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Editor's Note: This post is Part 3 of a 6-part series exploring new business models for linking small farmers to global markets being analyzed through an international collaborative effort that can be read about here.  Read an introductory post, catch up on part 1 part 2, and find out more about our work with the Center for International Tropical Agriculture at CIAT's blog.

In our last post we remarked how chain-wide collaboration was essential to creating shared goals amongst chain actors and  to making real progress towards small farmer inclusion.  Interdependency between chain actors appears key for weathering risk, meeting new standards of quality, complying with regulations, and promoting innovation and increased product value. This post explores the issue of transparency in chain governance, and the role it plays in meeting expectations, standards and commitments to buy and sell  volumes of a certain grade, as well as equitable processes of risk management across a supply chain with multiple participants. 

Transparent Chain Governance

Governance refers to the setting, monitoring, and enforcement of formal and informal rules along the value chain. Governance patterns in global value chains vary, and global-scale industrial organization affects not only the fortunes of firms and the structure of industries, but also how and why countries advance -or fail to do so-  in the global economy (Gereffi, Humphrey, Strugeon, 2005).

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Grabbing a notebook and pen from my bag in the back seat, I asked Esi, the program manager and driver today, to please brief me on the clients from TechnoServe's cotton program she and I were en route to visit. The Mpaka workshop, she told me, is one of the twelve workshops that TechnoServe has nationwide to train farmers on best practice methods of cotton production.

These nationwide workshops are a key part of the program strategy to revive Swaziland's cotton industry. They provide TechnoServe advisors an opportunity to improve the capacity of farmers to succeed in growing cotton by focusing on reducing their cost of production and increasing yields per hectare, two factors over which farmers have relative control.

The goal for the Mpaka workshop was to teach farmers the basics of effective pest control to ensure that farmers were both purchasing the right  pesticides to control the pests in their fields and applying pesticides in the most educated and efficient way. By focusing on this topic today, at this stage of the crop's lifecycle, TechnoServe advisors can help farmers control a factor that can improve yields and income by as much as 50%.[i]

For background: In 1989, 16,000 cotton farmers in Swaziland's Lowveld region produced 32,000 metric tons of seed cotton which contributed more than $14 million to the rural economy. Since then this number has fallen to the 394 metric tons produced in 2008. This isn't because 16,000 smallholder farmers are producing little to no yield, rather it is due to a myriad of reasons including a steady transition of cotton-producing farmers into corn and other food crops.

Sadly, however, the Lowveld region is not suitable for such crops and farmers are seeing failure after failure of food crop attempts. TechnoServe has partnered with the government-run National Cotton Board to revive the cotton industry in order to secure income for the thousands of struggling smallholder farmers in this region.

A few moments into the drive and my conversation with Esi her phone rang. Esi answered and gaily chatted with the head of the cotton farmer association we were en route to see. I took the much needed break to transfer the details of the conversation to my notepad and incrementally gaze out the window (something I do to keep my motion-sickness-prone stomach at ease).

When Esi hung up the phone, she informed me that we would have to alternate our plans today. The association we were supposed to train today canceled on short notice because they learned that a prominent aid organization was handing out food in their community. The farmers in the association that were scheduled to attend the training were going to collect handouts instead and the training was to be rescheduled for another week, hopefully in the near future.

The unfortunate truth is the overcoming the logistical challenges to reschedule a meeting within the window of this critical week for pesticide application is very unlikely.

While I am pleased to know the farmers and their families were likely relieved of food needs for a week or so, I believe that this illustrates an often discussed but rarely witnessed issue facing the development community: unforeseen setbacks to sustainable programming. We often talk about sustainability in development or compose programs that aspire to facilitate sustainability, but far less often do we address or share instances of setback.

I don't doubt that those farmers in the cotton association needed food, but I now wonder whether their crop will be as bountiful this season, their confidence not wavered, and most importantly, their income capacity not limited. If so, in three months time, rather than having the money to put food on the table and reinvest in their business, these farmers will be looking for the next wave of relief. I do acknowledge that I am jumping to a number of conclusions here, but this set of events is possible and similar challenges interfere with programs like this every day.

In reading this it may seem that I am cynical and risk averse, but on the contrary I am quite optimistic and thrive on the opportunity to address and overcome challenges. I am sharing this story now because I see a need to spur rigorous debate about ways in which practitioners can avoid development drag. BoP growth requires a functioning market and innovative solutions and I believe that we have a collective role to play in making this happen.

Each visitor and contributor to this site is already achieving much progress in strengthening the industry knowledge and practice, but I think we can do more. Continuing to deepen our collective wisdom and advance best practices is a promising way forward, and I am excited to continue this effort of insatiably searching for and delivering solutions.

