marketing. Costs and price

making should be analysed at each stage of the process in a manner that allows to identify

cost-effectiveness and bottlenecks and to define meaningful indicators and milestones.

Conditions for balanced risk sharing and coping strategies: risks should be assessed and

measured in terms of their consequence for both company and farmers; and mitigation

strategies should be outlined.

Conditions for building stable commitments: no project will be sustainable if it does not

generate increasing trust and mutual commitments between company and farmers; the

assessment should look into objective conditions and measures proposed for building

institutional and social capital (with contracts, regulations, incentives, transparent price

negotiation, conflict resolution mechanisms etc).

Reasonably enabling environment: the assessment should review whether there are

minimum conditions within the legal, institutional and social environment to address the main

risks and what are the mitigation measures; self-standing proposals should be led to integrate

better within the chain environment according to opportunities.

Conditions for adapting to changes and exit strategy: assumptions and risks should be

explicit; the schemes should have “plan Bs” if major assumptions fail (i.e. possibility of

switching products/markets); there should be clear milestones and exit strategy for Cordaid

support including access to mainstream financing mechanisms.

2.3 Use different scenarios to assess feasibility

The business plan and farm budgets with their break-even volumes and other basic indicators should

be put to the test with different scenarios. No proposal should be taken for granted with the “best case”

data generally presented.

After reviewing the realism of numbers behind the proposals, at least three scenarios should be tested:

“average”, “good” and “bad”. Scenarios should be tested against available information of past

performance of the crop in similar conditions.

2.4 Use a common framework for planning and monitoring of projects

Proposals should be presented in a similar framework allowing standard monitoring and evaluation. A

common terminology should be maintained. Proponents should be asked to formulate their project

within the framework that should be organized as follows:

Overall objective: must relate to Cordaid´s own policy objectives. Indicators should reflect

improvement in the livelihoods of farmers, sustainability of the business, and increasing role

of farmer organization and business as partners in the chain.


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Project purpose: should indicate the economic results of the proposed scheme in terms of

financial performance of the company and incomes of farmers, including contribution to

financial viability of farmers’ organizations. Indicators should be financial basically.

Expected outcomes: should indicate the intermediate outcomes of increased capacities of the

partners within the scheme: quantity and quality of products supplied by farmers, added value

and outcomes of marketing by the company.

Expected outputs: should describe the services provided through the project in terms of

technical, management, organizational and financial capacity building, both in terms of human

and physical capital.

Inputs: describe the financial, human and physical means used to develop outputs, both from

Cordaid source, the company and the farmers.

Assumptions and risks: the basic assumptions and risks outside immediate control of the

project should be clearly articulated (market, policy and social environment, climate, etc).

A common structure of the logframe type would allow avoiding confused and heterogeneous

proposals. The generic structure abovementioned might be translated in a simple logframe not more

than two pages with only significant, objectively verifiable indicators.

2.4 Develop more adapted criteria for including gender and environment inclusion

Cross cutting aspects are mostly cursorily considered in the projects. Mentioning them in the proposals

is not a guarantee that they will be significantly integrated. Cordaid should include in the screening

and assessment mechanisms some specific aspects:

Gender aspects should be integrated in the livelihoods dimension of feasibility. In that way gender

dimension of existing livelihoods systems will be described and potential impact of projects in gender

roles in the livelihood system could be assessed more precisely.

Environment is not only the direct impact of project activities. They have to be considered and

environmental impact of land use, inputs use and processing must be considered. In that way projects

based on organic conversion would always be assessed as positive. However another aspect has to be

considered, that is, if the project is going to strengthen the local capacity to manage natural resources

in a more sustainable way.

11.3 Introduce gradual funding and increase accountability of partners

The way Cordaid approves and transfers funding to its partners has a bearing on their accountability.

As we have seen, the actual system increases financial risk and limits accountability while Cordaid has

limited leverage on defaulting partners. Some simple recommendations might also be implemented in

the short term although some adaptation of contracting formats would be necessary.

3.1 Assess for each proposal the correct mix of subsidy and loan

While the combination of grants for service delivery and loans for investment and working capital has

been assessed as an excellent tool in general, there are instances where some investment or working

capital should be deemed eligible for partial subsidy, while for other cases companies might do with

service provision without large grants.

