Interna'onal  Rice  Research  Ins'tute      

     

Presented  By:  Jehiel  Oliver  

Aya  Consul'ng,  Inc.  

Mechaniza)on  Schemes,  Gender,  Microfinance  and  the  Rice  Value  Chain  

“If  you  care  about  the  poorest,  you  care  about  agriculture.  Investments  in  agriculture  are  the  best  weapons  against  hunger  and  poverty,  and  they  have  

made  life  beDer  for  billions  of  people.  The  interna)onal  agriculture  community  needs  to  be  more  innova)ve,  coordinated,  and  focused  to  help  poor  farmers  grow  more.  If  we  can  do  that,  we  can  drama)cally  reduce  

suffering  and  build  self-­‐sufficiency.”      

-­‐  Bill  Gates,  co-­‐chair  of  the  Bill  &  Melinda  Gates  Founda'on  

2  

Background  

3  

Rice  and  Global  Popula)on  Growth  •  Global  rice  yields  must  increase  by  an  es)mated  1.2%-­‐1.5%  per  year  to  keep  

pace  with  increasing  demand  

0  

100  

200  

300  

400  

500  

600  

1991   1996   2001   2006   2011   2016   2021   2026   2031   2036  

Tons  of  Milled  Rice,  Millions  

Addi)onal  Rice  Needed:  Over  200  million  Tons  by  2035!  

2010  Global  Rice  Produc)on  

Americas    

Africa        Asia              

Source:  Samarendu  Mohanty,  IRRI  

4  

Climate  Change  

•  Drought  •  Flood  •  Pest  •  Disease  outbreak      

Produc)on  

•  Management  Failure  

•  Low  technical  skill  /  capacity  

•  Crop  subs)tu)on  

•  ShiFing  Labor  Markets  

Poli)cal  

•  Regulatory  risk  

•  Infrastructure  risk  

•  Poli)cal  risk  •  Price  Controls  •  Export  Bans      

Market  

•  Variability  in  input  price    

•  Exchange  rate  vola)lity    

•  Counterparty  risk  

•  Default  risk    

Challenges  to  Rice  Produc)on  Growth  •  While  the  global  supply  of  rice  must  keep  pace  with  a  swelling  popula)on,  

covariate  risks  within  the  rice  produc)on  system  challenge  small  farm  produc)vity  

✓

5  

•  The  average  size  of  the  world’s  largest  100  ci)es  has  grown  to  almost  10  )mes  their  size  in  1900;  two-­‐thirds  of  these  ci)es  are  in  developing  countries  

•  This  trend  con)nues  to  transfer  valuable  labor  resources  from  rural  to  urban  areas  

Impact  of  Urbaniza)on  on  Global  Rice  Produc)on  

0  

1  

2  

3  

4  

5  

1900   1950   2000  

Average  Size  of  Top  100  Ci)es,  in  Millions  

Source:  World  Development  Report,  2009  6  

0  

15  

30  

45  

60  

75  

Category  1   Category  2   Category  3   Category  4  

Urbaniza'on  and  Income  –    Change  Between  1985  and  2010  

80   800   8000  

Urban

iza(o

n  rate,  %

 

GDP  per  person,  $2000  log  scale  

India  Vietnam   Thailand  

Indonesia  

Malaysia  

Source:  World  Bank  and  CIA  World  Fact  Book  

Urbaniza)on  and  Income  –  Change  Between  1985  and  2010  

China  

Impact  of  Urbaniza)on  on  Rice  Producing  Countries  •  Growth  in  urban  manufacturing  is  changing  the  distribu)on  of  labor  in  major  

rice  producing  countries  as  workers  migrate  to  large  ci)es  for  higher  wages  •  Compelling  evidence  suggests  a  posi)ve  rela)onship  between  urbaniza)on  and  

economic  growth,  meaning  it  is  a  trend  that  is  here  to  stay  

7  

Labor  Con)nues  to  Shij  Despite  Government  Efforts  •  India  implemented  a  Na)onal  Rural  Employment  Guarantee  Program,  but  labor  

con)nues  to  migrate  from  areas  like  Bihar,  UP,  AP  and  Karinataka  •  Labor  that  remains  in  these  states  (e.g.  farm  hands)  command  wage  premiums  

Source:  World  Development  report,  2009  8  

Gender  Dynamic  

9  

•  As  men  migrate  for  higher  earnings,  women  are  becoming  increasingly  more  important  in  rural  rice  farm  systems  and  will  subsequently  be  affected  most  by  urbaniza)on  