[i] National Cotton Strategy - 2009 to 2014, report developed under the leadership of the Swaziland Cotton Board, with assistance from TechnoServe/Swaziland, and through support from USAID. All statistics are drawn from this report unless otherwise noted.

Editor's Note: This post is part of a recurring series exploring new business models for linking small farmers to global markets being analyzed through an international collaborative effort that can be read about here.  Read the first part here and visit CIAT's blog to learn more.

Supply chain discussions, counting sheep and drinking warm milk have been sleep aids for insomniacs everywhere for quite some time.  But before your eyes glaze over and your head hits the keyboard, consider a bigger picture:  Supply chains connect us with every person, through every product, in every corner of the globe.   How can we encourage collaboration, information sharing, resource and technology transfer to create supply chains that allow small farmers to be successful and critical participants in global food chains?

Toward the end of my job search, I sought advice on my resume from a woman with a lot of recruiting experience.  She offered to help me refine my resume messaging.  At some point during the exchange I confessed that I didn't always understand why one resume was chosen over another in the recruiting process.  Her reply was brilliant in its clarity.  "Essentially, it's a matter of resonance," she said.  The recruiter will see something in the document that "clicks"----reminds her of herself and her experiences, meets the requirements of the position, and addresses the needs of the company. 

I was reminded of the "theory of resonance" while talking to Rahama Wright, social entrepreneur and founder of Shea Yeleen International, a nonprofit working to help African women secure sustainable livelihoods via shea butter production.  As you'll soon read, Shea Yeleen emerged out of a sense of kinship with the women with whom she'd worked in Burkina Faso as a Peace Corps volunteer.  We've talked about this dynamic force before; it's often what gets people to press their "go" buttons, which Rahama has clearly done.  So for those of you who've made New Year's resolutions to "press go", perhaps Rahama's story will offer some inspiration for 2010.  Let's get to know Shea Yeleen.

Tayo Akinyemi, NextBillion.net:
What does Shea Yeleen do?  Who does it serve and where do you work?

Rahama Wright, Shea Yeleen Founder:
Our mission is to support economic development in rural West Africa, and we currently operate in Burkina Faso, Ghana and Mali.  More specifically, we work with shea butter producers to gain access to US consumers.  We organize producer cooperatives, offer women business skills training, and create retail products that we can sell.  Shea Yeleen also works to educate US consumers about the market access issue, especially how to support the communities where we work.  With shea butter and other commodities of African origin, local communities often do not benefit from the trade of local goods.  Not surprisingly, market access for women producing shea is very limited, so we are trying to help bridge that gap.

Tayo Akinyemi, NextBillion.net:
I hear that you're currently raising funds for a new factory, rather successfully I might add.  What's the story there?

Rahama Wright, Shea Yeleen Founder:
We're raising money for 120 women in Dio, Burkina Faso where I served in the Peace Corps.  The purpose of the fundraising is to build a central production and training facility for the cooperative we've established.  The community has donated land and labor and Shea Yeleen is raising four thousand dollars to help pay for the facility's construction. 

Fortunately, we have nearly achieved our fundraising goal, which is very exciting.  We're working with the Peace Corps to offer continued organizational support to the cooperative and channel the funding.  Construction is scheduled to start in March. 

Tayo Akinyemi, NextBillion.net:
Why did you start Shea Yeleen?

Rahama Wright, Shea Yeleen Founder:
I am of Ghanaian descent-----my mother's family is from Ghana.  Although I grew up in Syracuse, I've always been interested in African issues.  Eventually I joined the Peace Corps and was placed in Burkina Faso where I volunteered at a women's health center. 

During my time there, I was really overcome by the challenges that the women faced within their communities.  Because of my background and family history, I saw my reflection in these women.  I could very easily have faced the same difficulties they were facing.  As a result, I felt a sense of responsibility to do something.  It didn't make sense to see those challenges and issues and not try to help. 

It became clear that the women I was working with could not pay for health services.  That's when we started thinking about income-generating activities for them.  Shea butter was a product that they were willing to organize around, so we started there.  With my experiences in the US and Africa, I thought I could figure out a way to get the shea butter to market.  So I began to work with a group of women to create a cooperative and formalize a business structure.  I formally launched Shea Yeleen in 2003 and the cooperative was formed in 2005.

Tayo Akinyemi, NextBillion.net:
Why shea butter?

Rahama Wright, Shea Yeleen Founder:
Shea butter is a unique commodity in Africa because producing it is considered women's work, equivalent to cooking, taking care of household, etc.  As more products are made from shea butter, there's a unique opportunity for women to benefit if they're able to sell products.  When women are empowered economically it changes their lives, the lives of their children, and their communities. 

