Entrepreneurship as a pathway out of poverty

Written by: William Saab (Senior Consultant), supported by Jennifer Morton (Analyst).  Also posted on LinkedIn.

Thinking Differently: Farmer Entrepreneurship in the Cocoa Sector

The need for a more sustainable sector where farmers and their communities can prosper and thrive is a broadly shared conviction within the cocoa sector. To bring this situation about, efforts within the sector have mainly focused on enhancing farm productivity, and in turn, farm incomes. However, perceptions about how best to support smallholder farmers are rapidly changing. I believe that the question we should be focusing on is how to put farmers at the heart of the system as empowered actors who are central players in the sector’s development. In short, how can farmers fully realize their potential as entrepreneurs?

Recently, I was asked to share my ideas during the plenary session of the 2018 Chocoa Conference on 23rd February, entitled “Sustainability beyond cocoa production: supporting farmers to become entrepreneurs”. What follows here is an outline of my vision: an ideal future state in which farmers in the cocoa sector are entrepreneurs in a thriving and inclusive market.

Cocoa Farming and the Market 

Like my colleagues at NewForesight, I believe there are market-based solutions to many sustainability challenges. This is because many of the issues we are addressing are caused by the market in the first place, most often market failures or distortions.

When thinking about how to support farmers, in cocoa and other commodity sectors, to become entrepreneurs, a few questions immediately come to mind:

  • How can cocoa farmers be entrepreneurs if they have no—or limited—choices?
  • How can there be choices for entrepreneurs without a functioning market for goods and services?
  • How can there be a functioning market when the providers of services and goods do not treat farmers as customers, but as (often passive) recipients of aid?

I believe that there are four key elements for creating a functioning market where farmers act as autonomous and thriving entrepreneurs: better data and insights, evidence-based approaches, service delivery as a business, and systemic solutions.

In this article, I want to touch on each of these, giving examples of promising trends, before sharing my vision of how these elements ideally all come together.

1. Better data and insights

In my work, I deal a lot with data, as I focus on supporting clients to evaluate the business case of their sustainability interventions at the farm- and company-levels. Crucial to my work is having the ability to make informed analyses and decisions based on quality data. The more quality data we have, the better our understanding will be of the actual situation of cocoa farmers. And the better our understanding of cocoa farmers, the more we are able to consider these farmers as individuals who have different characteristics, challenges, wishes, needs, and opportunities and who require and desire different things from those who are trying to support them.

Until now, especially on the level of smallholder farmers, data is typically scarce, not accessible or shared, and if available, often of sub-optimal quality. Yet, there are very promising recent developments in the cocoa sector which are driving availability of, and access to, better data at various levels. For example, organizations such as KIT (research forthcoming) and CGAP have come out with excellent data at the farm and household levels, and best of all, have made this data public—an invaluable resource for practitioners in the field. I believe the opportunities opened up by these recent trends in data availability can be transformative in shaping how we approach sustainable economic development at the farm level.

2. Evidence-based approaches

Sustainability thinking in the cocoa sector and beyond has evolved towards looking at impact and outcomes much more than in the past. Now, we are asking questions such as: which interventions will work and how? Under which conditions do interventions make sense? And what type of farmer will benefit from these interventions?

The cocoa sector is clearly moving more in this direction. Traditionally, the focus of interventions has mostly been increasing farm-level productivity through training and providing access to inputs such as phytosanitary products and fertilizers. Yet, this situation is evolving, and organizations are looking beyond productivity. The CocoaAction Farmer Economic Model began to drive this kind of thinking a few years back with a tool that allows users to project the expected farm-level business case under various assumptions using adjustable variables, including and beyond productivity. More recently, Fairtrade has published a living income strategy, which focuses on looking at a broader range of variables, including non-cocoa income and the cocoa price, as a necessary means to achieve sustainable cocoa farming across economic, social and environmental dimensions. The Living Income Community of Practice has similarly been set up as an open platform to drive new ways of measuring living income and identify strategies to close existing income gaps.

By looking beyond productivity, intervention design can be better tailored to actual conditions. As a practical example, cocoa trees have declining yields as they age, and so at a certain point, the positive impact from using expensive inputs will no longer be worth the investment cost. These kinds of insights are only possible by looking at cocoa farming in a holistic manner and designing interventions around outcome-based thinking.