Gender  and  Urbaniza)on  

India   Bangladesh   Sri  Lanka    

Agriculture  share  of  GDP   19.3   21.0   17.9    

Female  intensity  of  agriculture   55.5   51.5   40.1    

Female  agricultural  employment  as  share  of  total  female  employment  

46.0   60.9     39.9    

Male  agricultural  employment  as  share  of  total  male  employment  

35.5     45.1   29.6    

10  Source:  World  Bank  

Cost  of  Labor  is  Increasing  in  Agriculture  •  Wage  infla)on  within  the  Indian  agricultural  sector  increased  by  18%  (CAGR)  

between  2010  and  2012  

6%  4%  

13%  

18%  

0%  

5%  

10%  

15%  

20%  

1995  -­‐  2000   2000  -­‐  2005   2005  -­‐  2010   2010  -­‐  2012  

1995  -­‐  2000   2000  -­‐  2005   2005  -­‐  2010   2010  -­‐  2012  

Source:  RBI,  Ambit  Capital  Research  11  

Rural  Wage  Inequality  •  Despite  women’s  important  role  in  farming,  men  are  dispropor)onately  

benefi)ng  from  rural  wage  increases  •  Women  also  par)cipate  dispropor)onately  in  unpaid  work,  trading  farming  

services  with  neighbors    •  When  labor  is  hired,  increasing  wage  rates  place  downward  pressure  on  

women’s  farm  income  in  the  absence  of  mechaniza)on    

23.18  

29.44  32.18  

35.83  

15.33  19.02   20.43  

23.89  

0  5  

10  15  20  25  30  35  40  

1993  -­‐  1994   1999  -­‐  2000   2004  -­‐  2005   2007  -­‐  2008  

Real  Wages  of  Casual  Laborers  (Not  in  Public  Works)  

Rural  Male  

Rural  Female  

12  Source:  Government  of  India,  Ministry  of  Labour  and  Employment  

Empower  Women  Farmers  through  Mechaniza)on  Constraint   •  Unpaid  work  is  a  gender  specific  constraint  that  reduces  produc)vity  

of  women  in  rural  areas.    •  Low  produc)vity  at  the  farm  level  prevents  women  from  engaging  in  

self-­‐employment  /  income  genera)ng  ac)vi)es  •  Hired  labor  is  becoming  increasingly  more  cost  prohibi)ve  

Complexi)es   •  Land  ownership  is  highly  relevant  to  farm  produc)vity  •  Women’s  limited  access  to  land  assets  constrains  credit  •  Credit  is  crucial  in  accessing  produc)vity  enhancing  technologies  like  

machines  and  improved  seeds  •  Even  with  credit,  certain  produc)vity  enhancing  technologies  can  be  

cost  prohibi)ve  for  any  one  farmer  ac)ng  independently  

Solu)on   •  The  provision  of  microcredit  has  partly  addressed  rural  credit  access  amongst  asset  poor  women,  especially  in  South  Asia  

•  Despite  this  success,  Microfinance  Ins)tu)ons  (MFI)  have  low  penetra)on  in  agricultural  lending  

•  Significant  technical  capacity  building  is  needed  to  change  this  

Con)nuum     •  Approaches  focusing  on  MFI’s,  with  access  to  asset  poor  women’s  self-­‐help  groups  (SHG),  can  unleash  agricultural  credit    

•  The  promo)on  of  produc)vity  enhancing  and  environmentally  friendly  farming  prac)ces  is  paramount   13  

Solu)ons  

14  

15  

Economies  of  Scale  •  Buying  power  

for  specialized  machines  for  small  farm  holder  

•  Bulk  ordering  of  agricultural  inputs  

Input  Suppliers  • Machinery  • Fer)lizers  • Seeds  • Etc.  

Producers  • Small  Farmer  Holders    • Women  SHG  Members  

• Non-­‐SHG  Members  

• Large  Farmers  

Transport  • Farmer  Provided  • Third  Party  Providers  

Processors  • Milling  • Quality  Control  • Storage  

Aggregators  • Middlemen    • Exporters  

End  Consumer  • Retail  outlets  • Restaurants  and  Hotels  

• Export  to  Global  Market  

Microfinance  in  the  Rice  Value  Chain  

Credit  Access  and  Capacity  Building  •  Credit  to  

finance  machines  and  complimentary  inputs  

•  Capacity  building  

Post  Harvest    •  Financing  of  

micro-­‐processers  for  small  farm  holder  

•  Warehouse  receipts    

•  Quality  assessment  

Marke'ng  Efforts  •  Price  discovery  /

transparency  for  small  farm  holder    

•  Market  coordina)on  

MFI’s  Suppor)ng  Small  Farm  Holder  Throughout  VC  

•  Past  experiences  informs  us  that  value-­‐chain  (VC)  interven)on  should  be  targeted  at  producer  level  to  maximize  social  outcomes  (e.g.  women  farmers)  

