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June 2010
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Acknowledgements
The production of a document such as this is only possible with significant input from a wide variety of people
providing information, experiences, and thoughts. I hope that I have managed to capture at least some part of the
significant knowledge and expertise that those people have provided, and I would like to express sincere appreciation
to all of those involved.
Initial thanks are to the farmers who never tire of providing us with information and learning, they ultimately are the
people we serve, and the reason we need to continually improve our program quality. Thanks also to the many
processors, traders, buyers, government representatives and financial service providers who provided further
insights for this study.
Many thanks to the Mercy Corps field teams who continue to deliver quality programs, and who provided their
support and input. Particularly field teams from: Central African Republic, Ethiopia, Georgia, Guatemala, Indonesia
Liberia, Kosovo, Kyrgyzstan, Niger, Nepal, Pakistan, Somalia, Sri Lanka, Uganda and Zimbabwe. In Kyrgyzstan,
special gratitude goes to Catherine Brown, Robin Currey and Dariya Toguzbaeva together with all other program
and support staff including: Altinay, Eevgeni, Lyudmila, Nargiza, and Ulan. In Nepal, special gratitude goes to Josh
DeWald, Sanjay Karki, Mahendra Shahi, Tej Thapa, Jarrod Faith and Naresh Angbo, together with all other program
and support staff including: Hari Shrestha.
Thanks specifically to Anna Young for her continued support and patience and the rest of the review team who have
helped to finally mould this document into its present form; Keith Polo, Amy English, Bill Farrell, Diane Johnson,
Jennifer Mayer, Jim Anderson, Mike Goldman and Penny Anderson. Together with other input from program and
operational support teams including: Claire Paterson, Colleen Regalbuto, Joe Dickman, M. Alfi Syahrin, Sandrine
Chetail, Sara Murray and Sasha Muench.
Finally, sincere gratitude to Drew Katz, who provided significant support in developing, collecting and analyzing data,
and content development.
Andrea Mottram
Back cover;
Central African Republic – Jenny Vaughan/Mercy Corps
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Acronyms
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Executive Summary
Nearly half of the world’s workforce relies on growing food for their livelihoods1. That equals two billion people in the
developing world – 400 million smallholder2 farmers and their families. Farmers grow crops and raise livestock to put
meals on their own tables and to sell their products in the marketplace, earning the income they need to provide for
their families.
Although their work could not be more important, smallholder farmers remain some of the poorest people in the world.
Most live on less than $2 a day and tough challenges limit their ability to successfully compete in the marketplace.
Farmers must contend with poor infrastructure, unfavorable governance, limited access to business services, and
a range of daunting laws, regulations and standards. These challenges mean that they have limited opportunities to
raise themselves out of poverty.
Effective agricultural development gives smallholder farmers the boost they need to make their labor more profitable
and increase standards of life for their families. It also has benefits that extend far beyond the farm, helping to address
such global challenges as hunger, climate change and international security.
Recognizing this vital role across a spectrum of challenges – from household food security to large-scale economic
development – Mercy Corps is currently investing more than $145 million in agricultural development. The organization
works with smallholder farmers, agricultural businesses and governments to reduce hunger, increase incomes and
mitigate the environmental impact of crops and livestock.
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Recommendations
Three steps are essential to the success of a combined approach to agricultural development:
1. Public, private and civil society stakeholders must be mobilized from the outset. These
relationships form a foundation that enables the more challenging activities to take hold, such as collective
purchasing and marketing, greater learning and technical understanding, increased advocacy for smallholder
farmers and improved access to markets.
2. Provide access to technical knowledge and agricultural, business and financial services in a
sustainable manner, through existing market players. Microfinance institution (MFI) partners that
provide financial services to smallholder farmers must already be sufficiently sound and sustainable to ride
out any shocks from adding agriculture lending and must take on a commitment to make agriculture lending a
key part of their activities.
When MFI partners open new branches to reach smallholder farmers, operating subsidies can be offered for
a limited time but they should be structured to encourage MFIs to reach profitability and plan for long-term
sustainability.
Where there are no MFIs, informal lending groups such as village savings and loan associations (VSLAs)
can be supported – with the understanding that loans are limited to members’ capacity to save, and cannot
provide for all credit needs of small-holder farmers. Informal borrowing can be a good stepping stone toward
more formal borrowing, as long as MFI options are eventually available.
3. Improve farmers’ access to markets through such activities as marketing and facilitating pre-season
contracts between smallholder farmers and buyers. There should be a clear understanding of market
participants (buyers and sellers), support functions (infrastructure and financial services), rules and norms
(formal and traditional) and the other players (private, public and civic) that collectively constitute the market
system. Linkages should be facilitated between all these players and across the market system in order to
benefit the entire value chain.
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5. Program funding varies, with some budgets exceeding $2.5 million (USD). However, a majority (87%) of
programs surveyed had an average budget of around $700,000. Although traditional donors such as USAID
and the EC still contribute the largest percentage of funding, 44% (in number) of the programs were funded
by the private sector. Increasingly, private donors provide smaller – but often more flexible – funds than do
traditional donors. This is especially true in countries that have fewer funding options, or greater competition
for larger funds. Small funds can effectively be spent developing concepts and testing models; larger donors
can then take successful pilots to scale.
6. Measuring program impact at a global level remains challenging despite significant recent improvements.
Where appropriate, a set of agreed-upon sector indicators and variables (socio-economic/demographic/
cultural/ecological) should be incorporated into all projects. Explanatory variables are critical to understanding
performance, so that Mercy Corps can make informed recommendations about future projects and detect
global trends that may otherwise be missed.
Conclusion
The study concludes that Mercy Corps’ approach to agricultural development should, where possible, continue to
combine high-impact value chain development with increased access to financial services, rather than focusing on
just one or the other. To be effective, programs should ensure that wider market-system constraints and opportunities
are understood and addressed, not just for farmers but for other market players as well. If Mercy Corps takes this
approach, working in partnership with the private sector, public sector and civil society, it can help smallholder
farmers make significant progress in their quest for greater food security, higher incomes and a better standard of
living.
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Contents
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Scope and Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Key Terms and Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Study Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Data collection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Review of Mercy Corps’ experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Data collection from 15 countries implementing agricultural development projects . . . . . . . . . 10
Case studies from Kyrgyzstan and Nepal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Study constraints. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Collating information at a global level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Country case study data collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Mercy Corps’ Approach to Agricultural Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Combined Value Chain Development with Access to Financial Services:
Implementation and Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Summary of project examples: Kyrgyzstan, Nepal, Central African Republic, Guatemala, and Aceh . . 14
Kyrgyzstan (combined value chain development with access to financial services) . . . . . . . . . 14
Nepal (combined value chain development with access to financial services) . . . . . . . . . . . . . 14
CAR (combined value chain development and access to financial services) . . . . . . . . . . . . . . . 15
Guatemala (value chain development only) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Aceh, Indonesia (access to financial services only) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Comparing combined value chain development with access to financial services vs.
value chain or financial access only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Success factors and challenges of a combined value chain development with
access to financial services approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Stakeholder mobilization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Technical assistance and capacity building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Access to markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Access to financial services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Refining the Mechanics of Project Design and Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Project design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Assessment, design and planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Defining high impact and selecting commodities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Collaboration and stakeholder contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Project management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Team capacity to implement quality programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Timeframes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Funding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Measuring impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Annexes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Annex 1. Further details of the study outline. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Annex 2. Questionnaire developed to collect information from 15 countries . . . . . . . . . . . . . . . . . . . . 43
Annex 3: Mercy Corps’ approach to agricultural development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Annex 4. Summary of indicators used to measure impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Annex 5. Sector indicators for agricultural development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Bibliography. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
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Context
Approximately 5.5 billion people live in the ‘developing world’; three billion in rural areas4, of which approximately
400 million are smallholder farmers. Including farmers’ families, approximately two billion people, about a third of
humanity, depend on small-scale agriculture, most of whom live on less than $2 a day5.
Agricultural production is important for food security because it is a source of both food for consumption and
income for the majority of the rural poor. Aside from household food security, agricultural incomes also contribute to
basic needs such as shelter, health, and education. Agriculture-based countries6 employ 65% of the labor force in
agriculture which generates around 30% of the gross domestic product (GDP). However, despite the value of small-
scale agriculture, farmers remain some of the poorest people in the world. Living in the rural areas of developing
countries, farmers face significant challenges as they try to compete in the local and global agricultural sector.
Such challenges include: poor infrastructure (roads, warehouses); inadequate resources such as diminishing water
supplies; lack of technology and the ability to apply it; limited support from technical extension services and other
business services including financial; unfavorable governance, regulations, laws and standards (such as taxes and
land ownership); and the need to satisfy household food security demands with local production. These challenges
mean that small holder farmers are often unable to capitalize upon their existing assets and have limited opportunities
to compete in markets for higher economic returns.
Recognizing the importance of agricultural development7 in addressing these and other global challenges (such as
food security, hunger, poverty and international security), Mercy Corps continues to invest in the agricultural sector
as a part of its food security and economic recovery and development work. In 2008, Mercy Corps formalized
its agricultural development approach based upon field experience and recommendations. Now, as programming
expands, and the global focus on the importance of agricultural development heightens8, it is important to revisit
the approach and offer reflections on its effectiveness and to provide recommendations for improvements. These
refinements are required to not only enhance program quality and organizational learning, but also to ensure resources
are targeted in the most effective way to meet the needs of smallholder farmers, the private sector, and governments
in the varied contexts in which Mercy Corps works, and to ensure that Mercy Corps continues to grow its position
as a key player within the agricultural development sector.