It is therefore necessary to have a flexible policy based on the feasibility and risk assessment.


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3.2 Grants and loans to be transferred in gradual instalments

The instances of financial breakdown of schemes due to unrealistic assumptions and projections, and

of putting fragile companies into debt almost from the start, have been too numerous in the past. Even

with good feasibility Cordaid should not accept anymore to extend loans for working capital without a

trial stage at smaller scale. Investment loans should also be tailored to increasing capacity whenever

possible.

Loans should be transferred in progressive manner very much as done as a cardinal principle in sound

micro-finance.

As for grants there is no reason to transfer more than needed during an initial period. Tranches should

be transferred against due reporting (narrative and financial) from the previous period.

In that way, used by most donors Cordaid would reduce its own financial risk as well as the financial

risk of all its (hopefully) well-intentioned partners.

Phasing of financial and technical assistance support also to SMEs should be tailored to specific

development phase

3.3 Partners should be held accountable for their contractual obligations and reporting

It should not be admitted that a company beneficiating with Cordaid funding should get away without

proper reporting. Contracts should include provisions for suspending further money transfer after

undue delay in reporting or unacceptable reporting.

3.4 The reporting format should be based on the intervention logic and use indicators against

simple baselines

Private companies should not be asked to invest a lot of time in long winding narrative reports. If the

proposal has a simple logframe with good indicators, the reporting format should follow this logical

structure with short reporting and assessment of key indicators. The use of this format should then be a

contractual obligation.

It is no use asking companies to set up complex baseline studies. A simple assessment at the start of

the state for some key indicators from the logframe should be sufficient.

3.5 Review the policy on securities and try to involve more partners

The securities taken by Cordaid, at least in the first stages, have often proven quite ineffective. In

some cases the reliability of securities made on supply orders might be discussed.

One aspect that should be explored is that of risk sharing. Cordaid might try to associate local partners

involved in monitoring and BDS support of projects and create a vested interest on their part in the

good financial outcomes of the projects. Their fees would be at least partly linked to development and

financial outcomes of the SME-farmer arrangement

11.4 Move from project approach towards chain-wide programmes

We have seen that spontaneous proposals may mean that Cordaid is missing opportunities of good

partnerships that might have arisen from a more systematic approach. Likewise, the limitations for

proper monitoring, especially in country, are multiplied by developing a portfolio of unrelated and


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highly diverse projects. It means also that it is difficult to act beyond the self-standing partnership

between SME and farmers towards the supporting institutions and whole chain.

The following recommendations are more medium term and mean a major refocusing of Cordaid

policy.

4.1 Screen individual proposals as pilot initiatives to test potential processes

It would be a loss to eliminate the possibility of funding promising, spontaneous proposals. It would

confer added value to this process if proposals for self-standing projects would be assessed also as to

their potential to develop experiences in new, promising value chains and regions.

4.2 Develop chain-wide multi-stakeholders processes in the most relevant chains

Cordaid should start orienting its portfolio towards developing clusters of contracts within specific

value chains. The advantages of such an approach would be multiple:

The screening and assessment of new proposals would gain from the knowledge of the chain

and background experience and good practice.

Assessment and monitoring would benefit from economies of scale.

More stakeholders could be included, such as BDS providers and support institutions.

Farmer empowerment would be more feasible in chain-wide context.

Partners would gain from mutual experience.

More effective financial mechanisms could be put in place.

Mutual pressure for compliance and accountability could be sought.

Medium term projects would become components in a longer-term chain wide process.

Policy outcomes would become possible through multi-stakeholders alliances.

The added value and visibility of Cordaid support would be enhanced.

The honey value chains in Zambia and Ethiopia seem to afford ideal cases for developing such an

approach. These chains are especially promising because of the following reasons:

They are extremely relevant to Cordaid policy since beekeeping is a basic livelihood for poor

farmers living in marginal circumstances and with limited alternatives

The objective conditions for solid commitment are excellent because large-scale beekeeping is

not feasible.

The market opportunities for expansion of local, regional and international markets are good.

There are already very promising experiences and possibilities for added value and a “niche”

for Cordaid.

The potential replicability is very good.


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Other chains such as the international fair trade and organic coffee chain, are already much more

developed and supported and might be better considered through trade finance instruments at higher

scale.