•  MFIs  can  create  value  at  various  stages  of  the  VC  to  benefit  small  farm  holders  

•  Not  all  MFIs  are  created  the  same,  so  iden)fying  the  right  partner  is  cri)cal  •  Focus  on  MFIs  where  credit  is  merely  a  plarorm  to  deliver  development  services    •  Ideal  MFIs  would  have  mul)dimensional  approach  to  farm  livelihoods  (e.g.  BRAC)  

Self  Help  Group  (SHG)  

Results  1.  Increase  farm  produc)vity,  labor  savings,  yields  and  income  2.  Secure  sustainable  livelihoods  amidst  rapid  demographic  change  3.  Empower  marginalized  women  farmers  

Educa'on  

Access  to  Capital  

Value  Chain  Development  

Health  Care  

Agricultural  Extension  

Access  to  Technology  and  

Inputs  

Community  

Mul)dimensional  Approach  to  Farm  Livelihood  

16  Source:  BRAC  Microfinance  model,  Developed  from  previous  project  

No  “One  Size  Fits  All”  Solu)on  •  Designing  mechaniza)on  schemes  begin  with  deep  “seed-­‐to-­‐seed”  analysis  of  

local  rice  produc)on  systems,  fit  with  enterprise  models  for  financial  sustainability  analysis  

Land  Prepara)on  

Crop  Establishment  

Water  Management  

Pest  Management  

Harves)ng  Drying  

Storage  

Milling  

Produce  /  By  Products  

Mechanical  Transplan)ng  Direct  Seeders  Hand  Transplan)ng    

Laser  Land  Leveling  Bed  Farming  

Machine  Boom  Spraying  Manual  Spraying  

Combine  Harves)ng  Manual  Threshing  

Machine  Drying  Sun  Drying  

Tradi)onal  Storage  Sealed  Storage  Warehousing  (Receipts)  

Micro  Mill    Commercial  Mill  

Rice  Rice  Hull  as  Fuel    

Animal  Drawn  Plow  Four  Wheel  Drive  Tractor  

17  

Source:  IRRI  

MFIs  Provide  Knowledge  Transfer  Framework  

Microfinance  Ins)tu)ons  

Rural  Branch  Network  

Rural  Branch  Network  

Rural  Branch  Network  

Rural  Branch  Network  

Rural  Loan  Officers  

Rural  Loan  Officers  

Rural  Loan  Officers  

Rural  Loan  Officers  Coopera)ves  in  Rice  Produc)on  

Zones  

Farmers  

Farmers  

Farmers  

Farmers  

Farmers  

Cereal  Systems  Ini'a've  for  South  Asia  (CSISA)  •  Help identify appropriate

machines and complimentary products (e.g. mechanical transplanter, soil nutrition management, participatory variety selection, water conservation, etc.

•  Host “Trainer of Trainer” capacity building sessions for MFIs on use of technologies 18  

Farmer  feedback  loop  •  Ensures  farmer  needs  are  met  •  Replaces  biased  informa)on  sources  

(e.g.  pes)cide  salesman  giving  pes)cide  advice)  

•  MFIs  have  management  informa)on  system  in  place  for  project  impact  repor)ng  (see  Appendix  A)  

Cost  Reduc)on  through  Resource  Alloca)on  Planning  •  Through  MFIs  network  of  self  help  groups  (SHG)  the  cost  of  a  mechaniza)on  

scheme  can  be  reduced  by  amor)zing  cost  over  a  larger  pool  of  recipients    •  MFIs  have  compe))ve  advantage  over  machine  service  contractors  who  lack  

access  to  large  pool  of  SHGs  to  absorb  cost  of  interven)on    •  Technologies  like  loca)on  alloca)on  algorithms  in  GIS,  using  Leaf  Indexing,  can  

provide  insight  on  rice  produc)on  cycles,  op)mizing  a  machines  usefulness  across  mul)ple  SHGs  within  a  spa)al  market  

One  Coopera)ve  may  not  have  capacity  to  absorb  the  cost  of  a  technology  

