Programme profile
IMSAR: Improving Market Systems for Agriculture in Rwanda
Project description / objective
To commercialise agriculture by improving agricultural market systems to benefit poor rural households as producers, employees and consumers, and small and medium size businesses, resulting in increased sales/income for women and men smallholder farmers and enterprises, and increased Rwandan agricultural produce that has value-added and export diversification.
Market systems focus
Agricultural inputs
Due to low access to, and use of, high quality agricultural inputs and poor knowledge of good agricultural practices, average yields of most crops are much below potential. IMSAR stimulated change by piloting and testing - in partnership with agribusinesses - innovative products and distribution models that better responded to smallholder farmers’ needs in terms of price, suitability and accessibility.
Agri-finance
Agriculture lending only constitutes about five per cent of total loans in Rwanda. Poor access to affordable financial products tailored to the needs of agribusinesses and farmers continues to limit their ability to invest in agriculture, ultimately hindering the growth of the sector. IMSAR partnered with commercial banks, fintechs and MFIs to stimulate innovative financial products which meet the needs of smallholder farmers and the industry, and the characteristics of the market actors involved in the production, aggregation, logistics and processing of agricultural products.
Aggregation services & functions
High post-harvest losses, unstable volumes and poor quality of agriculture produce (which undergoes significant deterioration as it moves along the supply chain) hamper the performance and growth of the sector. IMSAR supported improved aggregation models to better consolidate agricultural produce or commodities, thus enabling economies of scale in transportation, processing, and storage, as well as improved coordination between farmers and other supply chain actors so that they are better able to meet the volume and quality requirements of end markets.
Programme interventions
Agriculture inputs
Crop-specific fertilisers
Stimulate demand for, and access to, crop-specific fertilisers (CSF).
The intervention included:
- A comprehensive marketing effort (branding of agro-dealer shops and marketing campaigns through radio jingles, television adverts and SMS) and dissemination of information to farmers on CSF through crop clinics and demonstrations plots
- Investment in the agro-dealers network to expand last mile supply through:
i) agro-dealer training and establishment of a commission/rebate system
ii) inclusion of additional agro-dealers through the establishment of a regional warehouse to make CSF more accessible
Testing an in-kind credit scheme for women agro-dealers
Despite women agro-dealers being very dedicated, trusted by their clients, and showcasing strong sales records, they made up only 25 per cent of a large fertiliser supplier which IMSAR partnered with. IMSAR’s analysis suggested that one key constraint leading to such a gender gap was that women struggled to buy fertilisers upfront due to lower access to capital. IMSAR therefore supported the pilot of a credit scheme, whereby selected women agro-dealers could access fertiliser on credit, to be repaid with no interest in 30 days.
Small packs of crop-specific fertilisers
Increasing the optimal use of crop-specific fertilisers by introducing small packs.
IMSAR provided market research to define the small pack strategy, including branding and marketing support; the design of a new company logo and tagline; promotional materials; and co-investment in the new packaging line.
Mechanisation
Introducing tractor services targeted at cooperatives.
IMSAR supported the costing and establishment of the model; assisted with coordination; and provided a hidden subsidy, for one season only, aimed to incentivise adoption and improve awareness of the benefits of tractor use.
Insect-based animal feed
Developing standards for, and supporting the commercial production of, insect-based animal feed. The interventions included:
- Training four agribusinesses to improve their capacity to farm and process black-soldier flies (BSF).
- Technical assistance to the Rwanda Standards Board (RSB) to develop the necessary standards to regulate this novel sector.
- Technical backstopping and grants to two companies to co-invest in commercial BSF production, meeting the newly developed Standards, with the aim to have strong demonstration sites and products available in the market.
Oyster mushrooms inputs
Increase access to oyster mushroom inputs (spawns and tubes) and extension.
The intervention included supporting the establishment of a commercial facility to produce mushroom spawns (which are grown into mushroom tubes that are used by mushroom farmers) and the development of a training curriculum to improve extension services to tubes and mushroom farmers.
