Agricultural Community Development Framework

Raymond Menard

Cheetah Development, Inc.

Copyright 2011-2015, All Rights Reserved

www.CheetahDevelopment.org

White Paper

Agricultural Community Development Framework

Linking human and economic development

Page 2 White Paper Cheetah Development

Abstract A review of the obstacles that trap subsistence farmers in poverty is connected to a framework is provided

to address these obstacles. A theory of change to create livelihood for smallholder farmers is delineated.

Table of Contents

Introduction: The Obstacles that Trap Smallholders ............................................................................3

IDEQ: Integrated Development Equation ............................................................................................4

Crops into Cash ......................................................................................................................................... 4 Money Grows on Trees ............................................................................................................................. 5

Crops ..................................................................................................................................................... 5 Value-Chain Investments ...................................................................................................................... 6 Cash ....................................................................................................................................................... 7 Opportunity Partnership ....................................................................................................................... 8 Accountability and Risk Management .................................................................................................. 9 Economic Development ...................................................................................................................... 10 Human Development .......................................................................................................................... 11

Theory of Change ............................................................................................................................. 12

Resolving Blocking Impediments ............................................................................................................ 12 Making Farmers Investable ..................................................................................................................... 12


AGRICULTURAL COMMUNITY DEVELOPMENT

FRAMEWORK

Introduction: The Obstacles that Trap Smallholders The developing world is dominated by subsistence farmers. Such people farm because they if they didn’t

they wouldn’t eat. It is not a matter of choice. They are termed subsistence because their production is

less or around their own food requirements. Across Africa these are typically 60-90% of a nation’s

population. In most developing economies farming is central to almost everything. Ironically, these

farmers usually fail to feed themselves well while their opportunity is to feed the world. There are more

than two billion people trapped in this rural condition representing the majority

of the poor on earth. It is not a bucolic state but an existence of hardship and short

lifespans.

There are several realities that truly trap people in this condition and make it

nearly impossible to escape even with outside assistance. They include:

Debt Finance: A lack of finance sufficient to access crop inputs of quality and sufficiency so as to

move from subsistence to meaningful surplus (personal farming to business farming.) Microloans

typically provide only a tenth of the amount needed even for one hectare or less.

Markets: While markets are large farmers are micro in size. This mismatch results in a paradox.

Farmers are unable to access markets though the demand far outstrips supply.

Logistics: Infrastructure, transport, storage, etc. are all lacking and unable to support reliable or

efficient linkages of farmers into economic systems. Moreover, these sectors of the economy are

dominated by middlemen and agents that are highly exploitative.

Value-chain systems: Closely related to the previous issue of logistics is the rest of the agricultural-

to-food value-chains. A well-known fact is that developing nations are in short supply of SMEs

(Small and Midsized Enterprises). As a result, there is a shortage of, preservation, processing,

distribution, and all of the myriad of businesses that make economies run successfully.

Corruption: Economic systems cannot move forward without trust. Corruption in developing

nations is notoriously endemic. We see it in governments, cooperatives, community leaders, staff,

and even banking systems.

Mindsets: The mindsets of the poor and of those engaging to assist them are the most challenging

factor faced.

There are a host of additional challenges that smallholder farmers face including lack of health, unsafe

drinking water, poor education, and climate change. However, these problems are in a different category

because they are not absolute blocks to opportunity. Whereas the six problems described may vary in

causal priority depending upon the crop, location, culture, etc., they each can be a total block to changing

the economic status of a person, family and hence community. Therefore, any investment must consider

them all if it is going to achieve success.

Subsistence famers eat

what they grow and

grow what they eat.

Little, if any, is left to be

sold to cover other costs.


We believe that many well-intentioned efforts have failed to achieve sustainable success for this very

reason: they only address one problem. What is needed is a holistic approach prepared on every front to

resolve the impediment issues. That is why we speak of a framework to rural community development.

The point of this paper is highlight each of the touchpoints of this framework so that it can be viewed as

a whole. Other documents will delve more deeply on the subjects.

IDEQ™: Integrated Development Equation™

Crops into Cash At its core, Cheetah Development’s community development framework is based on a simple idea: In

order to create livelihoods we need to turn the crop production of the rural poor into cash. This is their

only existing asset and opportunity. Moreover, their land and labor can be leveraged

into genuine value in the vast majority of circumstances. Historically, this is how

rising nations have become developed: agriculture succeeds, a middle class arises,

and then economies diversify.