Other chains that might be interesting besides the honey would include several food crop chains at

local and regional level, where opportunities exist to empower farmer to access promising new market

niches in burgeoning urban markets.

11.5 Integrate financial support and capacity building

Capacity building has been poorly integrated with financial instruments and often cursorily

approached in many proposals. As a result, grant money effectiveness is difficult to assess. Some

improvements must be brought in the way Cordaid supports capacity-building services. They go along

with a greater integration of grant and loan support.

5.1 Capacity building of farmers and organizations based on needs assessments

The capacity building process of farmers and their organizations has to be tailored to objective needs.

Proposals should include a description of basic needs related to the proposal and not covering only

production, but also other roles of the farmers and their organizations in the chain. This proposal

should be examined against the livelihood feasibility of the crop and process.

If needs cannot be assessed precisely at onset a study should be included at the start of the project.

Embedded services should not be taken as granted as the only solution possible. Third-party services

may be more adequate and independent from the company, when applicable (commonly for

organizational strengthening). The cost of the services should be also assessed within the supply chain

as a whole.

5.2 Efficiency and effectiveness of capacity building must be measurable

Capacity building programmes should be planned against verifiable targets. Reporting on numbers of

farmers trained and other workshop-based indefinite outputs as routinely done by some NGOs is not

acceptable. The outcomes of training must be clearly defined and verifiable.

In terms of efficiency some criteria of investment per farmer should exist. Investing more per farmer

than the returns that can be expected for both company and farmer does not make sense. The amount

of grant invested in the case of Gouda Gold for example should have been challenged from the start.

5.3 BDS support to SMEs to be integrated in projects

Cordaid supports start-ups and small, unconsolidated enterprises. These enterprises often are

themselves in need of BDS support and coaching. There should also be a needs assessment at this

level.

BDS support and coaching would be much more cost-effective in the context of a chain wide

programme.

11.6 Improve the monitoring and support to implementation

Improving the quality of design of projects is the first step towards improving Cordaid´s capacity to

effectively monitor progress and performance of projects, and act accordingly. Improving the


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regularity and quality of reporting is another step. Once this is done other improvements must be

ensured.

6.1 Include supporting partners in chain wide processes

Cordaid cannot monitor only based on reporting (even if it is improved) and need in country

monitoring also. Officers can only visit countries intermittently and without time for in depth field

visits. The use of local independent contractors for monitoring and coaching partners should be

fostered whenever possible.

Obviously it will be much more cost-effective with chain wide programmes attending a diversity of

partners in similar conditions.

6.2 Include key data from company and cooperatives records as indicators

All companies and farmer cooperatives should be expected to maintain adequate records of

participating farmers, production, sales and payments. Such records were the main source of economic

data on the performance of projects during the field case studies but surprisingly, many companies do

not maintain adequate records or do not wish to share information.

Whatever information is absolutely necessary for adequate monitoring of project performance, should

be maintained by the company at its own expenses and included as contractual obligation.

6.3 Improve and integrate the filing system

Although there are standards documents for the whole process of project management, the filing

system actually in use makes it difficult to use except by the current officer in charge. Key documents

are not filed in a common directory were information about all past and current projects would be

available.

There lacks a simple file where performance indicators of each project might be periodically

consolidated so as to allow a quick overview of the portfolio situation at any given moment. Again,

the division of work between grant and loan officers should be bridged by common monitoring

formats.

6.4 Develop quick response mechanisms

Currently Cordaid tends to have delayed response to problems after protracted time when reports are

not received. Even if reporting is improved, Cordaid should still need a quicker response mechanism.

It would be easier to set up if there is triangulated monitoring between the project internal monitoring

and Cordaid and its supporting partner external monitoring.

Some financial and physical indicators should be used as early warning system of incoming problems.

For instance data on crop management may give a forewarning of incoming problems to achieve

break-even volumes. Partners could be asked to include early assessment of crop status(some already

do for their own use such as BEEPZ).

6.5 Provide key coaching support to partners

Monitoring should be used primarily to assess the partner needs for support in order to improve

performance. When the Cordaid officer comes into country it is often too late for addressing

immediate issues.


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Some basic coaching would allow to solve many minor issues before they become critical and to

address bigger issues with adaptive measures. This is easier to say than to do, because Cordaid officers

would not be in a position to do this systematically. Again, this would be much more feasible in chain

wide programmes with BDS providers. The case of ABF with the honey chain in Zambia could be a

trial of the feasibility of this.