Assess women and youth's access to mobile-based agricultural information
IMSAR supported a social enterprise, focused on improving access to information through mobile technology, to conduct research aimed at better understanding how farmers are using the 8-4-5 platform which provides access to agriculture-related information. The study revealed similar levels of satisfaction among women and men and different age groups using the service, but they also found the cost of the service prohibitive. The findings also suggest that uptake is likely to increase if target users become more aware of the service overall and if some content could be accessed free of charge, and include information on weather for farmers.
Agri-finance
Commercial value chain financing and customised loan products
Increasing access to agri-lending for aggregated farmers and agribusinesses.
IMSAR provided market research, technical assistance and capacity building for the adoption of the value chain finance approach and development of new loan products i.e. commercial working capital loans, commercial investment loans, funded trade finance, and nonfunded trade finance. All these products are suitable for individual borrowers and the first three products can also be used to synchronise lending to multiple value chain actors under a Value Chain Facility, applying the value chain financing approach.
Learning from this intervention was leveraged to support a development bank to adopt and adapt the model.
Factoring loans
Introducing factoring loans targeting agriculture.
IMSAR partnered with a fintech company specialised in factoring finance to expand the provision of invoice factoring services to agribusinesses. This form of finance represents an affordable solution to meet the working capital needs of the many companies which do not have access to bank financing mainly because of lack of collateral.
IMSAR enabled the fintech to access a wholesale loan from a commercial bank by providing a cash cover (as a form of guarantee). IMSAR also provided support in effective marketing and promotion, including video testimonials with a special focus on women-led agribusinesses.
MFI mobile banking
Improving microfinance mobile banking services.
This intervention started with an initial assessment of the digitalisation needs and opportunities of three MFIs. Two possible innovation opportunities were identified: mobile banking and loan origination software. Out of the three MFIs, IMSAR then partnered with one to support the development of mobile banking (digital saving and lending) services. IMSAR also helped a telecommunications company to develop a 'push and pull' mechanism for the MFI, allowing its subscribers to receive messages for any transaction made on the platform, either by pushing (sending money from a mobile money account to a bank account) or pulling (getting money from own bank account to a mobile money account).
Aggregation services & functions
Improving and scaling the maize Cob Model
The Cob Model consists of purchasing maize on the cob instead of grain. Then the maize is shelled, cleaned and dried within 24 hours in an industrial facility, leading to top quality maize with minimal aflatoxin contamination, reducing rejection from buyers. Using this model, post-harvest losses are reduced to three per cent. It also allows farmers to sell their maize (on cob) weeks earlier without having to spend time shelling and drying the maize.
The partnership between IMSAR and the company behind the model also invested in identifying solutions to handling the large amounts of cobs accumulated post-threshing, and conducted a study on cob valorisation. The study has identified carbonised cob briquettes – which can be used as an environment-friendly substitute for charcoal products – as the most viable option for future piloting.
The company was later acquired by a large processor which adopted the Cob Model. To scale it further, IMSAR supported the company to develop a ‘supplier development programme’ aimed at aiding smaller aggregators to adopt the model.
Introducing the commercial agent model
Smallholder farmers often have limited access to the inputs, services and information they need to increase their production and sales. As a result, most aggregators face difficulties in accessing a stable supply of high-quality produce to meet their needs.
Commercial Agents (CAs) are intermediaries that are recruited and trained by aggregators to reach farmers and provide them with a combination of information, inputs and access to markets in order to source high volumes of high-quality produce. To incentivise performance, CAs are paid a commission on sales and, in some cases, a bonus contingent on the grade of the produce aggregated. IMSAR facilitated the introduction of the CA model in Rwanda with a maize and beans aggregator, and with a horticulture exporter.
Improving export-oriented outgrower models
Exporters in Rwanda largely rely on production from their own farms, with very few sourcing from cooperatives and smaller farmers. IMSAR supported two horticulture exporters, to engage with cooperatives and lead farmers to establish outgrower models. The model entailed training cooperatives and lead farmers on good agricultural practices and the Global G.A.P. Certification requirements, as well as solutions to adapt to climate change. In addition to training, the exporters provided some inputs (seeds and crop protection) on credit to ensure outgrowers could meet the quality standards and volumes required for export. IMSAR also supported one partner to establish a packhouse in Kayonza (Eastern province), which will be used by the company and its neighbouring outgrower cooperatives.
