Certifications, training, and efforts geared at organising farmers are key approaches for mitigating the risks for supplier. But they are not the only issues, and they do not provide the ultimate supplier solution. For example, without having access to the adequate inputs (plant material, fertilizer, and pesticides) farmers will not be able to apply what they have learned. Adequate inputs have to be available and accessible at affordable prices. Only the combination of training and access to inputs will lead to inproved yields and in turn increased farmer income. Clearly this also entails costs. At the moment the industry is shoulderong a large part of these costs, but in the long run farmers will by themselves have to secure bank loans for purchasing inputs. Financing is another key theme taht is important for safeguarding the supply of produce.
These are different financing options that can be explored, of which some are already in place, for example, the company Wienco makes it possible to purchase inputs ‘inputs on credit’ in Ghana. It is worthwile to look at already existing successful initiatives and exploring other suitable (financial) institutions that can provide loans. This effort would face a number of barriers. Because cocoa producing countries (especially in West Africa) are considered as high-risk and low yield areas, financial institutions are generally not interested in investing in agriculture and providing loans to farmers. Generally speaking agriculture is risky business; farmers depend on a lot of factors for having a succesful harvest: the timing of preparing plots of land, sowing, applying inputs and harvesting are crucial, as are climate and weather. But the problem is not only related to the creditworthiness of farmers, it also has to do with the existing lack of trust that farmers have in local banks. A recent book of Royal Tropical Institute on Value Chain Finance gives a number of practical examples on how farmers that are embedded in a value chain can get access to finance.
Even if the cocoa farmer’s access to financing could be improved, there are no guarantees that the farmers will actually invest this additional income in their own farms and communities. Will they spent their money on fertilizer, irrigation systems, or will they pay of their other debts, buy a television set or spend money on entertainment? Can investments in their local community be stimulated? How can this be done? What partnerships are needed? What are the drawbacks of such initiatives?
Another issue that requires some reflection is the issue of inclusion vs. exclusion. Although the aim is to certify, train, and as many farmers as possible, it is inevitable that in the end some farmers will receive training as well as financed planting materials and fertlizers, whereas other will not. It is essential to examine the principle that will guide this decision making: Which should be preferred, the least developed areas or places where a number on conditions are met (e.g., adequate transport and training infrastructure)? Ideally, vibrant local entrepreneurs would be involved, but can they be located? What are the future expectations that such decisions evoke?
The issue of inclusion and exclusion is also relevant for looking at extent to which ‘sustainability’ is a shared agenda. Max Havelaar and TCC respond to this concern by involving farmers in multistakeholders agreements, which help them organise and also strengthen their joint voice.
Final observations: Supplier failure is one of the main drivers for industry to invest in sustainable sourcing of cocoa. Due to increase risks that cocoa farmers in the future might not be able to produce the required quantity and quality of cocoa, it becomes increasingly important to make on-farm investments. To assure that increased quantities of cocoa are available on the market, cocoa farming has to be lucrative for farmers. The main themes in this context are certification schemes, training farmers, and organising farmers. The questions posed by Dutch actors in the cocoa chain vary from vary from how the costs of training schemes can be lowered to how successful initiatives can be scaled up.
next time: Remarkable sustainability initiatives.