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* Providers include: formal, semi-formal and informal. Formal = those subject to general laws and specific banking regulation and supervision
(e.g., licensed banks, commercial banks, non-bank financial intermediaries); Semi-formal = registered entities subject to general commercial laws
but not usually under bank regulation and supervision (e.g., financial NGOs, credit unions, cooperatives); Informal = non-registered groups (e.g.,
rotating savings and credit associations, village savings and loans groups, money lenders).
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Study Methodology
Data collection
Data were drawn from a number of sources using a variety of different methods to ensure that a broad spectrum
of information and experiences were captured. These are summarized below; further details of interviews and data
analyses are provided in Annex 1.
• Seventy Nepalese farmers in five individual groups representing two group types; farmers were self
selecting.
9 GAIT provides a summary of all funded projects, but relies on the accurate description, complete data input, and use of key words. Thus, some-
times projects may be omitted or included based on the key words provided, but not give an accurate description of the main project content.
Information used in the report from GAIT is therefore indicative of the projects described but may not be 100% accurate.
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Table 1. Details of focus group discussions held with farmers in Kyrgyzstan and Nepal
Group type Kyrgyzstan Nepal
1. Value chain development & access One apple group that received training One ginger group that received
to financial services. and access to specific loan products. training and access to loans. Two
cardamom groups who received
training and access to loans.
2. Value chain development only. One apple group that received training One ginger group that received
only. training only. One cardamom group
who received training only.
3. Access to financial services only. One apple group that received access
to loans only.
Over 40 individual interviews were held with farmers, traders, processors, association leaders, technical staff,
teachers, government representatives, microfinance institution staff, program staff and country team management.
Study constraints
Collating information at a global level
Over the past few years, Mercy Corps has invested in standardizing data collection and indicators across the agency
for similar program types to assess global agency impact. Within the agricultural sector, significant progress has
been made and a number of country programs are now measuring similar indicator types and collecting explanatory
variables for indicator performance. Further developments are also in place with the onset of Mission Metrics10, and
a set of standardized agricultural sector indicators (Annex 3).
Despite this progress, requirements for this study were such that the current variation in methods of collecting and
presenting indicator data between different countries made comparisons across countries challenging, and close
comparisons almost impossible. With the adoption of mission metrics and standard agricultural indicators over time,
it should be possible to analyze and present more comparable global data in the future.
10 The Mission Metrics initiative is Mercy Corps’ effort to define and measure agency-level metrics to help improve performance management at the
agency level while also answering greater calls for accountability. It provides a common understanding of what is meant by “secure, productive and
just” by outlining critical success factors (themes) to achieve the agency mission. In essence Mission Metrics are a set of indicators that address
mission-critical success factors.
11 A perennial plant is a plant that lives for more than two years (http://en.wikipedia.org/wiki/Perennial_plants).
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Despite these constraints, the various forms of data analysis (triangulated qualitative data from farmers and other
stakeholders together with quantitative indicator data in Kyrgyzstan and Nepal; data and experiences from Guatemala,
Central African Republic and Aceh; survey data from an additional twelve countries; the Gates project analysis; and
reviews by Mercy Corps technical experts) provides sufficient information to draw conclusions and make clear
recommendations for improving program quality.
This study was conducted by Andrea Mottram (PhD), currently technical advisor to Mercy Corps. Andrea has
experience managing program implementation for Mercy Corps, in addition to agricultural research and development
experience for other organizations. While this could create potential bias, because the information collected was
varied and triangulated, this is not considered to significantly affect the analysis. At the same time, possessing
experience of the practical situation within Mercy Corps, combined with a broader agency understanding, enabled
the information to be understood within a field context and facilitated the data collection process, putting it into the
context of the wider environment.
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12 The enabling environment consists of all factors external to enterprises which allow market systems to function and perform well (e.g., policy, legal,
regulatory framework, governance, social cultural contexts/norms).
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Summary of projects: Projects targeted increasing ginger and cardamom farmers’ ability to increase their profit
margins via a variety of intervention points including:
strengthening group organizational capacity; improving
business skills; and improving technical practices (specifically
in areas of varietal selection, cultivation, disease management
and post-harvest handling). Projects also forged links with
traders, wholesalers and exporters by facilitating collective
marketing, information sharing and contract farming. There was
a focus on creating an enabling environment by: facilitating
interactions between different stakeholders; improving
negotiating and coordination between value chain actors and
other market system stakeholders; and working with trade
associations. Mercy Corps helped the largest Microfinance
bank in Nepal, Nirdhan Utthan Bank Ltd (NUBL), expand its
operations into the rural project areas of Eastern Nepal,
promoting group-based savings and loan products suitable for
Nepal – Mercy Corps
rural households in sparsely populated areas.
Central African Republic (combined value chain development and access to financial
services)
Project: Global Food Crisis Response (GFCR) (Phase I: Sept 2008 – Apr 2010; Phase II: May 2010 – Feb 2011).
This was a large project incorporating coordinated,
but separate country responses in five countries:
Central African Republic, Nepal, Niger, Somalia
and Sri Lanka. This study focuses on activities in
Central African Republic only.
Problems addressed: Increasing food
prices exacerbated by the economic crisis and
continuing conflict which significantly affected
local populations’ food security and livelihoods.
As a result, a limited cash economy existed at
project start-up.
Summary of project: The project focused
simultaneously on immediate interventions to
improve access to food, as well as medium- and
longer-term solutions to develop more sustainable
Central African Republic – Jenny Vaughan/Mercy Corps food and agricultural systems. Although cash-for-
work was an element of this project, this study
only reviewed the longer-term agricultural strengthening component of the project. This project component focused
on potato and onion value chains, provided seeds and other inputs to farmers (due to severe seed limitations in
the country), provided technical and business training, market analysis, cost/revenue calculations, and marketing,
and supported an agricultural fair to develop market linkages. In the absence of any financial service providers,
the project supported the promotion of VSLAs which included training on business management and product
commercialization.
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Problems addressed: Financial support services for farmers and related agribusiness entrepreneurs represented
a significant limitation to development. Financing was largely provided through informal moneylenders, not from
MFIs. A lack of credible information on rice production, harvest cycles, and government investment contributed to
the rice industry being seen as high risk to many MFIs, despite the untapped profit potential related to the potentially
high number of agricultural loans. Similarly, many farmers perceived banks as bureaucratic and hard to access.
Summary of project: Loan funds were provided by Mercy Corps in stages to seven MFIs to expand their loan
portfolios, linked to clear targets and deliverables. At the same time an intensive training program was provided to
the MFI staff, including the directors and loan
officers, covering topics such as loan management,
savings mobilization, and sales skills. Cross-visits
were arranged for MFI staff to visit well established
MFIs in Java. All seven MFIs were graded using a
standard MFI grading system. Loan products that
met farmers’ requirements such as grace periods
(no payments for a certain timeframe) to allow for
the growing season (when no cash is coming in)
were also developed with these MFIs. To ensure
sustainability and further expansion, training was
provided through a training-of-trainers system
embedded within three MFI associations (MFI
member associations) so that training could
continue to other MFIs in the future, with
evaluations linked to a service provider in Jakarta.
Indonesia – Cate Gillon for Mercy Corps
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Box 1: Examples of project impact from Kyrgyzstan, Central African Republic, Nepal, Guatemala and Aceh
in Indonesia
Nepal
Paanchthar Premium Cardamom Project (PPCP) and Expanding access to finance in eastern hills of
Nepal (results to May 2010)
• 60% change in profit margin per unit of production.
• 90% beneficiaries belonging to Dalit or Janjati ethnic groups.
• 48% reduction in fuel wood use for cardamom drying.
• 7 new branch offices of NUBL opened.
• 6,785 loan clients, of whom 351 are registered in cardamom/ginger projects.
• USD 1.73 million of loans disbursed, of which USD 106,000 to cardamom/ginger project farmers.
• Total savings USD 158,000 of which USD 93,000 compulsory savings.
A summary of the focus group discussion results is presented in Table 2 which outlines the impact of project
activities on four different group types: (1) value chain development with access to financial services; (2) value
chain development only; (3) access to financial services only; and (4) neither value chain development nor access
to financial services. The information provided for each group listed in the left hand column, is separated under four
headings: community mobilization, technical knowledge, access to financial services, and access to markets. These
categories relate to the main focus of project interventions described in the previous section.
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Table 2. Results of different farmer group discussions in Kyrgyzstan and Nepal, categorized by
impact on main project objectives and group type.
Project objective category
Community Technical Access to Overall
Group type Mobilization Knowledge Access to Markets Financial Services Impact*
1. Value chain Kyrgyzstan - HIGH Kyrgyzstan - HIGH Kyrgyzstan Kyrgyzstan - MEDIUM-
development Group structure Improved tech- – MEDIUM-LOW MEDIUM HIGH
and access contributed to: niques (reduction Group develop- Specific loan
to financial learning experi- in pests/diseases), ment helps, but products and
services ence; peer sup- diversified varieties still limited, need general loans.
port; farmers through grafting to join association Farmers possess
working together satisfying commer- but first need to more knowledge on
to purchase inputs cial and home de- register as NGO. how to use loans
e.g., organic pes- mands; limited use No market for 30% e.g., recognize
ticides; increased of chemicals. Ob- of yield (rotten quality seedlings
community cohe- served differences apples). and use loans to
sion and spirit. in quality, anticipate purchase from
higher yields. reputable sellers.