Without a doubt, this is a business mandate and requires a business approach. Once

this fundamental proposition is accepted many conclusions immediately present themselves:

1. Development approaches are turned on their head: we need to buy from the poor rather than

give to them.

2. Markets (the source of cash) will drive results.

3. Cash means that there is a profit on the work.

4. Profit means that the work becomes self-sustaining.

5. Results will be measured in simple hard numbers: how much cash/profits that families achieve.

6. The discipline of the profit/numbers driven model means that all impediments to profit must be

simultaneously resolved. It is not satisfactory to conclude that 80% of the activities succeeded

while no profits were achieved.

7. The development framework must be imbued with business considerations. We say more, it must

be actual business.

The layers of understanding surrounding this

core concept are vital to its ultimate

attainment. That is why we speak of an

integrated development equation. The pieces

fit together. The following diagram summarizes

the IDEQ concept. However, the words and

concept titles need careful definitions.

Consider that many orgs would say they do this

very work while they don’t do any business at

all. Therefore, we offer the following brief

explanation of our work and activities against

the backdrop of the problems highlighted in the

introduction.

Rural livelihood starts

with a core mandate:

Turn crops into cash.™

Buy from the poor rather

than giving to them.

People could grow food – and lots of it. It’s the rest of the value-chains that is completely broken.


Money Grows on Trees Contrary to the old adage, money does grow on trees and under the ground in the form of potatoes or

peanuts and fill fields with every imaginable crop across this great planet. But turning the fruits of the

earth – crops – into cash, takes disciplined business. There are seven aspects of this work that are required

for success in a developing nation context: crops, cash, value-chain investments, opportunity partnership,

accountability & risk management, economic development, and human development. Each of these seven

aspects are dealt with in turn in the following discussion.

Crops It all starts with crops. That is where smallholder farmers have assets, skills, and opportunity. Some are

already producing in excess of what they need for consumption and so have moved beyond subsistence.

But we can do better and need to. The world is a global economy and smallholders must and can compete

against those in developed nations, even if the

developed nation farmers are subsidized. Thus, if

possible we prefer crops that are not benefited by

a high degree of mechanization and scale.

The good news is that increasing yields has

become a science rather than an art. Cheetah has

found that typically we are able to increase yields

in the first year by 5x to 10x per acre over what

farmers are already growing. Good seeds,

treatments, and proper agronomic practices pay

immediate dividends, without farmers becoming

highly industrialized. Maize fields planted on same day in Tanzania. Cheetah field on left. Traditional practices on right. Yield will be 8x or more. Drought resistance will be better.


For farmers to increase yields, they require access to

quality inputs (made available through value-chain

investments – discussed below) and they require

training and the support of agronomists. Cheetah

achieves this by starting a farmer service company,

by engaging with ag supply companies, and by

working with local banks, and by working together

with NGOs. To learn more, see information about

Pearl Foods, which is the farmer service company.

Post-harvest losses are

extraordinarily high in

underdeveloped nations. It is a tragic irony in places rife with malnutrition and

hunger, food is lost. Even for durable crops like grains, the loss rate is around 30%.

Massive unaccounted losses are post-growth not just post-harvest. For many fruits and vegetables, half

of the crop is never harvested because market off-take systems, preservation, and buyers are not in place

to accept the peak harvest quantities. The wet/dry annual periods are also feast/famine seasons. Farmers

understand their own harvest losses and are usually reluctant to increase their yields through better crop

inputs or more acres being tilled until they are assured of off-taking opportunity.

In order for farmers to succeed, it is not enough to grow more. We need to apprehend the illusory problem

of ‘overproduction’ that exists at harvest time.

Value-Chain Investments Grain storage is insufficient and cold storage is almost non-existent. There is almost no food processing

and local people cannot preserve the bounty of harvest for consumption later. Large harvests cannot exit

the field because they have to be carried on the backs of malnourished, small farmers. These and

numerous other challenges confront farmers. The reason is simple: these

are undeveloped nations so the SMEs that provide these solutions are

also nonexistent or under-developed. The most obstructive of these

problems require solutions or the rest of the investment

fails.

The relationship between farmers and an under-

developed value-chain is so dysfunctional as to be a

vicious cycle. Farmers struggle to succeed and so do

companies that would be potential off-takers.

Cheetah’s solution is to invest in both sides of the

problem simultaneously. We have created new debt

and equity finance solutions to enable these

investments to occur (METAFINANCE and MICRO

VENTURE CAPITAL). And we are creating a pipeline of

opportunities and a portfolio of companies that engage in the layer

of business that resides right beside the farmer – the “last mile”.