Mul)ple  SHGs,  opera)ng  within  a  MFIs  branch  catchment  area,  with  complimentary  produc)on  cycles,  can  share  the  cost  of  a  machine  

SHG   SHG   SHG   SHG  

SHG   SHG   SHG   SHG  

SHG   SHG   SHG   SHG  

SHG  

19  

Environmental  Impacts:  SHG  Coordina)on  for  CDM  

Rice  produc)on  accounts  for  1.5%  of  GHGs  globally  

It  takes  2,500  liters  of  water  to  produce  1kg  of  rough  rice  

The  Clean  Development  Mechanism  (CDM)  allows  emission-­‐reduc)on  and  water  saving  projects,  in  developing  countries,  to  earn  cer)fied  emission  reduc)on  (CER)  credits  

CER  credits  can  be  bought  and  sold  in  the  open  market  but  most  emission  reduc)on  projects  are  cost  prohibi)ve  for  small  farmers  

By  grouping  farmer  SHGs,  CER  credits  could  finance  various  GHG  reducing  and  water  saving    projects,  for  the  benefit  of  the  environment  and  the  small  farmer  

•  Rice  farmers  are  significant  contributors  of  green  house  gases  (GHG)  and  water  resource  use  

•  Environmental  interven)ons  can  be  cost  prohibi)ve  for  a  single  farmer  

Source:  Ole  Sander,  IRRI  and  UN  Framework  Conven)on  on  Climate  Change  

Project  Structuring  -­‐  Shared  Risk  and  Benefit  •  Mechaniza)on  schemes,  collateralized  by  tangible  assets,  mi)gate  covariate  risks  

(weather,  disease,  etc.)  related  to  financing  agricultural  produc)on  •  Credit  risk  is  further  enhanced  by  SHG  social  capital  •  Leveraged  leasing  structures  provide  an  example  of  op)mal  structure  to  balance  

stakeholder  incen)ves  and  risks:  

21  

Specialized  Machine  

Manufacturer  

Single  Purpose  Leasing  Company    

(Fee  Based  Management  Provided  by  

CSISA)  

Lessee  (Rice  Farmers  in  Microfinance  Coopera)ves)  

Delivery  of  Customized  Machines  

Purchase  (Bulk)  of  Customized  Machines  

Equity  Investors  (Machine  

Manufacturer,  MFI)  

Provide  Customized  Machines  on  

Lease  

Leasing  Fee  Paid  by  SHG  

Tech.  Capacity,  Machine  Repair,  

Support  

Share  Capital  Distribu'ons  

Debt  Investors  (MFIs)  

Debt  Investment  For  Asset  Purchase    

Lien  on  Assets  

MFI  

Provision  of  Credit  and  complimentary  

agri-­‐inputs  purchased  at  bulk  

Repay  principal  and  interest  on  microloans  

Tradeoffs:  Leverage  Leasing  Structure  

22  

Pros  • Small  farmers  needs  remain  at  the  forefront  • Sustainable  model  that  provides  market  based  long  term  solu)on  • Shared  ownership  provides  key  stakeholders  a  financial  incen)ve  to  engage  • Helps  mi)gate  biased  informa)on  to  farmers  • Reduced  risk  from  collateral  based  lending  • Reduced  cost  of  mechaniza)on  adop)on  for  par)cipa)ng  farmer  groups  • Circumven)ng  credit  restric)on  related  to  asset  poor  farmers  • Provides  roadmap  for  long-­‐term  asset  accumula)on  and  market  development  through  lease  buy  back  op)on  

• Can  accommodate  growth  into  more  innova)ve  systems  (e.g.  custom  farming)  

Cons  • More  complex  than  tradi)onal  extension  model  • Requires  upfront  donor  capital  for  structuring    • Significant  coordina)on  and  stakeholder  “buy-­‐in”  needed  • Financial  due  diligence  process  is  in-­‐depth  and  sensi)ve  to  data  input  

•  All  program  structures  come  with  trade-­‐offs,  op)mizing  these  tradeoffs,  for  the  benefit  of  the  marginalized  female  farmer,  is  cri)cal  

Key  Considera)ons  

Target  Progressive  Farmers  in  Coopera)ve  A  farmer  that  is  respected  within  the  group  –  leveraging  social  capital  to  build  group  

confidence  in  new  technology  

Ensure  this  farmer  is  trained  on  the  proper  use  of  the  machine  and  any  other  

complimentary  technologies  Provide  farmer  with  workable  revenue  

model  for  machine  

Thoroughly  Vet  Interven)ons  

Fully  understand  and  appreciate  delicate  local  farm  systems  and  social  fabrics   Pilot  technology  before  large  scale  roll  out   Maintain  feedback  loop  with  individual  

farmers  and  coopera)ves  

Iden)fy  Appropriate  Partnerships    MFI’s  with  branch  networks  in  rural  areas  experiencing  labor  displacement  and  

escala)ng  labor  costs  

Coopera)ves  with  appropriate  infrastructure  for  a  given  technological  

interven)on  (e.g.  irriga)on,  roadways,  etc.)  