Nepal – HIGH Nepal - MEDIUM Nepal - MEDIUM- Nepal - MEDIUM- MEDIUM-
(women); Ginger farmers: LOW HIGH HIGH
MEDIUM (all) New low-fiber 7 of 33 cardamom Clear rules and
Female groups seed, improved groups participate regulations,
empowered to storage/quality in collective borrowing
manage finances, (higher price). Car- marketing. more fair than
participate in damom farmers: Limitations due to: moneylenders,
meetings and Improved drying/ existing individual but some loans
support/learn grading (improved loans, distances still tied to
from each other. quality – buyer not- between farmers, moneylenders.
Linkages between ed 60% improve- differences in Ginger farmers use
men and women ment in quality). harvest times and loans for new seed
enhanced within Better price (3000 trust issues. and storage.
the HH. Rs/40kg more for
better quality).
2. Value chain Nepal - LOW Nepal - MEDIUM Nepal - MEDIUM- Nepal - LOW MEDIUM-
development Some limited level Training points as LOW Farmers borrow LOW
only - Nepal of mobilization above. Collective from moneylenders
through training marketing points (interest high).
groups. as above for Nepal Banks reluctant to
lend due to lack of
collateral.
3. Access to Kyrgyzstan - Kyrgyzstan - LOW Kyrgyzstan - LOW Kyrgyzstan - MEDIUM-
financial MEDIUM Some technical Limited options MEDIUM LOW
services only Group works information Loans used for
- Kyrgyzstan together to make available from MFI purchasing:
repayments and but not yet used. animals, spring
involved in commu- Some information planting, gasoline,
nity meetings. from other farmers seeds fertilizer,
who participated in sewing machine.
training.
4. No value Kyrgyzstan - LOW Kyrgyzstan - LOW Kyrgyzstan - LOW Kyrgyzstan - LOW
chain Group much less Limited production Limited options MEDIUM
development involved in commu- knowledge, Prefer individual
or access to nity meetings seedlings not loans
fin. services successful
- Kyrgyzstan – purchased low
quality market
seedlings, not *Overall impact: HIGH = Greatest positive impact on
using ecological farmers livelihoods, LOW = lowest impact on farmers
methods livelihoods.
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The most beneficial economic and social impact was observed by farmers in group type 1: those farmers benefiting
from a combined value chain development with access to financial services. This combination allowed farmers to
invest loans in business improvement, provided them with agricultural information to help them make the most of
their investment, and improved market linkages to facilitate better end prices. The provision of credit and technical
knowledge through groups rather than individuals cemented the farmers’ relationships with each other, enhancing
the effects of learning, providing a better foundation for group marketing, and facilitating peer support.
When only value chain development activities were provided, without the link to financial services (group type 2), the
problem of limited access to affordable credit for on-farm investment was not addressed. In Nepal, almost all farmers
take loans at the beginning of each season to invest in seeds and other inputs; for the majority, taking loans from
local money lenders or traders who usually offer extremely high interest rates, is the only option. Without expanded
access to financial services, a typical farmer’s only option is to continue borrowing from those moneylenders, locking
him or her into a high interest loan, limiting where produce can be sold, and often requiring that the farmer settle for
low prices, resulting in reduced income.
When only access to financial services was provided, without value chain development (group type 3), the problems
of technical capacity and market linkages were not addressed. Possessing access to finance, but not the improved
knowledge of where to target financial resources, or the opportunity of enhanced market options, resulted in reduced
options for increased returns on the loan fund. Increasing farm output does not necessarily increase income; farmers
have to be able to invest in the right crop and technology, have the right market linkages available, and operate within
an enabling environment to be able to really benefit from loan investments. All farmers in this group expressed a
need to include technical training with the loan service, together with improved market opportunities. MFI staff also
expressed the need for improved access to technical and marketing assistance in order to decrease the risk of loan
default.
Results for those farmers that did not receive project support in terms of access to financial services or value chain
development (group type 4), show that without the project support, stakeholder mobilization, technical knowledge
and access to credit are all very limited. Farmers in all the groups noted that access to financial services together
with quality inputs, technical support, and market linkages were the key areas in which they needed support.
Note on moneylenders
Discussions with farmers highlighted that providing financial access to farmers will not result in immediate
disassociation with money lenders because:
a) It will take at least one harvest to pay off the money lender loans.
b) Often MFIs limit initial loan sizes to farmers to reduce the risk associated with unknown clients, and will lend
more only once farmers’ credit rating increases. In some cases, e.g., in the Nepal project, these initial loans
did not cover the full borrowing required by a farmer. Therefore, farmers may need to continue to borrow from
money lenders, but this need will be reduced over time as loan sizes from MFIs increase.
c) Money lenders are often easily accessible (they live in or near the village), and they often provide other
services to rural communities, such as provision of food staples which can be taken on a loan basis during
lean seasons. (In the case of Nepal, farmers exchanged cardamom for staples such as rice, salt or millet).
The findings presented in Table 2 and described above, were also reflected in Guatemala, Aceh and Central
African Republic. In Guatemala, although value chain development activities successfully facilitated USD 1.3 million
of vegetable sales with the formal and informal markets including Wal-Mart Inc., an overriding problem was the lack
of access to financial services, especially for post-conflict groups, which are less likely than others to access credit
from the formal sector. Farmers’ lack of access to credit prohibited expansion of productive activities and access to
formal markets as they could not make the productive investments necessary to expand and thus realize economies
of scale to reach higher-level buyers. The project did assist some groups to solicit loans from public or private banks,
often providing letters of understanding explaining the group’s position within the project and their relationship with
Wal-Mart. However, these efforts resulted in only a small number of loans. Project staff stated that if the project was
to offer credit, groups should be evaluated according to their experience with managing credit, and those with little
experience should be offered appropriate amounts in an incrementally increasing credit-cycle approach.
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In Aceh, the financial access project had significant impact in terms of developing the capacity of MFIs (two MFIs
reached grade C on the PRIME rating standards developed by the International Financing Corporations (IFC) thus
enabling them to access funding from lenders outside of Indonesia), and increasing their client portfolio. However,
because activities were not closely linked to other value chain development activities, the project faced considerable
challenges encouraging MFIs to lend to farmers – particularly rice farmers – considered high risk by the MFI.
The approach in Central African Republic combined value chain development with access to financial services, but
in this case the focus was VSLAs rather than formal financial institutions. This combined approach was successful
in increasing productivity and sales (192-311% depending on the commodity), and VSLA groups made 939 loans
and collected USD 24,100 in cumulative savings. However, in this case two factors limited the effectiveness of the
combined approach:
1. Farmer selection – because VSLA group members are selected by the group, it is more difficult for the
project to ensure that those benefiting from value chain development activities are also those that are included
in VSLAs. This is also experienced with the MFI model, as they too select who they will lend to, but in this case
the MFI is encouraged to lend to farmers who benefit from value chain development activities due to reduced
risk. One solution to this could be to support VSLA development first, and then ensure those members are
involved in value chain development activities.
2. Limited loan fund – because the size of the loan in a VSLA group is limited to the amount that they can save,
farmers are severely limited in the amount of capital investment they can raise. This means that when their
businesses grow, and they begin to formalize their activities, they need additional sources of credit to make
the required larger investments.
The benefit of this combined approach is that farmers possess more knowledge about where to invest small amounts
now and larger amounts in the future. It is also a good lead-in to MFI loans, as farmers now have credit experience,
making them less risky to the MFI. This approach is therefore a good stepping stone to further value chain development
combined with access to financial services through MFIs.
Stakeholder Mobilization
In both Kyrgyzstan and Nepal, mobilization
was continually identified as a key component
of project success. Mobilization was designed
as a key element of Kyrgyzstan’s project from
the beginning, but centred on the agricultural
commodity rather than the whole community
(e.g., technical training groups, loan groups,
and garden association formed to develop
marketing options). The project specifically did
not encourage registration of groups as formal
entities, or outline what structures they needed
to be, but focused on mobilizing groups to
work together. The decision to register as an
NGO or association was left to the community
members involved; the process was not
facilitated by Mercy Corps, although interested
groups were linked to other organizations that
Nepal – Andrea Mottram/Mercy Corps supported such services.
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Similarly, in Nepal, an element of the project design was to strengthen farmer groups. Mercy Corps’ partner NUBL,
implemented a significant mobilization process as part of its group lending scheme, with frequent visits from NUBL
staff to the groups at least once a month. Both farmers and NUBL staff highlighted the significance of this mobilization
process in terms of enhanced capacity to manage the loan funds and improve working relationships. Project staff
also identified the importance of this mobilization process after observing enhanced results in the loan groups.
Project staff subsequently commented that mobilization should have been a more significant element of the farmers’
technical capacity building process, as it improved relationships which supported improved group marketing.
All participating Kyrgyz and Nepalese farmers expressed the view that they benefited from greater learning through
a group approach and better community spirit as a whole, and
in Kyrgyzstan in particular farmers expressed the belief that
things were more possible than before. This contrasted starkly “We feel much happier as a
with the feelings of non-project participants who did not have community and have lots more social
that same positivity, although this could also be an inherent events than we used to.”
personality trait that initially prevented those farmers from
participating in the project. – Participating farmer from the EcoSad
training and loan group, Kichy Jargylchak,
As a result of the project mobilization process in Kyrgyzstan, Kyrgyzstan
one group secured resources from a gold mining company
to help support the building of a new bridge, and in Nepal
mobilization of different stakeholders and associated meetings
resulted in the abolishment of the fawa13 system.
Community/stakeholder mobilization
Why?
