For more on this topic, join the session Going to Scale with Smart Investments in Community Food Production and Health Initiatives: A Response to Fiji’s Health Crisis at the GLF Bonn 2020 digital conference on 4 June.
By Jana Dietershagen and Judith Ann Francis, Innov4AgPacific Team, CTA, The Netherlands
The current climate and COVID-19 crises clearly show that governments and the international community must invest in collective actions that benefit Pacific island smallholder farmers, fishermen and other agro-based small and medium enterprises (SMEs).
These stakeholders are the engine of small Island Developing States’ (SIDS) economies and have the potential to build resilience and ensure the sustainability of local Pacific Island agri-food and nutrition sensitive systems.
However, doing business in the Pacific Island Countries (PICs) is very challenging, as shown by the World Bank Ease of Doing Business rankings for 2019. Out of 190 economies, Samoa ranks 90th, Vanuatu 94th, Fiji 101st, and Kiribati 158th. This is partly because access to finance and investment opportunities are very limited for Pacific agri-entrepreneurs, and the cost of borrowing is high.
Producers and businesses need an enabling environment with innovative policies and financial services to compete in domestic and international markets. This would reduce dependence on imports and generate employment and wealth in urban and rural communities.
Banks, governments, donors, development partners and private investors need to be more responsive to the specific needs of Pacific agro-SMEs and the opportunities they offer for socio-economic development. These should go beyond ‘business as usual’ and pay special attention to ensuring gender and youth inclusiveness and bridging the rural-urban divide.
In 2016, the Technical Centre for Agricultural and Rural Cooperation (CTA) and the International Fund for Agricultural Development (IFAD) launched a four-year project on “Leveraging the Development of Local Food Crops and Fisheries Value Chains for Improved Nutrition and Sustainable Food Systems in the Pacific,” or ‘Innov4AgPacific’. Valuable lessons have been learned.
The Innovation Grant Facility
In 2018, the project launched the Innovation Grant Facility (IGF), targeting agro-based SMEs in Fiji, Kiribati, Marshall Islands, Samoa, Solomon Islands, Tonga, and Vanuatu. Twenty-three Pacific agro-based SMEs have received IGF awards (up to a maximum of USD 20,000) for product and packaging development, feasibility studies, facility re-design, quality assurance, and food safety certification.
To be eligible, SMEs needed to be Pacific Islander majority-owned and contribute 20% of their total budgets. Priority was given to SMEs that could demonstrate that the grant would be used to benefit smallholder farmers, rural farming communities and disadvantaged groups.
Pacific businesses take the leap and go digital
Nature’s Way Cooperative (NWC) is a Fiji-based cooperative that packages and carries out mandatory quarantines on fruit and vegetables for export market. NWC applied for the IGF aiming to modernize its processes and introduce a more efficient traceback system.
After securing the funding, it engaged TraSeable Solutions, the only blockchain company in the Pacific islands, to digitalize their value chain and develop a web-based traceability system. The cooperative has tested and validated the system and expects it to be able to more consistently meet market demands. TraSeable Solutions had earlier received an Innov4AgPacific ICT grant, business coaching and mentorship support to develop their TraSeable Farms App.
Votausi McKenzie-Reur, one of the IGF’s female entrepreneurs and owner of Lapita Café Limited in Vanuatu, also experienced the benefits of going digital. The company, founded as a small catering business in 1992, continues to grow and introduce new locally sourced and processed products to the market.
Lapita Café is well known for its gluten-free root crops flour, nuts and condiments. Through the IGF, the company has re-designed its packaging to give its product line a fresh look and feel that reflects its passion for Vanuatu’s traditional and natural foods. It also developed a new website, coached its staff in marketing and sales, and bought new processing equipment.
Having accessed the IGF, our production increased, and our staff is using machinery more efficiently. Since our sales and marketing coaching, we have experienced a 20-30% growth in the business in the last three months. We believe that we will continue to experience growth.
Votausi McKenzie-Reur, Vanuatu
Like many other SMEs in the Pacific, McKensie-Reur’s business often struggles to source consistent supplies of fresh raw produce from farmers and larger companies, who do not pay directly and immediately upon receiving products. The company regularly experiences cashflow problems, which hinders access to financial support, and is managing an increasing number of constantly changing policies.
Improving access to finance in the Pacific
Development finance institutions in the Pacific, such as the Development Bank of Samoa (DBS) and the National Bank of Vanuatu (NBV), are offering innovative financial products that are benefiting the lives and livelihoods of smallholders and contributing to the development of nutritionally, culturally and environmentally sensitive local crop and fishery value chains.
NBV has successfully trained over 50,000 workers and expanded its customer base through its capacity-building and mentorship schemes. DBS is running a successful financial inclusion program to empower women and youth in rural communities.
The key to DBS’ successful program was the establishment of a partnership with the Central Bank of Samoa, Samoa Life Assurance Corporation and the Ministry of Women, Community and Social Development. Another example is the Pacific Financial Inclusion Programme, which created the PacFarmer app to facilitate digital payments and allow farmers to keep records and generate digital legers to help them access loans.
Pacific Islanders have also taken matters into their own hands: Sashi Kiran established the Foundation for Rural Integrated Enterprises & Development (FRIEND) as a social enterprise in Fiji. FRIEND generates income for communities by encouraging backyard gardening, producing a range of value-added products such as cassava, breadfruit flour, and chutneys, and running a restaurant that offers healthy traditional foods made from organic produce and locally-sourced fish.
Through marketing and sales and an enterprising ability to attract external funding, FRIEND has been able to expand its innovative community-based agriculture, nutrition and health activities.
How can we make farmers and SMEs bank-ready – and vice versa?
It is essential to create an enabling environment and regulatory framework, as shown by Innov4AgPacific’s “Improving the business environment for micro, small and medium-sized enterprises in Pacific Island countries” and “Financing Agribusiness and Value Chain Development in the Pacific” assessments.
These include developing an incubation ecosystem and business advisory and mentoring services for start-ups and entrepreneurs in agriculture, with an emphasis on youth. Central banks should be encouraged to consider allocating 1–2 percent of reserves to agricultural SMEs and banks to help keep savings in the rural communities that generate them.
At the same time, investments must be made in financial literacy and value chain capacity-building programs to support higher incomes and improved livelihoods for rural communities that rely heavily on agriculture. These should include the professionalization and collective action of farmer and producer organizations and SMEs. Agribusiness and value chain performance will improve as farmers and SMEs lobby more capably for improved financial and technical services and cheaper inputs to control costs.
Farmers, SMEs and financiers need to be in constant communication and build stronger partnerships. These include partnering with village mayors and councils, which has helped establish rural community banking services. Similarly, partnering with ICT service providers has improved data capture for mapping and ensuring the traceability of value chains.
The IGF, and likewise the financial instruments offered by banks such as DBS and NBV and development partners, are promising examples of public-private financing mechanisms that are enabling innovation in Pacific agro-based SMEs. There are major opportunities to apply lessons learned to design a blended finance product to support the sustainable development of the Pacific agriculture and fishery sector.
One promising way forward could be partnerships involving donor agencies, national development finance institutions, commercial banks and registered farmer and private-sector organizations, with support from national governments. Each PIC could consider piloting such a partnership model.