Increased yields alone

will not feed more

hungry people.


Companies operating include Pearl Foods, a farmer service company and Reservoir, a food preservation

company working on harvest losses. In various stages of development are cold storage, cargo transport

bicycles, soil testing, dairy solutions, poultry solutions, grain bins, and more.

Currently, value-chains are dominated by middlemen1 who are exploitative and add no value. In

developed nations, middlemen are essentially extinct. Companies that occupy positions in value-chains

do so because they offer a competitive value-add.

Cash There is an old saying, “Cash is king.” In a business sense this has a lot of validity. And to the smallholders,

cash is the hoped for result of their efforts. Cheetah operates with a triple bottom line: profits, impact

and environmental sustainability. The impact we are focused on is livelihood development for

smallholders. Unlike many impact objectives, we have an easily measured result: the cash profits we

deliver to farmers. This is a clearly delineated target that in contrast to most impact objectives is simple

to measure and report.

Nevertheless, cash is difficult to manage. Consider that one of the current theories of development

espoused by that community is the ‘linking farmers to markets’ proposition. The usual practice is to

provide farmers with some market training, maybe make some introductions, and send them to town to

work it out. It breaks down in almost all cases on account of logistical issues (more on that later) but most

elementally on the issue of cash.

Under this ‘linking’ theory, if everything were to work (and it

occasionally does) so that smallholders had bountiful crops

and a ready market with all logistics managed, cash is often

still a problem. How is each farmer to be properly accounted

for with no corrupt tendencies? In nations were bank

accounts, including microfinance accounts are below 15% of

the population, how are they to be paid. Imagine a modest

village group of 300 hundred farmers each owed $500 on a

similarly modest harvest amount. Is the buyer expected to

come to the village and distribute $150,000? That would put

everyone in danger. Mobile money sometimes provides

partial solutions but telephone ownership in many areas is still

below 30% and many villages still lack any phone service. Who will manage the payment of taxes common

on most crops? How will the farmer group’s bookkeeping be completed?

The point is that logistics of even cash disbursement is a significant challenge. It takes the possible

solutions mentioned and a few more to make it work. That is where Cheetah includes cash management

in its work. It manages all the money down to each farmer. Over time, farmer groups can and will develop

the capacity to do this themselves, with appropriate audits. But we cannot wait for that to happen while

people suffer and opportunity beckons.

1 Please see our white paper, “Aid, Middlemen and Value-Chains: Market Economies vs. Capitalism”


Opportunity Partnership Opportunity. The first half of this title is opportunity. Opportunity is

driven by markets. That is a key reality that is too often

unresolved by NGO approaches. A market2 is a list of actual

buyers with whom you can negotiate terms including

price, quantity, quality, delivery, payment, etc. This is

clearly a business function. We should not expect NGOs

or governments to understand or provide farmers with

markets. The unsuitability to the task is exactly why NGOs

apply the theory of ‘market linkages’ mentioned earlier.

Market linkages fail because they are massively complex in terms of

understanding markets, price swings, logistics, etc. Even in the USA,

large farmers with tens of thousands of hectares join cooperatives

and other business entities to hand off much of the marketing

problem. Why would we expect groups of remote and uneducated

people to do this in this rest of the world? Thus marketing is a key part

of the partnerships.

Given the underdeveloped state of these nations, there is a shortage of businesses ready to engage and

do this work. That is the opportunity that Cheetah leverages to provide the services needed by farmers to

rise out of poverty. Since we are operating within and forming afresh functional value-chains, we need to

be insistent that every value-chain partner profits. Without that, the value-chain will break and everyone

will lose. This means from the farmer up, everyone must profit. Win-win-win-win!

Partnership. Developed economies succeed because numerous companies engage in more than casual

partnerships to serve customers. Even items that you can hold in your hand like a cell phone have

hundreds and likely thousands of companies producing components, services and software to make it

work, not to mention the tens of thousands of patents that are actively contributing to the functionality.

Such partnerships may be vendor/buyer, alliances, joint ventures or other hybrid relationships. Currently,

about a third of all USA based sales occur because of a marketing alliance between two or more

companies.

Despite the prodding of donors for Public Private Partnerships, strategic partnership approaches are

comparatively thin among those in the development community. This is especially troublesome because

the challenges are so significant and integrated solutions are necessary to sustainable success.

There are three generalized partnership relationships that are all vital to results: between farmers, with

farmer groups, and in the businesses surrounding farmers. In that last category, Cheetah partners

aggressively with donors, the private sector, NGOs, banks, universities, and especially off-takers.