• Farmers’ relationships are strengthened, forming the foundation for development activities such as collective purchasing
and marketing and enhanced production (thanks to greater technical understanding and learning between farmers).
• Stimulates the formation of civic groups such as cooperatives and associations, which then advocate on behalf of other
farmers.
• Enhances relationships between various stakeholders in the market system encouraging overall market development,
and longer-term benefits.
13 The fawa system required that farmers give a buyer an extra kilogram of cardamom for every 40 kilograms sold .
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Scaling up
The quality of training delivery was similar when provided by Mercy Corps staff (agricultural training in Nepal) and
financial service provider staff (financial services training in Nepal; agricultural and financial services training in
Kyrgyzstan). However, the continued sustainable provision and expansion of training to other famers is more likely
with financial services because they are delivered by existing service providers and are embedded as part of the
loan product: the MFIs can continue to provide this service in the future, and farmers do not have to decide whether
or not to pay for it.
The challenge for both Nepal and Kyrgyzstan was how to scale up high quality agricultural training to those outside
the project on a sustainable basis when it had been provided by project staff. The preferable delivery method for
agricultural knowledge is to use existing agricultural service providers (e.g., encourage input suppliers to provide
technical services as part of their inputs, develop existing government systems if they are functioning, or work with
other existing service providers and introduce the concept of fees for service to farmers). However, in both countries,
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as is often the case, there were very limited opportunities for this (government services were underfunded, often not
relevant to the farmers specific needs, and sometimes not trusted by farmers, there were few agricultural input suppliers
in these more remote areas, and encouraging farmers to pay for agricultural knowledge is very challenging).
Both projects intended for farmers to share knowledge through farmer-to-farmer networks. This was somewhat
successful in Kyrgyzstan, where project participants and, to a lesser extent, non-participants, increased technical
practices, suggesting there was a diffusion of knowledge from project participants to neighbors and other community
members. However, there are limitations to this method in terms of reach, speed of uptake and quality of information
passed on.
Another solution explored in Kyrgyzstan was for the MFI itself to provide agricultural knowledge services to loan
clients. Kompanion, a development institute as well as an MFI, now has technical experts such as veterinaries and
crop experts on staff to provide such information, although there are currently challenges associated with the ratio of
staff to clients and the quality of the service. This method is currently being explored in Nepal, with the development
of “Agricultural Lending and Technical Services (ALTIS)”, a concept which combines access to financial services
with business and agricultural knowledge. This combination of services would be provided by one financial institution,
with the cost of service delivery incorporated into loans’ interest rates. This type of approach not only provides
farmers with both agricultural and financial access and knowledge, but also makes good business sense for the
lending institution in terms of providing more security for the investment, thus reducing loan default risk. There are
challenges with this approach, as its success will depend on the ability of financial institutions to hire staff with the
necessary expertise to provide these integrated services.
Why?
• Facilitating embedded services that are commercially paid for is more sustainable than provision by the NGO.
• Providing a combined financial services and agricultural capacity product provides more security on the loan investment
for the lending organization.
• Providing business skill training early on generates profit baseline data; motivates farmers to participate in follow-on
activities; sets the tone for envisaging the farm as a profitable enterprise; and helps borrowers interact with formal
finance institutions.
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Access to markets
Development of associations and linkages with buyers
Developing and supporting farmer and trade associations is an
important part of improving market linkages and advocating on
behalf of farmers. Project interventions in Nepal helped create
the Large Cardamom Entrepreneurs’ Association of Nepal
(LCEAN), which is actively working with the local Chambers of
Commerce to establish a marketing strategy for premium pink
grade cardamom. In Kyrgyzstan, the Nur-Omur Association of Fruit
Growers facilitated the sale of 4,761 tons of apples, apricots and
pears worth an estimated market value of USD 2.3 million during
the GAP project.
Facilitating linkages between famers and buyers has to be a large
part of any value chain project, and was a strong focus in both
Kyrgyzstan and Nepal. By the end of the gardens and plastics
project, 62% of participants were selling to more than one buyer,
up by 30% from the start of the project.
Group marketing
Group marketing often enables farmers to obtain better prices and
forge improved relationships with buyers who need to purchase
on a larger scale. For example, cardamom famer groups in Nepal
can receive around USD 20 more per 40 kg due to improved
quality, collection and market if sold in 10 – 12 ton loads. Improved
products, collective marketing and forward sales contracts resulted
in a reduction between the ‘farm gate’ price and the local major
market centre, Birtamode.
However, successful group marketing was the biggest challenge
Kyrgyzstan – Andrea Mottram/Mercy Corps
observed in both countries. In Nepal, only 7 of 33 cardamom groups
were actively marketing together. Reasons highlighted by farmers in Nepal included: slight difference in harvest
times; different product quality; distances between farmers; trust; and ability to collectively market when farmers are
already tied into individual loans with money lenders. Storage is another important consideration with regard to group
marketing. In Nepal, the project improved ginger storage techniques so that farmers could store ginger seed longer.
Similarly in Kyrgyzstan the project supported the development of a storage and collection centre.
Group marketing is often not possible at the beginning of a project because farmers are tied into individual loans with
money lenders, requiring that they individually sell their produce to money lenders. Even when not tied into individual
loans, the challenges of organizing the group, collecting the commodities and variations in quality between different
farmers mean that the process is slow. However, these challenges are more evident when trying to measure the
impact of a short duration project, because group development and improved marketing take time. Over the longer
term, the number of groups does generally increase every year.
Although there are clear benefits to group marketing, is it is important to support individual marketing and not rely
solely on the group approach.
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services such as training, business information and access to technology) therefore need to ensure that the products
and services they deliver are of high quality and in demand by farmers, and then have a clear marketing strategy to
expand their services and working areas.
Note on market systems
There are many supporting functions which determine market behavior and practices, shape relationships and provide
information and incentives (such as research and development, agricultural technical services, and infrastructure).
Markets are governed by formal or informal rules that shape market outcomes and control business operations and
behavior. There are also many market players in addition to core value chain actors, such as government, private
sector, non-profit organizations, business representation organizations, and informal networks and alliances who
play critical functions in the market system. These elements, together with the core market (buyers and sellers,
or the value chain) collectively contribute the market system. Thus, agricultural development interventions that
combine “high-impact” value chain development with increased access to financial services interventions, need to
ensure that other wider market system constraints and opportunities are addressed not just for farmers but other
players as well.
Access to markets
• Understand and engage with existing buyer demand before starting other phases • Do not just focus on
of the project such as increasing supply. Build the supply (financial institutions the farmers, make sure
and other service providers) and the demand (farmers and other stakeholders) the buyers’ needs are
simultaneously: do not just focus on one side. well researched, i.e.,
be demand-driven not
• Facilitate linkages at various levels in the value chain and wider market system, this producer-led.
will benefit the value chain, and market system as a whole.
• Mobilize and strengthen farmers’ groups so they can improve market access
through greater critical mass and group problem solving and advocacy.
• Financial institutions need to be able to target clients correctly and explain why
their services add enough value to be worth the additional costs. They also need
to explore keeping costs low, for example by providing more efficient services, and
faster disbursements and demand loan and savings products. The same applies for
other service providers.
• Consider supporting market and household level interventions through combined
marketing and service provision e.g., improved marketing and veterinary services
could improve marketing of small animals (poultry, goats, sheep) for sale and to pay
for veterinary services; and improve animal health for large animals (cattle, camels)
as household safety nets during shocks.
Why?
• Understanding market systems and facilitating market linkages are critical for project success.
• Collaborating with private sector buyers is important for understanding the market and facilitating buyer-supplier
contracts with farmers and buyers.
• Market linkages are critical for farmers to benefit from fair prices and access to different markets.
• Mobilizing farmers into groups is one way for farmers to access better markets.
• Financial institutions and other service providers need to be able to market themselves, especially in environments where
other providers may offer lower rates or informal lending exists.
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Group lending
MFIs in both Kyrgyzstan and Nepal lent predominantly to
groups. The main difference was that in Nepal groups were
“Understanding all the financial female-only and managed all the transactions themselves,
transactions was really complicated making repayments to the bank only every quarter (as was
in the beginning, but now we standard practice for the self reliant group model at NUBL 14).
In Kyrgyzstan, groups were mixed gender, monthly payments
understand how it all works. It is were required, and transaction details were all completed
much better for us to manage all the by Kompanion. Kompanion’s first mixed gender groups were
transactions than the bank doing this piloted through the project and mixed gender group loans (in
for us because we learn more and which women are required to be the majority in the group),
have much more confidence” have been rolled out country-wide based on the pilot’s positive
results. In particularly remote areas, where distances to branch
– female loan group treasurer Arubote, offices are long and transportation difficult, quarterly payments
Nepal were welcomed by farmers in Nepal, who considered this a
considerable benefit of the process. This was confirmed by
farmers in Kyrgyzstan, who wanted to make less frequent
payments than their obligatory monthly payments due to travel distances between villages and MFI offices.
In Nepal, the condition of female-only groups and the fact that
group members were responsible for more of the transactions
and details, had a significant effect on increasing women’s “Before only men used to attend
capacity and standing in the community. In Kyrgyzstan, some meetings, being part of the lending
farmers preferred mixed groups because different people and group has given us more confidence
genders brought different skills to the group. The group lending so we can attend meetings”
approach meant farmers were pressured to repay loans,
although some farmers preferred individual loans because of – female farmer from loan group
this reason. Bhalukhop, Nepal
14 NUBL operates in two models: a) The Self Reliant Group model where repayments are made on a quarterly basis; and b) The Grameen Model
where NUBL determines the loan period and repayment schedule based on the nature of the loan purpose and cash flow situation of clients. The
first is predominantly used in Mercy Corps supported projects.