Tayo Akinyemi, NextBillion.net:
Do you have plans to scale your venture?

Rahama Wright, Shea Yeleen Founder:
Yes.  Right now we work with about 300 women through various partnerships in Mali, Ghana, and Burkina Faso.  We've done a very good job of organizing and training, and we have a small retail product line.  We want to expand our line, increase brand awareness, and explore new distribution channels so that we can get more products to market and give consumers greater access to them.  Ideally we'd like to grow the cooperative from a few hundred members to a network of cooperatives with a few thousand members in the next five years.  It's also very important for us to share stories of women we work with and demonstrate our impact on their income levels.

Tayo Akinyemi, NextBillion.net:
How easy is it to stimulate domestic demand (i.e. within Africa) for your products?

Rahama Wright, Shea Yeleen Founder:
It's possible, but we've noticed that Africans who can afford to buy these types of goods are buying imports from Italy and the US.  People tend to want a more refined, "foreign" product.  Shea butter is also considered less mainstream and has been stereotyped as belonging to poor people.  Unfortunately, due to lack of facilities, we can't produce retail products from our shea butter in Africa.  Shea Yeleen is forced to import shea from Africa, create the retail products in the US, and sell them to American customers.  If we could figure out how to manufacture our products and sell them in Africa, they would sell very well.   

Tayo Akinyemi, NextBillion.net:
What are your toughest challenges as an entrepreneur?

Rahama Wright, Shea Yeleen Founder:
As with any start-up or social enterprise, funding is a huge hurdle.  Our sector specific challenge is trying to work effectively in communities without running water and electricity; gaining access is difficult.  On the business side it's sorting out market access and distribution-looking at distribution channels is a huge part of our mission. 

If you'd like to learn more about Shea Yeleen, check out their website:.  Also, Shea Yeleen has been featured in O Magazine and Rahama is a winner of the Women Rule! O-White House Leadership Contest.  Finally, to support the current fundraising drive, go here.

Note: I am an employee of TechnoServe and have used the release issued today to report on this exciting news.  I will work with NextBillion to report on the progress of this partnership in the coming months and years.

The Coca-Cola Company, nonprofit TechnoServe, and the Bill & Melinda Gates Foundation today launched a partnership to enable over 50,000 small fruit farmers in Uganda and Kenya to increase their productivity and double their incomes by 2014.

This four-year, $11.5 million partnership will enable mango and passion fruit farmers to participate in the Company's supply chain for the first time. With a $7.5 million grant provided by the Gates Foundation to TechnoServe, $3 million provided by The Coca-Cola Company, and $1 million by bottling partner Coca-Cola Sabco, the project aims to create new market opportunities for local farmers whose fruit will be used for Coca-Cola's locally-produced and sold fruit juices. As the implementing partner, Technoserve will train participating farmers in improving quality, increasing production, getting organized into farmer groups, and will facilitate access to credit.

"This partnership is a great example of sustainability. By partnering with tens of thousands of local farmers, we can help increase their incomes while meeting our needs for locally sourced fruit, benefiting both the community and our business," says Nathan Kalumbu, Coca Cola's East & Central Africa business unit president.

As global and local demand for fruit juice grows, there is a critical need to increase production. Small farmers can benefit from this increased demand by supplying fruit that meets the needs of local buyers such as Coca-Cola. Through this partnership, farmers who were previously unable to access this market opportunity will be provided with the tools to do so. This partnership will also serve as a model for Coca-Cola as it grows its juice business in other markets and has been designed to be easily replicated.

"This partnership is the type of innovative approach needed to foster economic empowerment across the globe and we are proud to be a part of this effort in East Africa," says Muhtar Kent, Chairman and CEO of The Coca-Cola Company. "We and our partners the Gates Foundation and Technoserve believe that investing in farmers is a proven strategy to reduce poverty and build sustainable communities."

"Empowering small farmers to increase productivity, improve crop quality and access reliable markets is critical to addressing global hunger and poverty," says Sylvia Mathews Burwell, president of the Global Development Program of the Bill & Melinda Gates Foundation. The foundation has committed more than $1.4 billion, focused on Sub-Saharan Africa and South Asia, to strengthen the entire agricultural value chain-from seeds and soil to farm management and market access-so that progress against hunger and poverty is sustainable over the long term. "Partnerships like this provide farmers with the tools and resources that can help revitalize African agriculture and increase opportunities for small farmers so they build better lives for themselves and their families."

