By Beth Jenkins and Piya Baptista, Non-resident fellows of the Corporate Responsibility Initiative at the Harvard Kennedy School
Read enough blogs, and you might think the formula for increasing smallholder farmers’ incomes is well-known: training + access to (inputs x finance x markets). Simple, right?
From 2008-2015, TechnoServe’s East Africa Coffee Initiative reached more than 250,000 farmers in Ethiopia, Kenya, Rwanda, and Tanzania, increasing their incomes by more than 25%. A new report published by the Corporate Responsibility Initiative at the Harvard Kennedy School describes what lay behind these reach and impact numbers. It confirms that training and access to inputs, finance, and markets are essential. But it also reveals the enormous complexity involved in putting them in place.
There is nothing simple about agricultural systems. In the East African coffee sector, there are five million smallholders. Many of them are organized into cooperatives for the purposes of marketing and selling their coffee. In Ethiopia, cooperatives are themselves organized into cooperative unions. There are private traders operating with and alongside the cooperatives, selling to exporters who in turn sell to roasters—who then sell to retailers and consumers like us. And there are challenges at each step of the journey. Smallholders often produce poor quality coffee. Their cooperatives struggle to gain access to financing for modern processing equipment. Exporters have trouble doing business with them because management and governance standards are low. Cooperatives don’t have systems for sorting and storing coffee of different grades, and their leaders – who are not compensated on performance, or in some cases compensated at all – lack incentives to pass any price premiums back to farmers. Banks consider the sector too risky to lend, and the policy and regulatory environment requires reform.
In this context, TechnoServe’s East Africa Coffee Initiative was less a technical intervention and more an exercise in system leadership: aligning incentives, building capabilities, and cultivating relationships of trust among diverse stakeholders in the coffee value chain and broader enabling environment. It also involved a healthy dose of innovation.
For example (believe it or not, this is not a comprehensive account):
TechnoServe identified demand for high-quality Arabica coffee in the specialty market and determined it was feasible for East African smallholders to meet it
The organization commissioned basic agricultural research, such as soil studies
This enabled it to provide farmers with customized agronomy training and facilitate access to appropriate inputs
At the same time, it worked with cooperative leaders to improve management and governance, for instance by instituting transparency sheets and SMS-based bookkeeping that enabled exporters and banks to view their finances in real time
This helped to persuade banks to lend cooperatives money to invest in better coffee processing technology – along with training for credit officers and risk-sharing TechnoServe helped to arrange from the International Finance Corporation
At the same time, TechnoServe innovated a new business model for exporters in which they provide cooperatives with working capital, processing and marketing in exchange for a percentage of the sale price
And the organization drummed up interest from roasters like Starbucks Coffee Company, Peet’s Coffee & Tea, Stumptown Coffee Roasters looking to source high-quality coffee with a unique story
In coffee, there are significant price premiums for quality, which gave stakeholders the incentive to participate. But TechnoServe still had to overcome significant skepticism and the fact that it didn’t have all the answers in advance. Luckily, the organization had eight years, $65 million, and strong support for an approach based on experimentation and learning – including from failure – from the Bill & Melinda Gates Foundation.
As in most projects, and in life, some things worked well and some could have worked better. A key question will be the extent to which change catalyzed by the Coffee Initiative can be sustained and continue to scale of its own momentum. There is some evidence that farmers continue to use the agronomic practices they learned, but there are also unresolved challenges – such as policy and regulatory reform and the absence of a local market for farmer and cooperative support services.
Systems change is complex, messy, and very long term. Never-ending, really, as systems continuously evolve. To accelerate progress toward more sustainable, inclusive growth and development, civil society organizations, their funders and corporate partners need to think and operate in new ways – for example, pushing the concept of empowerment to its limit and challenging the cost-per-beneficiary calculus. The report makes a few suggestions based on lessons learned through the Coffee Initiative. As TechnoServe’s Global Coffee Director Paul Stewart summarizes it, “Think holistically. Be willing to go out on a limb. Be patient. And measure everything.”
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