However, the most interesting part of our partnership approach is that we practice it with smallholders.

We believe that this is an aspect of our work that it too rarely applied by others. In this context,

partnership means some combination of the following:

2 Please see our white paper, “Understanding Markets”

Much of Cheetah’s work focuses on markets and finance since they are largely lacking for smallholder farmers.


1. We go to market together with farmers. In the division of labor, they are producers and we

manage logistics and marketing.

2. We believe in the assets and potential of smallholders as our partner. We don’t operate our own

farms and compete with them.

3. Our profits are often directly link to farmers. We succeed or fail together. This forces us to be

empathetic to their challenges and to address them directly.

4. We treat smallholder groups with respect, expectantly listening to them because we know we will

learn how to succeed better together.

5. We sign contracts with smallholder groups and

expect them to be followed.

6. We assume ordinary business risks associated

with the successful performance of smallholders.

7. We invest in our farmers.

Finally, we expect farmers form partnerships

between themselves, ala cooperatives.3 Without

that they cannot jointly finance, work, or market

their crops. They are too small to address markets.

Accountability and Risk Management The world tends to see these billions of desperate rural people as ‘poor farmers’. When push comes to

shove people give instead of investing

because they feel bad. As a result,

smallholders are trapped in poverty

because the pathway out is blocked.

There is very little in the way of

investment, partnership, future, and

options.

As a matter of course, every organization

has governing policies for accountability

and risk management. However, for

Cheetah in many ways this is our special

sauce. In order to make investments

directly in or dependent on smallholders

requires that they become investable

themselves. From the point of view of

investors, subsistence farmers need to be

perceived as a reasonable business risk.

This requires applying accountability and

risk management not just to the external

business practices but comprehensively to smallholder activities.

3 Please see our white paper, “A New Approach to Farmer Cooperatives”

Smallholder farmer/leaders reading, discussing, and adopting a group constitution.


For example, consider training activities which are common to

many organizations engaging with smallholders. It is ordinary to

audit such events with headcounts, signatures of attendees, etc.

Farmers game such offerings because they are so frequent in many

villages. They show up late. Don’t pay attention, only come for a

free snack, etc. However, when Cheetah conducts a training

session on agronomy for smallholders, the attendance and

subsequent compliance with the practices taught means a

commercial crop input loan may or may not succeed. So we offer

no free snacks, payment for

attendance or other incentives. We do the training in the field and have

farmers actually practice the activities hands-on. If they do not attend, they

will not receive the loan. Therefore, accountability is directly linked to risk

management. Most all farmer activities have serious levels of accountability

and consequences. This is different than the typical way that smallholders are

usually engaged.

Cheetah has written accounting and business operational policies. It operates its businesses as franchises,

designed to be replicable. Therefore, it is very deliberative in setting out clear policies for all of its work.

This significantly raises the level of accountability and risk management it is able to achieve, even in the

difficult circumstances of developing nations.

The constant objective is create accountability and risk management so that smallholder farmers and the

investments linked to them achieve reasonable levels of business risk. Farmers need to be seen as

investable. More on that below.

Economic Development In economic development, Cheetah works predominantly at a community level. There are two

contributors to that community’s economic development: A) The economic investment that surrounds it

and enables the community to participate in the economy of the area and the world. B) The micro

economy of an individual that is often described as livelihood development.

Cheetah’s objective is not to engage every single smallholder in a community in its partnership. It should

be mentioned that more than half of the people engaged are women and orphans figure prominently in

our work, as well. However, the truth is that many villagers do not want to be farmers. When there is no

cash, everyone must be a farmer because otherwise they will not eat. Once there is cash, things change.

Consider that a study in the USA in the 1970s suggested that money entering American towns at that time

would turn 10 times before leaving. In essence, when the crop is converted to cash, the crop can be ‘eaten’

more than 10 times before it is consumed. It multiplies the effect. In addition, the introduction of cash

into the local economy means that people who are not strong enough or not inclined to be farmers have

alternative ways to create income and thus earn their food instead of growing it. Immediately affected

will be women, especially widow-headed households. For example, once there is money, they could make

dresses because their neighbors will have cash to purchase them. In our surveys of Tanzanian villages, we

see exactly this trend. As villages move beyond subsistence, local economies develop.

Making smallholder farmers

investable is the foundation

of IDEQ. It is the key that

unlocks opportunity.