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Unlike Kyrgyzstan, the process in Nepal involved a group lending scheme that included compulsory savings as a
part of the process. Farmers liked this element because they saw their savings grow, and were encouraged to save
more based on those results (after 18 months, total savings for NUBL clients served by project supported offices
was USD 141,044, of which USD 86,617 was compulsory savings). Although not offered as an option in Kyrgyzstan
(because Kompanion is currently not permitted to accept savings), some farmers mentioned they would like the
option of voluntary savings, and would trust Kompanion above other MFIs to provide that service. It is important
to note that compulsory savings do raise the cost of the loan since the borrower doesn’t receive the full amount
borrowed as payments are being put back in.
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fact that Phidim is a more rural town, and thus more easily accessible by poorer farmers in rural areas. Thus, opening
branches in more rural areas may provide greater access to poorer clients, probably because challenges such as
travel, and familiarity with finance staff and processes are addressed. This is particularly important when interventions
such as mobile phones and pay points in stores are not effective, for example in these rural areas of Nepal where
there is no mobile phone coverage
Table 3. Number of clients registered with two NUBLbranches (Phidim and Phikkal) disaggregated
by poverty category during years 2008/09 and 2009/10.
200
Phidim Branch Office
Increase in client registration number
120
80
40
0
A B C D E
Poverty Category
Figure 1. Increase in client registration from 2008/09 to 2009/10 in the Phidim and Phikkal branch
offices, disaggregated by poverty category.
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• Ensure partners support a wide range of financial services, not just microcredit if • Avoid creating special,
they are legally allowed to. short-term projects that the
MFIs cannot continue after
• If MFIs have access to loan capital on the local money market, when encouraging program funding is over.
them to extend into new operational areas, one option for support is to cover Ensure the MFI can afford
the loss incurred by the MFI for a set period, rather than providing loan funds. to maintain the loan product
Conversely, if access to loan capital is a challenge, loan fund grants or debt indefinitely.
financing is an option.
• Consider VSLAs or other solidarity group models as an entry point to introduce
inexperienced borrowers to sound financial management and savings practices.
Then build ways for VSLA members to graduate as their agriculture enterprises
mature. Strategies might include facilitating linkages with an MFI, or developing an
inventory credit relationship with a recognized and trusted trader.
• Where there are no MFIs, it is possible to support informal lending such as VSLAs,
but be aware that since loans are capped by their members’ capacity to save, they
are not able to cover all credit needs, and MFI options should be developed for the
longer term.
• Support group lending through MFIs, as this helps build confidence and develops
relationships that can then be used for other benefits such as group marketing and
instils some element of group peer pressure to help reduce loan defaults. However,
also ensure individual loans are provided by the MFI as well.
• Most successful projects facilitate links between farmers and MFIs so that trust is
developed between both stakeholder groups.
Why?
• MFIs need to be able to ride some of the risks associated with shocks (manage their loan loss), and there needs to be
a significant base to work with including large and diverse enough client base to cope with this, especially when doing
short-term projects.
• Mercy Corps should aim to be a distant facilitator, otherwise farmers assume funds are a grant rather than a loan and are
more likely to default.
• Other financial services, such as savings, are important in addition to credit.
• Covering the loan loss for a specific time period rather than providing loan funds will help partners plan and prioritize
cost-recovery of new branch operations within the project timeframe.
• In the absence of MFIs, or as a stepping stone towards MFI lending, facilitating informal lending such as VSLAs is more
sustainable than the provision of loans funds or grants by an NGO.
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Why?
• To fully understand the high-value commodity market so that constraints and multiple leverage points can be identified
together with local stakeholders, ensuring the commodity of choice is in demand and that farmers can make a profit.
• This allows a clear project concept to be well researched and designed. The concept should incorporate flexibility to
allow for changes during the project cycle.
• Good relationships with different stakeholders are key to project success and longer term sustainability.
• The project needs to fit in with critical external factors such as productions seasons.
• Finance and operational staff are involved in project implmentation and understand different elements that program staff
might not be aware of such as purchasing challenges and donor financial requirements.
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“High-impact” commodities
Why?
• Making the right commodity choice is one of the most important parts of the project, focusing on “high-impact”
commodities will help to make the choice and ensure wider impact.
• Without a country-level definition of “high-impact”, it will be unclear what this means and who it targets.
• The time required developing new commodities and associated risk of marketing new products is high.
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Why?
• Contribution by beneficiaries and avoidance of reliance on free inputs and services is the only way to ensure project
sustainability.
• Collaboration helps resolve conflicts of interest and reduces delays, plus ensures involvement of different stakeholders
in key processes to further buy-in and sustainability of interventions.
Project management
Project management is the overarching critical component of “Leadership of the project manager
any project intervention. Getting the management right can
make the difference between project success and failure. [who has significant experience
Team capacity, timelines, and budgeting are key elements of working with value chains and the
project management. private sector] was a key factor of
the project’s success”
Team capacity to implement quality programs
It was evident from the questionnaire information that many – representative from Wal-Mart Central
of the field teams were unclear on the use and processes of America, Jan 2010
some of the key tools and frameworks that should be used in
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value chain programming. It is critical that field teams are supported and trained on the concepts and practical use
of relevant tools and frameworks, and that communities of practice are established so that field teams can share
experiences to ensure program quality. Relevant Technical Support Units (TSUs) should roll out a coordinated
training program using methods such as online interactive training sessions, webinars, voice-over presentations and
sessions at regional meetings. Field team leadership should ensure that team members dedicate time to thorough
up-front training.
Team capacity
• Train team members on the relevant tools and frameworks to • Spreading existing team members too thinly
across different projects.
ensure program quality using innovative in-house methods
such as online training sessions, voice-over presentations and • Expensive overseas trainings targeted at a
sessions at regional meetings. few individuals, with limited impact on team
learning and project implementation.
• Use internal team members to conduct market analyses.
• Ensure that overall management from country leadership is
adequately budgeted and planned over the course of the project
cycle.
• Engage global TSU team members more proactively during the
implementation phase and not only during assessment, design,
or evaluation periods.
Why?
• Ensuring team members have the correct skills and the time to manage projects is a key element of project success,
especially when the project incorporates specialist elements such as market development, value chain development and
access to financial services. Experience in key competences improves project impact due to in-depth understanding and
improved relationship building with stakeholders.
• Using internal staff in analyses expedites the process, reduces cost and equips the implementation team with the
knowledge and relationships required during implementation. It also keeps those skill sets in-house, making them
available for replication and the training of others internally.
Timeframes
The problem of short project timeframes was the single most repeated issue raised by project teams in more than
ten countries, causing the biggest challenge for project implementation and quality. The average project length of
agricultural development projects15 is two years (25 months). Removing the four longest projects, which are 58
months and over, the range for the remaining 94% of project timelines is from 5 to 44 months, with an average of
21 months. Of the total number of projects, 45% are 18 months or less. The length of a project obviously has a
significant impact on the type of interventions possible. For agricultural projects, which are often tied to specific
seasons in which interventions can be done, the length of a project is even more significant. In many cases 18
months would only allow for 1 harvest season to be captured within the project timeframe, which usually is not long
enough to fully ensure adequate uptake of techniques and monitoring of MFIs and other services.
In most cases, country teams responded to this challenge by implementing a continuous cycle of short projects
which build upon each other. Although this does go some way to addressing the short timeframe issue, teams
are forced to design projects that will produce high impact numbers within short timeframes, rather than designing
better phased elements of a longer term, more sustainable project.
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Following discussion with project teams in three countries (Guatemala, Kyrgyzstan and Nepal), the following minimum
timeframes are recommended to ensure effective project impact:
• one year for pilot projects with direct farmer interventions on a small-scale;
• three years for annual crops and commodities where there is some level of organizational development in
terms of associations and other support services; and
• five – six years for perennial crops or where there are only minimal levels of organizational development.
However, it is also understood that funding streams available are often shorter-term in nature. If short timeframes are
unavoidable, teams need to be realistic about the impact they can have, and where possible design those shorter
projects to build on others, tying the cycle of projects into a clear country-wide strategy, and staying consistent with
this strategy. At the headquarters level, lobbying donors to extend agricultural project timeframes should also be
considered.
Timeframes
Why?
• 2-3 yrs minimum is required for annual crops to ensure at least two harvest cycles within the project timeframe to test out
behavior change and commercial viability of products, services and linkages. Longer may be required for post-conflict
groups where time needs to be spent on building levels of trust and developing relationships with formal markets.
• At least 5 yrs is required for perennials, or crops where there is very little organizational development e.g. trade
associations, to allow enough time to develop organizational development and fully understand impact on perennial
crops.
Funding
Using information from GAIT, the total budget attributed to 6916 ongoing identified agricultural projects17 is USD
161 million, with an average project budget of USD 2.3 million. However, only nine of these projects have a budget
of more than USD 2.5 million. When these nine projects are removed, the remaining 60 projects (87%) contribute
a total budget of USD 44 million, with an average budget of USD 721,429. Thus, nine of the 69 projects contribute
73% of the total agricultural funding. While these projects are obviously significant for the countries in which they
are implemented, and contribute a significant amount to agency operations, it is also important to understand that a
majority of country programs are implementing projects with much smaller budgets.