TechnoServe's implementation of this partnership will build on a track record of similar partnerships underway across Africa including banana, cashews, cocoa and coffee. They will ensure that sustainable environmental and social standards are embedded into the program at the farm level.

"We are honored to be a part of this innovative collaboration, as it represents a significant step forward for private sector development in Africa," says TechnoServe President and CEO Bruce McNamer. "This investment will drive momentum toward reducing poverty across Africa by helping entrepreneurial farmers connect to markets and get the support they need."

This project will be implemented in close collaboration with the governments of Kenya and Uganda, given its significance in the context of their poverty reduction strategies.  It is intended to produce lasting benefits for participating farm communities, enabling them to benefit from improved livelihoods for many years to come.

This post introduces a series focused on new business models for sustainable trading relationships.  This series will discuss emerging enterprise solutions for small farmer inclusion, the corresponding impact on livelihoods of the rural poor, and the expanding market for sustainable business development for the public and private sectors.

Following the money often leads to interesting insights. If you work in international development, you've likely noticed a good deal of money being channeled to the hands of social entrepreneurs.   Backed by social impact banks and foundations, social investors are  zeroing in on enterprises committed to both financial returns and impact,  addressing everything from rural water access , eye care services and surgery,  affordable housing and sustainable sourcing, some of the most pressing issues of the world today.

Social Investment and Rural Enterprise Development

At CIAT's Linking Farmers to Market Program an explosion of new partnerships and learning alliances are occurring across the public/private aisle. Learning from the business models we've seen in the last few decades, we've joined up with a network of organizations (New Business Modes for Sustainable Trading Relationships) committed to capitalizing on a budding framework for enterprise-based inclusion of small growers in the developing world.

This international consortium of organizations is housed at the International Institute for Economic Development (IIED) in partnership with Catholic Relief Services,  Rainforest Alliance, CIAT, Sustainable Food Lab, and the Bill and Melinda Gates Foundation.

Principles of New Business Models

From examining the literature on value chains, following discussions with the private sector and drawing on our own experience through pilot projects, we have identified as set of principles that can serve as a framework for diagnosing and improving trading relationship when moving to a scalable business model.  This framework continues to evolve as global advances are made and smallholders are creatively engaged in dynamic markets.  We have seen consistent evidence that supply chains are most robust for smallholders where there is a structure in the value chain for:

1. Chain-wide collaboration on shared goals and identified champions for these goals;
2. New market linkages;
3. Fair and transparent chain governance;
4. Equitable access to services;
5. Inclusive innovations in the chain; and
6. Measurement of outcomes throughout the chain, with those measures shared between chain actors and used for continual commercial and social improvement.

This series will focus on our research around these issues, discussing the tenets of what our consortium has denoted as hallmarks of sustainable trading partnerships, recognizing that pro-poor development is in the interest of both the public and the private sector.

How can we design, fund and implement affordable solutions for the developing world's toughest challenges? How can we maximize social impact with our designs? The "Design for Extreme Affordability" panel at Net Impact conference tackled these very issues.

Jeffrey Gangemi, Communications Consultant at Dun & Bradstreet moderated a conversation between two entrepreneurs who have designed affordable solutions: Peter Frykman, Founder & CEO of Driptech and Ting Shih, Executive Vice President of ClickDiagnostics.

Problem: Farmers in drought-ridden regions of the developing world need better, cheaper, more effective ways to use their meager water supplies efficiently.

Solution: Driptech creates affordable, water efficient irrigation systems for small-plot farmers in developing nations. Their drip irrigation product is low cost and low tech, but designed using high-tech expertise.

The Driptech team met at Standord in a course called Entrepreneurial Design for Extreme Affordability. Traveling to Ethiopia, they noticed that farmers were unable to grow crops due to scarcity of water and high costs drip irrigation products. This spurred their invention of Driptech tubing, which is 2-5x less costly than the alternatives and works better and more reliably. In a 5-month pilot with 15 subsistence farmers, Driptech was found to save farmers water, labor and time while enhancing their dry-season crop income.

Problem: The developing world lacks doctors, particularly in rural areas leading to poor healthcare coverage.

Solution: ClickDiagnostics uses accessible mobile technology infrastructure to arm community health workers with the ability to connect to remote medical specialists who provide remote consultation. Rural healthcare professionals that lack adequate expertise to make diagnoses can take photos of patients, send them for review by the proper physician anywhere in the world, and then make a diagnosis based on their expert input. Treatment can happen immediately. ClickDiagnostics' solution can work anywhere in the world with decent cell reception.

Both Driptech and ClickDiagnostics offer elegant, cost-effective solutions. But getting there hasn't been without challenges. Frykman and Shih described their challenges and keys to success building affordable products to serve emerging markets.