Machine  manufacturers  with  servicing  capabili)es  who  also  value  equity  

ownership  and  long  term  commitment  

23  

Appendix  

24  

Appendix  A:  Report  Impact  through  MFI  Framework  •  Researchers  who  develop  a  technology  are  too  close  to  the  idea  and  can  suffer  

from  “inventors  bias”,  therefore  they  shouldn’t  be  tasked  with  assessing  impact    •  Assessing  impact  must  be  unbiased  and  on-­‐going  system,  not  one  off  reports  •  Top  )er  MFIs  have  strong  Social  Performance  Management  systems  (SPM)  in  

place  that  could  capture  unbiased  impact  data  for  mechaniza)on  scheme,  this  data  would  only  need  to  be  monitored  and  analyzed  by  CSISA  M&E  specialists:  

25  

Informa)on  Collec)on  

Informa)on  Consolida)on  

Informa)on  Analysis   Repor)ng  

Decision  Making  

Pilot  Tes)ng   Delega)on  

Communica)on  

Implementa)on  

Appendix  A:  What  is  SPM?  •  Social  performance  management  is  an  ins)tu)onalized  process  that  has  

evolved  within  the  microfinance  industry  and  involves:  –  Sevng  clear  social  objec)ves  –  Monitoring  and  assessing  progress  towards  achieving  social  objec)ves  vis-­‐à-­‐vis    

thorough  data  collec)on  –  Using  this  informa)on  to  improve  interven)on  and  communicate  with  

stakeholders  and  donors  •  A  social  performance  assessment  enables  a  project  to  measure  its  social  

performance  rela)ve  to  its  social  mission  and  objec)ves  in  an  on-­‐going  way  •  Social  performance  looks  at  the  en)re  process  by  which  impact  is  created,  

including:  –  Impact  data  related  to  mechaniza)on  scheme  (income,  efficiency,  yields)  –  Analysis  of  ins)tu)onal  objec)ves  –  Effec)veness  of  scheme  in  mee)ng  these  objec)ves  

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As  a  global  economic  development  consultant,  Jehiel  brings  a  unique  blend  of  skills   acquired   from  his  over  10  years  of  professional  experience  working   in  both  the  private  and  public  financial  sectors.   Jehiel  currently   focuses  on  the  agriculture,   micro,   small   and   medium   enterprise   industries   on   a   variety   of  projects   including   program   reviews,   financial   due   diligence   and   transac)on  structuring   /   execu)on   for   socially   responsible   investors.   As   owner   of   a  bou)que  consultancy,  Jehiel’s  clients  include  USAID,  ShoreBank,  UN  FAO  and  Calvert  Founda)on.  He  has  work  experience   in  over  ten  countries,   including  areas  in  conflict.    In  addi)on  to  his  du)es  at  Aya,  Jehiel  serves  on  the  board  of  H4H,  Inc.,  a  $250  million  dollar   impact   investment   fund   focused  on  mortgage   reinsurance   for  South  African  communi)es  affected  by  HIV/AIDS.    Jehiel  also  sits  on  the  board  of   Shared   Interest,   serving   as   treasurer   and   execu)ve   commiDee  member.  Shared   Interest   is   a   loan   guarantee   fund   that   has   benefited   over   2  million  marginalized   persons   to   date   through   its   work   in   the   microfinance   and  agricultural  sectors  of  South  Africa  and  Mozambique.    Prior  to  working  in  interna)onal  development,  Jehiel  served  as  an  analyst  and  associate  with  Key  Banc  Capital  Markets.  Within  this  organiza)on  he  worked  within   the   Ins)tu)onal  Capital,  Private  Equity,  Debt  Syndica)ons  and  Upper  Middle  Market  business  divisions.  

Jehiel  Oliver  Owner  Aya  Consul)ng  +1(404)  861-­‐6617  jehiel@ayaconsult.com  Skype:  jehiel.oliver  ayaconsult.com  

Appendix  B:  Biography