3. Service delivery as a business

I strongly believe that for cocoa farmers to become entrepreneurs, they need to be served by a professional market which delivers in-demand goods and services, for example training and knowledge, inputs, equipment and financial products. Providers of goods and services in such a market need to view farmers as customers rather than as recipients of aid. A necessary corollary of this requires that the providers of goods and services see their service delivery as a business. They must focus continually on improving the efficiency, effectiveness, and sustainability of their models. When service providers start to compete on these three factors, the landscape becomes competitive and only those models which outdo their competitors on these elements will thrive. Such a thriving market creates the foundation for the necessary replicability and scalability to achieve transformational change in the cocoa sector. By necessity, performance is naturally driven upwards over time as different service providers are forced to innovate in order to stay afloat, meet the (evolving) needs of their customers (i.e., farmers) and remain competitive in the market.

I get the most energy from working on sustainability challenges with the private sector, and I see more companies—both inside and outside the cocoa sector—now viewing service delivery as a business, and no longer as a cost center. A fascinating piece of work is the Service Delivery Models work that IDH has been driving for the past few years—with the support of NewForesight—in which they are using a common methodology to analyze the service delivery models of dozens of organizations across different sectors, commodities and geographies. The Smallholder Insights Report released in December 2017 summarizes the exciting, overarching findings from a comparative analysis of the 30 different service delivery models that have been analyzed so far.

4. Systemic solutions

Most of the challenges in the cocoa sector are systemic in nature. Their causes are often linked to forces at the sector, national, regional and global levels, and are always intricately linked to a broader context. These causes are beyond the power of any individual actor to resolve.

Like the systemic nature of the challenges, the solution will likewise need to be systemic in nature. In cocoa, the private sector, governments, civil society and others must work together to create a sustainable system and sector. Perhaps most importantly, a truly sustainable and inclusive cocoa sector must have at its heart its key stakeholders: autonomous, entrepreneurial and empowered farmers, who take their own decisions and have a real say in designing this ideal system.

Can we move towards such a system? I think we can, and landmark partnerships and initiatives are pushing in this direction. One recent example which is bringing together various types of stakeholders in an inclusive way is the Partnership for Productivity Protection and Resilience in Cocoa Landscapes in Ghana and the Cocoa and Forests Initiative which focus on tackling deforestation issues in the sector in a multi-stakeholder way. Another key partnership is the International Cocoa Organization (ICCO) which seeks to be an inclusive forum bringing together all stakeholder groups, including farmers and farmer organizations, who all agree to a single vision for the sector and commit to joint action to bring this about. The upcoming ICCO Global Cocoa Agenda Monitoring Framework, developed by NewForesight and to be introduced at the April 2018 World Cocoa Conference, is an example of an integrated approach to developing a shared vision and common monitoring framework, committed to by a broad range of stakeholders, to assess progress towards commitments and impact at a sector level.

An Ideal End-State

So, what does my view of an ideal end-state which I have outlined above, look like?

(1)  The sector is composed of entrepreneurial farmers, and all stakeholders in the sector respect the autonomy of, and difference between, various types of farmers, including their different characteristics, desires, and ambitions;

(2)  Services are available to farmers based on their specific needs and desires, rather than one-size-fits-all solutions which are only focused on one dimension such as increasing productivity;

(3)  These goods and services are offered to farmers as part of a functioning market, in which farmers are seen as customers rather than passive beneficiaries who must be helped, where service providers gain business from their customers by competing and continuously improving on impact, efficiency and sustainability;

(4) Finally, this functioning market brings together a multitude of stakeholders, including, at the core, farmers, each of whom recognizes their own limits while seeking synergies and complementarity with others to bring about shared opportunities and lasting sustainable change.

In this article, I have shared my thoughts on a pathway towards a more resilient and empowered cocoa sector, with entrepreneurial farmers at its heart. I hope to have shown that at least part of the solution can be found through market interventions, and that a (considerate) business approach to sustainability has the potential to empower and improve lives.

Have I succeeded in sparking your interest? Please let me know what you think of this article, through william.saab@newforesight.com.  

William Saab is a Senior Consultant at NewForesight Consultancy, where he loves analyzing the business case for sustainability at the farm, company and sector levels. He leads NewForesight’s work in economic and quantitative analysis, which includes building dynamic models to measure the impact of sustainability interventions at various levels.

Jennifer Morton is an Analyst at NewForesight Consultancy where she focuses on systems thinking, sustainable development and transformative change. At NewForesight, she has played a key role in the development of the Organic Cotton Accelerator (OCA)—a market-driven sustainability partnership among major fashion brands driving systemic solutions to farm-level impact in organic cotton.