11.7 Incorporate sustainability and exit strategies

Sustainability issues are not explicitly addressed at this stage. This makes it difficult for Cordaid to

decide how to phase out its support.

7.1 Include sustainability targets and milestones in planning

Cordaid should include from the start, targets and indicators for the sustainability of the schemes. This

should include the financial sustainability (self-sustainability and access to local financial sources),

institutional sustainability (internal regulation of the scheme and external institutional support) and

social sustainability (decreasing rates of drop-offs from the scheme).

There should be clear milestones indicating when some targets should be achieved and to what level.

These milestones should in their turn trigger some relevant actions from Cordaid.

7.2 Prepare for phase out from the start

The conditions for phase out of Cordaid support should be set from the start and linked to

sustainability indicators. While it would be a pity to withdraw support from a scheme that is struggling

harder than panned but making progress, it would also be good to have thresholds and triggers that

may signal the need for pull-out. Linkages should also be sought with local financial institutions to

encourage them to do more investments in agriculture and on more favourable terms.

7.3 Link continued support by Cordaid to well defined parameters

Too many loans are being rescheduled and renegotiated without sufficient criteria about what should

be achieved to overcome existing limitations. The use of milestones and triggers should be

incorporated to some extent in contracts.

11.8 Develop effective learning mechanisms and identify good practices

Besides the need to address its current limitations, the monitoring system used by Cordaid should also

give more room to encourage mutual learning.

7.1 Encourage local partners and Cordaid officers to share stories and good practices

Dry reporting and monitoring reflects the weaknesses of design and more often than not, leads to

bypassing very important occasions for learning. The Cheetah case is an obvious illustration of a

project fraught with problems and at the same time, rich of learning and bearing within, the very

opportunities for overcoming its problems.


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Besides routine reporting, both partners and Cordaid staff should be encouraged to report and share on

illustrative stories and good

practices.

This can be made in various ways

that do not need to be time

consuming. They can at the same

time be motivating for all.

The use of photography should also

be encouraged.

Personal case stories are the most

direct way to give a “face” to

otherwise anonymous issues and

processes.

It is also very important to realize

that failures are a great way to

learn; as Robert Chambers has put it

repeatedly good development

practitioners must be ready to

“embrace their mistakes” by

analysing and discussing them so as

to make sure to overcome them.

7.2 Develop narratives and theories of change and encourage staff to test and review them

Cordaid needs to develop its own “narratives” of the value chain development process. This does not

need to be a formal and mechanical process. It can be produced by improved monitoring, discussion of

good practices and illustrative stories, so as to develop a common vision of what the process should

be, by which Cordaid can successfully support and go along successful processes.

Staff should be encouraged to organize their view of what makes a successful process, what should be

the role of Cordaid, and to regularly challenge the new assumptions with findings from practice.

7.3 Develop training programmes on value chain development and farmers livelihoods

Cordaid staff should be exposed to regular training on basic issues related to the agricultural portfolio,

basic assessment of SME performance, and agricultural value chain financing in order to better bridge

the gap between officers with longer field experience, and younger officers with more limited field

background, and between credit and grant officers.

Illustrative story from a NWBKA route chairman in Zambia

Mr Christopher Laina is route chairman for NWBKA in the Munyambala route. He himself manages 150 hives and is the biggest producer in his association. Most members have between 70 and 150 hives. They had been selling to NWBP but the sales stopped in 2004.

In 2008 after the Brachystegia season his association sold 100 buckets to Mpongwe through the arrangements with NWBKA. He has produced 20 buckets. He is supposed to register the sales of the association but has lost the book where he kept the figures. He does not know exactly how many members his association has, as they do not meet very often. He has received basic training from NWBKA and is supposed to train other members. He has received a bicycle to visit the route. For him, the biggest producer in the area, honey is the main source of cash but he is also producing maize and groundnuts and drying fish from the nearby river. Mpongwe paid 3500 ZMK per kg for comb honey last season. Buckets contain 25 to 28 kg in comb. He is not happy with this price, which he does not see as an incentive although he receives a very small commission on sales. He considers a bulking centre as the most important innovation needed in his area.

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