16 One of the 70 selected projects did not have required information in GAIT.
17 “Agricultural projects,” not “high-impact” agriculture projects, because it was not possible to segregate the two in the GAIT database.
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When the total budget is broken down by donor, USAID is the largest donor, with a total budget of almost USD 98
million (including a USAID sub-grant through DAI). Followed by USDA, EC and DFID contributing USD 29.8 million,
USD 10.2 million and USD 6.6 million, respectively. In total, these four donors contribute 89% of the total funding
(Figure 2) and 45% of projects in terms of number (Figure 3). Eleven percent of the projects are funded by CIDA,
USDS, Save the Children and SDC. The remaining 44% of projects are funded by private donors such as: the Bill
and Melinda Gates Foundation; Phoenix Fund; Walmart, Starbucks; Waterloo Foundation; and individual donors.
Interestingly this 44% of projects in terms of number contributes only 4% of the overall funding.
30 31
Private USAID,
USDA,
$143,646,118 EC, DFID
USAID,
USDA, 8
EC, DFID CIDA,
Save,
SDC,
USDS
These results show that traditional donors continue to be important, as they provide large funds for big projects that
also cover a large proportion of agency operational costs e.g., a significant contribution to projects in Afghanistan,
Ethiopia, Guatemala, Mongolia, Sudan and Uganda. However, private donors are increasingly becoming more
important to provide smaller, but often more flexible funds particularly in countries with either less or much more
competitive larger funding options e.g., Central African Republic, Honduras, India, Liberia, Nepal, Niger, Somalia
and Sri Lanka.
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Budgeting
• Develop budgets together with program, operational and financial staff. • Over budgeting market development
projects which require more facilitation
• Ensure one project manager is ultimately responsible for the budget rather than provision of large inputs.
expenditure, but different departments incorporate their budget pieces.
• Developing budgets without sufficient
• Ensure expenditure follows a pre-planned pattern (usually bell-shaped monitoring and operational costs included.
curve), and is reviewed monthly with finance staff.
• Ensure operational and monitoring/evaluation requirements, including
staffing, are budgeted sufficiently.
Why?
• Targeting flexible funds at more innovative projects can be a way of testing out ideas that can then potentially be funded
by larger donors once the groundwork is done.
• Linking budgets to timelines ensures effective project implementation.
• Market development projects should be more heavily focused on facilitation rather than input provision.
• Operations teams posses knowledge of prices and operational requirements; it is important that this experience is
incorporated into the budget.
Measuring impact
Monitoring and evaluation (M&E) are critical for informing program design and adjustment. It is equally important
to measure overall project impact to ensure transparency and accountability to donors and beneficiaries. M&E is
becoming increasingly important as donors and other agencies focus more attention on the importance of measuring
impact and proving sustainability.
M&E has been a significant part of Mercy Corps’ programming for some time; excellent systems have been developed
supported by strong technical support (see “Bibliography” for useful Mercy Corps M&E documents including “DM&E-
in-a-box”). Within the agricultural sector, significant progress has been made. Most country programs now measure
good information, participate in an annual global results compilation exercise, and projects are often completed with
an evaluation. However, there is always room for improvement and ensuring that Mercy Corps continues to build
upon this foundation is an important step for further enhancing program quality.
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therefore required, with the option to add other indicators at the country level to satisfy donor and other in-country
requirements and uses. Building on an original indicator set that was developed in 2008 as part of the agricultural
strategy, a standardized set of sector indicators for agricultural projects has now been developed, some of which
are linked to Mission Metrics. The indicators, listed in Annex 3, are the standardized set of agricultural indicators that
should be used in all agricultural development projects. While not every indicator in this standardized set has to be
measured, country programs should select the relevant indicators from each category that best measure the project
focus. Additional indicators can also be added to meet in-country needs. It is important to note that environmental
and social impact indicators have to be included in project monitoring; of the nine countries reviewed in Annex 5, only
two measured environmental, and four, social impact indicators.
Developing indicators
Of country programs that could provide information on how indicators had been developed for the project (nine in
total), 67% of indicators were developed by the country team specifically for the project identified, in one case in
addition to indicators suggested by the donor, and another with support from TSU. In two cases these indicators
were also a continuation from other projects within the country. None of the teams developed indicators in discussion
with other country teams or other HQ representatives. This highlights the limited exchange of information between
country programs, and perhaps provides another reason for differences in indicators currently being measured by
each country program.
There was a general agreement that there needs to be more creativity when designing market level indicators such
as those which measure linkages between actors in the value chain, use of services and other behavioral changes
resulting from interventions, rather than measuring intervention specific indicators such as trainings attended. A
good example of this is provided by the Kyrgyzstan TAP and GAP projects which measure uptake and use of new
techniques rather than attendance at training events.
Measuring indicators
In terms of practically measuring indicators, the views of different
project teams varied. Some teams found it difficult to measure “Measuring increased knowledge is
income and to define what income means, others found jobs not sufficient – we need to measure
difficult to measure because of the varied interpretation of the impact on behavior, and actually
jobs, and some found percentage change difficult to measure if people use these new techniques
accurately, resulting in a change of indicator to measure number
rather than percentage. Generally, the results highlighted a
or not”
consensus that indicators need to be more clearly defined at – Mercy Corps country team member
the outset, and good baseline information needs to be collected
to allow fair attribution of change to project impact.
Attribution
Attributing change (relating impact measurements specifically to project interventions) is an important consideration
when measuring impact. Farmers’ livelihoods are complicated; a number of different income sources contribute to
overall household income, at the same time various factors within market systems influence processes throughout
value chains in which small-farmers operate. It is easy to attribute impact to specific project interventions, when in
fact it might be something external to the project. It is therefore important that the results are analyzed with a view to
wider influences such as: market prices, seasonal fluctuations, other income sources such as labor, and changes in
the wider market system affecting project participants as well as the wider community.
Examples of attributing change from Kyrgyzstan and Nepal are provided in the box 2 below together with further
reading provided in the bibliography.
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Box 2. Detailed data collection and analysis of results in Kyrgyzstan and Nepal illustrate the point of
attributing change
Example: In the Kyrgyzstan GAP project, average household income of project participants increased by 20%. Total
income increased by 3% (USD 167) for non-participants. These figures alone suggest that the interventions
impacted income directly. However, when the details of proportioning income between different sources:
agriculture (separated out for home gardens, apples and large plots); livestock; formal employment; and
other sources, was compared, the significant difference was in formal employment; there were no significant
differences between the participants and non-participants for home gardens and apples, which actually
increased for both.
Example: A 60% - 231%19 change in profit margin per unit of ginger production (USD 6,206 to 9,940 (60%) and
20,517 (231%) per year) was observed in the Nepal ginger project. This was due predominantly to increases
in productivity from high-quality seeds, better cultivation practices, and reduced disease together with higher
prices of low-fiber ginger, reduced breakage and collective marketing. Some of the increase in profit can be
attributed to market fluctuations (10-14 cents/kg increase in market price). If market fluctuations had not been
tracked, this difference would not have been identified.
Monitoring
Why?
• Without baseline information it is difficult to measure the impact of project interventions.
• Agricultural sector indicators need to be included so that data can be compiled across countries at a global level, and
some level of standardization maintained.
• Choosing the right indicators can aid data collection, and provide clear project impact results.
• If indicator results are interpreted incorrectly, attributing change to the project intervention will also be incorrect.
19 231% represents the actual change observed. 60% takes into account market fluctuations and isolates the impact of project interventions from
market fluctuations by reducing prices by the maximum price variation.
20 Baselines provide a set of data that are then used to compare with the same data set collected later in the project lifecycle to measure change
resulting from the project intervention. For example, income baseline data would be collected from farmers who will benefit from project interven-
tions before (baseline) and after project interventions. (See baseline tip sheet in the bibliography).
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Conclusion
There is no doubt that value chain development interventions are beneficial for smallholder farmers. Similarly,
enhancing access to financial services can solve some of the financial issues that farmers and other entrepreneurs
face. However, the results presented from various stakeholders in over ten Mercy Corps operational countries,
demonstrate that combining value chain development with access to financial services is more effective in improving
farmers’ livelihoods than either one or the other in isolation. This combination provides farmers and agribusiness
with the ability to: access financial services to invest in their businesses; access and apply new technology; improve
agricultural technical capacity and business decision-making skills; increase agricultural productivity; and identify and
access more profitable and sustainable markets that result in increased profits. Of the 100 plus farmers interviewed
in both Kyrgyzstan and Nepal, all of them agreed that they needed both interventions together to achieve the highest
impact on their income.
While this combination is fundamental in addressing some of the challenges farmers face, this concept has to be
understood within the context of the wider market system. Programs need to address limitations within the enabling
environment, understand how the different market players operate within the system, and identify clear, focused,
market-based solutions to facilitate farmers’ ability to compete in markets for higher economic returns.
At the same time, the quality of program design, management, and monitoring of these programs is crucial to good
quality program implementation. Clear market assessments of the commodity and financial markets, including the
forces acting upon those market systems, need to be completed with stakeholders early in the project cycle and
constantly revisited. Sufficient project timeframes are required to meet program deliverables, and when timeframes
are short, multi-year flexible programs tied into clear country strategies need to be developed. Management and
implementation teams should incorporate private and financial sector skills and have access to clearly developed
training programs and cross learning opportunities. Furthermore, teams need to continue to build their skills to
effectively measure project impact, collect clearly defined, and globally coordinated, indicator data and relevant
explanatory variables to understand indicator performance.