It is possible to roughly measure the progress achieved beyond subsistence at a very gross level by just

driving through villages. Shops spring up, children have better school uniforms, and local services like

churches, schools and clinics are better staffed and in better condition.

Human Development When we see people suffering, we want to do something about it if we have any heart at all.

Unfortunately, when we don’t know the people who are suffering our instinct is to deal with the suffering

itself rather than the underlying causes. Rarely does this have lasting impact.

Much of human suffering is caused by poverty yet only a small percentage of aid goes to livelihood

development. Even so it has been well established that economic development leads intrinsically to

human development. For example, a 10% increase in income = 6% decrease in infant mortality, an

amazingly direct correlation. Other studies show economic development results in lower birthrates,

higher education rates, less child oppression, less domestic violence & more stable families, and more

rights for women.

Cheetah Development’s model is part of a holistic development perspective that Cheetah has identified

as the Integrated Development Equation (IDEQ). This model identifies a process for economic

development in undeveloped regions in a way that leads to sustainable solutions and increases the impact

of traditional aid approaches. This model catalyzes the available local resources to deliver a

comprehensive approach to development.

When there is no cash, basic human development is not sustainable. For example, an aid organization

may build a medical clinic but the people cannot pay to use it. In the Iringa region of Tanzania, population

about 1 million, there are 438 medical clinics and more

than a dozen hospitals. This is a lot of facilities for the

population. However health care is of poor quality,

medical staff often go without salaries, and medicine is in

short supply and often fake. Therefore the support

expenses never end. This is true of schools, water and

utility systems, etc. However, once there is cash, then

human development projects become increasingly

sustainable. For example, farmer’s cooperatives we are

working with have a primary objective to provide group

health insurance policies to their members. This

introduces a payer into the local health care system so

that care can be upgraded and be sustainable.

That economic development leads by itself to human development is well-known. Although human

development may be intrinsic, rarely is development practiced in such a way that there is a direct

connection to economic development. At Cheetah we see that these can be link in a virtuous cycle

improving the impact all around. Therefore, we are very interested in combining our efforts with those of

human development. We are especially interested in drinking water and healthcare insurance because

they can be linked to farmer success.


Theory of Change

Resolving Blocking Impediments At the outset we identified six blocking impediments that trap smallholders in poverty. We will pause here

to show that these are all mitigated or removed by the seven aspects of IDEQ.

Impediment Resolution A lack of Debt Finance makes it impossible for farmers to access quality inputs.

Cheetah has introduced METAFINANCE as innovation to provide debt financing for crop inputs and other products for smallholder farmers. By partnering with farmers on markets, a significant part of the risk is mitigated since the proceeds of the loan have a guaranteed market. Farmers forming coops allows them to negotiate finance.

Markets are inaccessible to farmers even though demand far outstrips supply.

Cheetah links its success to farmers by partnering with them. Cheetah’s ultimate success is driven by successful sales of the farmer’s production. Since the farmers form cooperatives their production can be aggregated to better access the large markets that are readily available.

Logistics are insufficient and dominated by exploitative middlemen.

When Cheetah partners with farmers in the division of labor Cheetah takes responsibility for all logistics. Middlemen are eliminated and the likelihood that inputs will be received, crops will be able to reach markets, cash will get to the specific farmer owed becomes highly reliable.

Value-chains are underdeveloped and stuck in a vicious cycle.

Cheetah has created a new equity finance model, MICRO VENTURE CAPITAL. This finances the development of businesses that reside in the value-chain space close to farmers, solving their immediate problems and connecting them to opportunity.

Corruption is endemic. Cheetah has strict accountability and risk management practices. These convert corruption from an obstacle to a manageable cost of business.

Mindsets are set against pathways to progress.

Cheetah doesn’t expect mindsets to always change. Rather, we manage in concert and if necessary around them. Just because a smallholder may believe that success can never come, doesn’t mean that we can’t bring them some level of positive results. By accessing market driven opportunities that flow through every part of the value-chain, we are able to get people, companies, NGOs, and stakeholders to engage. By partnering we become shareholders in success, empathetic to the challenges faced, and expectant listeners all of which work towards positive engagements regardless of mindsets. By bringing a payoff of economic and human development we are able to constantly win mindshare.

Making Farmers Investable The foundational

achievement of this work is

to make farmers investable.

That is what will drive the

capital that can bring a

triple bottom line AND scale

to millions of families –

many thousands of

communities. This simple

mission statement sits at

the base of this

opportunity. It is the only

path forward yet remains largely unrecognized.

Documents

Agricultural Community Development Framework