Frykman described how he was able to get funding to get Driptech off the ground, despite the process being slow and gradual. The first bit of funding was the hardest to get. After that they were able to talk about the money raised and convince other investors to get on board. They'll be going out for their A round in 8 to 12 months.

Both panelists mentioned the need to understand the country specific context in which they are working. For Driptech, distribution has hinged on successful country-specific strategies. In India, Driptech piggybacks on established commercial agricultural input distribution networks. In China, they've worked with local governments on distribution. At ClickDiagnostics, Shih has found the key to success is understanding how the healthcare structure works in each country they operate in. While her product can work anywhere, she absolutely needs to understand the context.

Driptech is eager to serve the base of the pyramid. "It's easy to design another attractive mp3 player to sell to rich people. But it's much harder to design a product to serve dollar a day farmers," Frykman said.

Both entrepreneurs are dedicated to sustainable revenue models with social missions. The for-profit model enables growth and expansion. "I'm adamant about doing well by doing good and attracting more products and services to this sector through enabling technologies," Frykman said, touching on the idea of trickle up innovation.

Keeping these products low cost is of utmost importance. Frykman acknowledged that he sacrifices durability for low cost to some extent. Driptech is currently manufacturing in India, laser punching the tubing in Palo Alto and then selling the product back in India. They plan to do all pieces of the manufacturing process in India, but for now they are eating the excess cost of transit to California to test market acceptance.

I was pleased to learn that competitive threats are not top of mind for Driptech or ClickDiagnostics. Frykman isn't worried about competition. The market he serves is untapped and a "rising tide lifts all boats" as he sees it. Similarly, partnering has been key to Shih's success so far. Shih described how ClickDiagnostics seeks out its competitors and then figures out how to collaborate, and leverage their technology, research or other assets. When solving big problems, we need to think more and more in this mind set of radical collaboration, rather than competition.

Here are stories that caught my eye this week, an event coming up in San Francisco, and an opportunity for bloggers writing at the intersection of technology and poverty:

The Financial Access Initiative out of NYU has concluded in a new report that 2.5 billion people don't have access to a financial institution, including microfinance.  Jonathan Murdoch, FAI's managing director and a professor of economics and policy at NYU, has an illuminating quote: "Until now, the margin of error when considering the world's unbanked was about plus or minus a billion-unacceptable in any other field."  (Except in naming blogs.)

The report, Half the World Is Unbanked, notes that 800 million people living on less than $5 a day currently have access to financial services.  The survey was compiled from existing cross-country data with assistance from McKinsey's Social Sector shop.

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The Financial Times (US) published a full-page article October 2 entitled "To feed a need" that brought to mind research that WRI generated back in 2003 on the Indian conglomerate, ITC, and its rural engagement strategy called e-Choupal.

In brief, both the article from last Friday and the case study document the benefits of direct market access by poor rural farmers in India: by avoiding the traditional market middlemen and establishing transparent and honest markets, poor farmers achieve higher prices, and the markets benefit as well. 

India has now created a National Spot Exchange in Bihar, one of India's poorest regions; it is a unit of the Multi-Commodity Exchange. While the article never refers directly to ITC's pioneering effort to break the stranglehold of middlemen on rural farmers, it seems clear that their private sector business has provided the model for the government's new programs. 

One can only hope that public adoption of this business model does not undo the gains farmers who have had access to alternative markets have enjoyed, but rather amplifies the positive impacts, and extends the benefits substantially. 

Our friends at Changemakers point our attention to a recently launched competition that is very closely linked to the role of enterprise in development. Run in alliance with the Global Alliance for Improved Nutrition (GAIN), the competition "is open to innovators with new ideas to expand and improve nutrition - to make sure all people have access to the vital nutrients and the critical information that will help them thrive. Solutions with the potential for growth and scale are likely to come from creative community members from all corners of the globe and local, grassroots organizations." (from Ashoka's press release).

There's something interestingly different about this particular competition. Besides a $5,000 cash prize and extensive media exposure through Changemakers's networks (common to all Changemakers competitions), the five best projects will have the opportunity to present their projects to investors during the GAIN Business Alliance Global Forum, taking place in May 2010 in Dubai.

I encourage you to forward this announcement around to anyone you know who might be working in an eligible project. I will do so with Tom Stehl, a friend who works for a corageus organization called Meds and Foods for Kids, which is tackling the challenge of child malnutrition in Haiti through locally products that fall under the category of Ready-to-Use Therapeutic Foods (RUTF). Tom was part of the 2008 Class at Santa Clara University's Global Social Benefit Incubator. Click here to watch his introduction video.