Incorporating these elements into Mercy Corps’ agricultural development programming will maximize program
quality and impact, empowering smallholder farmers to address their own needs and realize their potential, ultimately
improving their income and livelihoods, and enhancing overall food security and economic growth.
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Annexes
Annex 1. Further details of the study outline
Collection and analysis of data
Key Mercy Corps internal perceptions and analyses were collected from field teams in twelve countries using
questionnaires containing both closed and open-ended questions (Annex 2). Country projects were selected from
GAIT using key words such as high-impact, value chain, and microfinance. Contributing countries were: Central
African Republic, Ethiopia, Georgia, Guatemala, Liberia, Kosovo, Kyrgyzstan, Nepal, Pakistan, Somalia, Uganda,
and Zimbabwe.
Specific project impact data for Kyrgyzstan and Nepal from 2007, 2008 and 2009 were collated using in-
country DM&E data:
• TAP – Kyrgyzstan: Daily recording of apple production and use (197 of 200 households); survey of 400
randomly selected households; horticultural practice monitoring to assess if households adopted new
horticultural techniques in their gardens (88 of 200 participating households).
• GAP – Kyrgyzstan: A stratified (by village and among participants and non-participants) random sample of
650 households in the targeted villages were interviewed with a structured questionnaire. Analyses include
602 households; 335 non-participants and 267 participants interviewed in 2007 and 2008. “Participants” are
residents who enrolled in the GAP horticultural development initiative during open enrolment; “nonparticipants”
are residents in the communities where GAP was implemented, but who did not enroll. Demographic
differences between participants and non-participants were tested using two-sample t-tests for comparing
means and two-sample z-tests for comparing proportions. 49% female, 51% male. More than half (0.58 ±
0.49) of respondents were below the poverty line.
• Spicing Up the Deal - Ginger – Nepal: Profit and loss data were collected from farmers using an enterprise
budget format, which resulted in data on: production, amount of land cultivated, sales, prices, and costs.
Using these five variables resulted in the capture of costs and changes such as fluctuation in market prices or
increased land cultivation. The baseline survey was conducted in June 2008 (after sales of 2007 crops), the
end-line survey was conducted in May 2009 (after sales of 2008 crops).
• PCCP – Nepal: Similar formats were used as in the ginger project; data were collected from farmers and
exporters. Farmer end line data was collected in March 2008, after sales of the 2007 crops. Export data using
similar business sheets from exporters were collected in September 2008 (also after sales of the 2007 crop
and just before the 2008 crop harvest started).
Focus group discussions and key informant interviews were conducted with a wide ranging number of
representatives on the current (2009/10) EcoSad project in Kyrgyzstan, CaGi and EAF projects in Nepal, plus
information was collated on the impact of combing value chain development and microfinance activities. All interviews/
discussions used key questions to direct an otherwise open-ended discussion session. Details of contributors are
noted below.
Kyrgyzstan individual and focus group discussion contributors:
1. Farmer groups (total more than 40 farmers):
a. EcoSad training, no EcoSad loans, Kichy Jargylchak
b. EcoSad training and EcoSad loans, Kichy Jargylchak
c. No EcoSad training and no loans, Kichy Jargylchak
d. No EcoSad training but took Kompanion general loans, Sary-Kamush
2. Individual Farmers: Kamal Zabirov (Participant of TAP/teacher, Tamga); Jayloo Mamatov (Participant of GAP,
Darhan); Synchy Malaev (Participant of TAP/teacher, Tosor); Ravila and Indyr (TAP participants, farmers &
teacher, Tamga); Egemerdiev and Medin (EcoSad participants, Sary-Kamush)
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Project background
1. Country and region: ___________________________________________________________________________
2. Project/Grant title: ____________________________________________________________________________
3. Main project staff contact details: ________________________________________________________________
4. Project timeline (months): _______________________________________________________________________
5. Start date: _______________ End date: ___________________________________________________________
6. Total project budget (USD): _____________________________________________________________________
7. Percentage or amount (USD) of total project budget allocated for direct program costs: __________________
(excluding project staff costs)
8. Type of project:
Agriculture value chain development
Agricultural related microfinance
Non-agricultural related microfinance
Value chain and agricultural microfinance combined
Other (please specify) _____________________________________________________________________
9. List out the project objectives/expected results: ____________________________________________________
_____________________________________________________________________________________________
10. Who are the main beneficiaries of the project (e.g. cashew farmers, fruit processors)? ____________________
Project design
1. How was the project identified?
Continuation of existing project
Organisation/beneficiaries came to Mercy Corps
Mercy Corps conducted assessments
Response to RFA or other donor driven call for proposals
Other (please specify ______________________________________________________________________
___________________________________________________________________________________________
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2. a. What frameworks, processes, initiatives or tools were used in the design of the projects, please note this is
specifically in the design of the project? Please complete the table below:
b. Of those that you did use, listed above, which were the most useful and why? _________________________
_____________________________________________________________________________________________
3. If your project included both value chain activities and microfinance, were they designed together from the
beginning, or did one come later as the project progressed? If so, how did that happen?
_____________________________________________________________________________________________
_____________________________________________________________________________________________
4. What were the deciding factors in identifying who the main beneficiaries would be?
_____________________________________________________________________________________________
_____________________________________________________________________________________________
Project implementation
1. a. What specific approaches were used in project implementation? Please complete the table below:
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b. Of those that you did use, listed above, which were the most challenging and why? ____________________
_____________________________________________________________________________________________
_____________________________________________________________________________________________
2. What are the main project successes? ___________________________________________________________
_____________________________________________________________________________________________
_____________________________________________________________________________________________
3. What elements of your program (implementation methods/staff interactions/organisational linkages etc)
contributed to the program’s success?
4. What elements of the project did not work so well and how could this be avoided in the future?
5. What elements of the project were the most challenging to implement, and why?
6. Do you feel that the duration of the project is long enough to meet the project goals? Please explain.
_____________________________________________________________________________________________
_____________________________________________________________________________________________
_____________________________________________________________________________________________
_____________________________________________________________________________________________
7. What improvements would you make if you were implementing this project again from the start?
_____________________________________________________________________________________________
_____________________________________________________________________________________________
_____________________________________________________________________________________________
_____________________________________________________________________________________________
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8. If you were talking to someone who was about to start a similar project like yours, what 3 things would you tell
them to do and to avoid?
3 things that should be done in a similar project 3 things that should be avoided in a similar project
9. What additional resources or skills would be helpful in order to better guide field teams in this kind of project
implementation in the future?
_____________________________________________________________________________________________
_____________________________________________________________________________________________
_____________________________________________________________________________________________
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Reach # of No. of individuals If program collects data “In East Africa, Mercy
beneficiaries receiving assistance by on households rather Corps’ agricultural
assisted the project and or the than beneficiaries use the development programs
project’s agents, including formula: Avg Household assisted 1,000,000
partner NGOs. Size X No. of Households individuals.”
assisted.
Reach # of businesses No. of agri-businesses The program and M&E “In Latin America, Mercy
assisted assisted by the project managers should Corps’ agricultural
or its agents, including collaboratively define development programs
partner NGOs. While the qualification for assisted 5,000
small holder farmers and a business having businesses.”
householders can be agri- received assistance
business, this indicator (e.g. interaction with
aims to measure off-farm program or partner
agri-businessess and not staff with one or more
households. concluded interventions
with attributable results,
etc), and result allocations
should be fairly enforced
by the latter. Caveat:
Only include business
deemed as ‘Agri-
businesses,’ (businesses
that are direct actors in an
agricultural value chain.)
Reach (Social % of total project Tracks the inclusion Measured as a simple “Our agricultural
Inclusion) participants of disadvantaged and % of total project development programs
that belong to a marginalized groups participants assisted over 10 million
disadvantaged within the project individuals, of which 75%
or marginalized intervention. Parameters belong to disadvantaged
group for what groups constitute or marginalized groups.”
‘marginalized’ must
be established for the
local context, but often
includes women, youth,
and disadvantaged ethnic
groups.
Economic # of full time The number of full-time, Measured as the number “Mercy Crops has created
(Employment/ jobs created permanent jobs created of jobs created directly 1,650 new full time jobs in
Jobs) in the agricultural value or indirectly as a result of agribusinesses, including
chain technical assistance or input supply, marketing
investment in any part of committee members and
the value chain as a part post-harvest processing.”
of project interventions.
CONTINUED
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Economic US$ value Total US$ value of ‘Sales Results for multiple “In the Middle East,
(income) increase in profit - Production costs’ of farming households Mercy Corps’ agricultural
of households all households or small should be aggregated. development programs
or smallholder holder farmers who This indicator is meant helped farmers generate
farmers are beneficiaries of the to measure household more than US$1,000,000
program. level change, therefore in profit, which in turn
should not be used to is helping the growth
collect data on large-scale of the local agricultural
agribusinesses. economy.”
Economic US$ value Tracks the percentage This indicator helps us to “As a result of Mercy
(income) increase in change in value of sales understand how program Corps’ agricultural
value of sales per farming enterprise as interventions benefited development programs,
of households a direct result of project not only the sales of small scale farmers in
or smallholder interventions. farming enterprises, but West Africa increased
farmers also the market as a the value of sales for their
whole. Greater change goods by 45%, directly
in percentage captures impacting the local market
the parallel with market and economy.”
growth.
Economic US$ value Value of production is Initial baseline surveys “In West Africa, our
(income) increase in value calculated by ‘Production should be used to programs helped farmers
of production X Price’. Used to express determine the ‘original’ increase their value of
of households increases in production value of production before production by more than
or smallholder in monetary terms and the programming initiative US$300,000.”
farmers capture the impact of began. By using post
price on household program data on the ‘new’
production levels. value of production, one
can then use a simple
subtraction of ‘New -
Original’ to determine the
US$ increase.
Economic US$ value of Value of savings in MFIs, VSLAs and “Through agriculture-
(Ag Finance) savings accrued formal financial services, SACCOs must keep specific financial services,
by farmers including Savings and records of members’ farmers across the world
and/or agri- Credit Cooperatives, deposits. Use these have been able to save
businesses Village Savings and Loan records to determine how US$150,000.”
Associations, and Micro- much has been saved for
finance Institutions agricultural communities.
Economic US$ value of Value of loans accessed MFIs, VSLAs and “Farmers have accessed
(Ag Finance) credit accessed by agricultural clients in SACCOs must keep US$1.2 million in
by farmers formal financial services, records of loans taken out agricultural loans in Asia
and/or agri- including Savings and by members. Use these and Africa.”
businesses Credit Cooperatives, records to determine how
Village Savings and Loan much has been credit
Associations, and Micro- has been accessed in
finance Institutions agricultural communities.
CONTINUED
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21 This strategy is continually being revisited in consultation with global programs to reflect changes in the development field, local contexts and
opportunities and needs of the farmers. This approach document is current as of 2010.
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The diagram below demonstrates the range of methods that Mercy Corps uses to improve access to investment
capital in both emergency and recovery stages of our work, as well as how we work to develop sustainable access
to credit and investment capital over the long term.
Emergency Household Group Based Low Cost High Cost Recovery- Group Savings Equity Commercial
Distributions Level Basic Income Share Grants Share Grants based Loan & Loan Investment Credit &
Income Grants & Generation Products Methods Leasing
Supplies Grants
Graphical representation of the Mercy Corps Approach to Agricultural Development Graphical representation of
the Mercy Corps Approach to Agricultural Development
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Kyrgyzstan • Increase in HH and • # new buyers • # new loan groups • Adoption rates of
home garden income • # new suppliers • # community farmer different management
• % Increase in income • % increase in selling to groups practices (participants
from apple sales more than one buyer • # activities organized and non-participants)
• Adoption rates of key • # buyers households independent of donor • % participants adopting
horticultural practices know support practices
• # loans; USD value; • Sales of target com- Tons of waste removed
repayment modity
• # farmers trained
CONTINUED
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Bibliography
Albu, M. (2007). Comparing M4P and SLA frameworks: complementarities, divergences and synergies.
de Ruijter de Wildt, M., Elliot, D., and Hitchens, R. (2006). Making Markets Work for the Poor. Comparative
Approaches to Private Sector Development.
McVay, M., and Snelgrove, A. (2007). Program Design for Value-Chain Initiatives. In Information to Action: A Toolkit
Series for Market Development Practioners. Waterloo, Canada: Mennonite Economic Development Associates
(MEDA).
Mercy Corps. (2008). Mercy Corps South Asia Agricultural Sector Approach
Mercy Corps. (2009). Agricultural Development: Sector Approach
Mercy Corps. (2009). Agricultural Development: Varying Degrees of ‘Income’ Indicators Guide for Agriculture
Mercy Corps. (2009). Agricultural Lending and Technical Services (ALTIS) Product Paper
Mercy Corps. (2010). The Global Food Crisis Response Program: Review of Lessons Learned Participatory Impact
assessment Guide
Mercy Corps. (2007). DM&E Tip Sheet #5: Baselines
Mercy Corps. (2007). DM&E Tip Sheet #9: Budgeting for M&E
mcdl.mercycorps.org [Internal Mercy Corps website for DM&E in a box, agricultural development and other
resources]
US Government Initiative. (2010). Feed the Future Guide
World Bank (2008). World Bank Development Report
www.bdsknowledge.org [Donor Committee for Enterprise Development (DCED), Inter-agency website]
www.cgap.org [Consultative Group to Assist the Poor (CGAP) website]
www.microfinancegateway.org [Microfinance gateway service of CGAP]
www.springfield.org [Springfield Centre website]
Xavier, I., Lin, L., Thirtle, C. and Wiggins, S. (2001). Agricultural Productivity Growth and Poverty Alleviation.
Development Policy Review 21, 19 (4): 449-466.
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Glossary
The following list of terms is a subset of a full list that is currently being finalized and approved for official use within
Mercy Corps.
Agricultural Microfinance: Sustainable provision of specialized financial services provided in support of on-farm
activities; subsector of financial services.
Business Development Services (or Business Services): Wide range of nonfinancial services that producers,
traders and enterprises need in order to enter a market, survive, produce, compete and grow (e.g., business planning,
accountancy, bookkeeping, legal, marketing, product development, input supply, equipment sale of leasing, training/
mentoring, technical assistance, access to technologies and communications).
Clusters: Geographically close groups of interconnected companies/associated institutions linked by common
technologies and skills.
Collective marketing: Farmers coming together to sell their produce in a group rather than individually.
Economic development: Qualitative change and restructuring in a country’s economy in connection with
technological and social progress. The main indicator of economic development is increasing GNP or GDP per
capita, reflecting an increase in the economic productivity and average material well-being of a country’s population.
Economic development is closely linked with economic growth.
Enabling environment (commonly referred to Business Enabling Environment): All factors external to
enterprises and which allow market systems to function and perform well (e.g., policy, legal, regulatory framework,
governance, social cultural contexts/norms).
Financial Services: The wide array of formal and informal services used by households and enterprises in a market
system. Financial services include savings, loans, insurance, remittances and leasing services.
Livelihood: Comprises the capabilities, skills, assets (including material and social resources) and activities required
for a means of living, including food production, meet basic needs, earn income.
Local Economic Development (LED): Participatory process that encourages partnerships among public and
private stakeholders within a locality. A number of approaches can be used within LED such as clusters, value chain
development and market development.
Making Markets Work for the Poor (M4P): A market development approach aimed at effectively and sustainably
improving the lives of poor people by understanding and influencing market systems.
Market: Set of arrangements by which buyers and sellers are in contact to exchange goods, labor or services for
cash or other goods or services. Markets may be formal or informal in structure.
Market development: Sub-field of enterprise development focused on the poor’s participation in and benefit from
existing and potential markets in which they interact as producers, consumers or labourers; market development
focuses on systematic change and strengthening institutions for sustainability with development agencies acting in
a ‘facilitator’ role rather than a direct intervener.
Market System: The multi-player, multi-function arrangement comprising of three main sets of functions; core
transaction, rules, and supporting functions undertaken by different players (private sector, government, representative
organizations, civil society) through which exchange takes place, develops, adapts and grows.
Microfinance: Sustainable provision of financial services adapted to the needs of low-income (bottom and middle
of the pyramid) peoples. Providers include:
• Formal – licensed institutions subject to general laws and specific banking regulation and supervision (e.g.,
development banks, commercial banks, non-bank financial intermediaries);
• Semiformal – registered entities subject to general and commercial laws and recognized by a public authority
but not usually under bank regulation and supervision (e.g., financial NGOs, credit unions and cooperatives);
and
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• Informal – non-registered groups not officially recognized by any government authority (e.g., rotating savings
and credit associations (ROSCAs), village savings and loan groups (VSLAs), money lenders and savings
collectors.
Microfinance institution (MFI): Financial institutions that generally target the poor. They can range from formal
to semi-formal to informal.
Networks: Formal/informal arrangements that facilitate exchange of information and technology and promote
coordination and collaboration within a cluster.
Private sector: Businesses ranging from informal microenterprises to large-scale formal enterprises, usually
involved in product delivery and associated product development and skills enhancement. Private sector is noted for
its segregation from the public sector.
Pro-poor growth: Concept that economic growth can reduce poverty if it occurs in the right way.
Public sector: National government departments, regional and local government and state agencies. That part of
an economy that is managed and funded by government/public sources.
Stakeholder: Full range of actors involved in or affected by a particular focus (e.g. microfinance, rice subsector,
value chain) including governments, private business, not-for-profit associations and civil society.
Subsector – aggregation of alternative channels through the production/distribution system for one or a group of
closely related products. Defined as all the enterprises and other market actors that buy and sell from each other in
order to supply a particular set of products or services to final consumers.
Upgrading: Enterprises acquire technological capabilities and market linkages to increase competitiveness and
move to higher-value activities. Refers to a change in mind-set, improvements in skills, making new (designs) products
based on knowledge of final customers, employing new technologies, taking on new functions within a value chain,
and other actions that lead to greater competitiveness. Upgrading can include product development, technology
transfer, workforce training, effective backward linkages to suppliers, as well as the use of ICT to enable firms to
identify and compete in new markets.
Value chain: Full range of activities required to bring a product or service from its conception to final consumers
and disposal; implies a value-added at each stage. Value chains can be local, regional, or global, and may include
input suppliers, producers, processors, transporters, and buyers.
Value chain analysis (VCA): Type of market-system analysis which focuses on the dynamics of linkages within a
productive sector, especially the way in which firms and countries are integrated including global linkages; includes
a description of actors in the value chain and an analysis of constraints along the chain.
Value chain development (VCD): Process by which value chain developers —often NGOs —promote strong
business linkages, encourage better market performance, and create an enabling environment for a specific commodity
or actor within a value chain. Value chain developers do not position themselves directly within value chains, but
rather act as facilitators that can offer sustainable interventions aimed at increasing value chain competitiveness.
Value Chain finance: Process when credit and other financial services flow through actors along value chains.
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Agricultural Learning Study
Notes
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