Improving access to agricultural certification services
IMSAR partnered with a compliance company to establish a cadre of independent and locally based consultants that can provide pre-audit and audit services, increasing accessibility and reducing the costs associated with obtaining certifications (Global G.A.P, HACCP, and Organic Certification). Full and partial sponsorships were provided to the consultants to incentivise participation and ensure inclusiveness. First-comer discounts were provided to exporters to receive audit services.
IMSAR facilitated the National Agricultural Export Development Board’s packhouse to obtain the Brand Reputation Compliance Global Standards (BRCGS) START! Certification, which allows exporters using the packhouse to move beyond wholesalers and to supply their products to high-end retail markets in the UK and Europe.
Supporting the establishment of the Kigali Wholesale Market for Fresh Produce (KWMFP)
IMSAR funding and technical assistance included refreshing the initial feasibility study, reworking the financials and developing the initial upstream and downstream investments; drafting a transition strategy to guide stakeholders on the shift of the wholesale operations from the current location to the new market; organising a learning visit of key stakeholders to South Africa to visit established wholesale markets; coordinating a steering committee; and catalysing additional support from other development partners.
Introducing pig contract farming
The pig sector has high growth potential in Rwanda, but it is constrained by several factors including the high cost and inefficient supply of piglets, animal feed and health products and services. IMSAR therefore partnered with a piglet breeding centre to test a contract farming model whereby farmers were provided with piglets and some feed on credit, as well as access to periodic veterinary services and farm management advice. The intervention was later scaled with a company focused on pig aggregation and processing.
Improving aggregation and marketing of oyster mushrooms
IMSAR assisted the development of a system for timely sourcing from small mushroom growers, as well as to stimulate the demand for mushrooms by strengthening their sales strategy. This included establishing stalls at key open markets, recruiting sales agents and developing a new logo and promotional materials.
Facilitating investment in employer-supported childcare
Lack of access to childcare prevents women, who are disproportionately responsible for it, from being fully productive. IMSAR, in partnership with UNICEF and NAEB, conducted an assessment which revealed that workers’ productivity, and in turn businesses’ performance, increase as a result of childcare facilities being available to workers across tea companies in Rwanda. Addressing one of the recommendations of the study, IMSAR developed, in partnership with the National Child Development Agency (NCDA) and UNICEF, a blueprint for employer-supported childcare which aims to assist private sector companies, and especially agribusinesses, to provide childcare services to their employees.
Promoting improved HR practices to boost businesses’ performance
Despite the strong growth of floriculture exports from Eastern Africa, Rwanda’s share remains small, partially due to the high set-up costs, investment and skills needed for production. In addition, low and fixed daily wages and the lack of broader incentives leads to a generalised lack of motivation, and in turn high turnover and low productivity (an issue largely affecting horticulture too). IMSAR sought to boost quality and volumes of flower exports by assisting an exporter with acquiring the necessary soft and hard infrastructure to meet the demand and requirements from international markets. Within the former, IMSAR supported the company to implement a general daily wages increase for all casual workers; more regular training and upskilling activities, and a promotion scheme.
Notable results (systemic change, poverty impact)
Market actors operating in agricultural markets change practices and increase investment, reaching smallholders with new and improved goods and services
19 companies had a new or improved product or service reaching farmers and agribusinesses still available in the market at the time of closure, continuing to invest in the model as needed.
IMSAR leveraged USD $1.37 for every dollar invested from its grant fund – generating an investment of over USD $6m in agriculture. Such results indicate that partners responded well to IMSAR’s stimuli and were confident of the profitability of innovations developed in partnership with the programme. It is worth noting that these figures do not include the significant volume of capital devolved to agrilending from partner financial institutions as a result of IMSAR’s supported innovations, nor the multimillion US dollar investment in the Kigali Wholesale Market for Fresh Produce, which IMSAR investment unlocked.
Selected market systems work more effectively for poor farmers and agro-enterprises
IMSAR’s supported innovations generated USD $11.2m in additional sales for companies, of which USD $2.4m are from non-traditional exports.
Farmers’ sales increased by over USD $1.51m.
To various degrees, signs of systemic change were observed across the portfolio. All partners, but one (which temporarily halted their operations), were still investing in the innovations at the time of closure, including for adaption and scale. Some innovations have been adopted/adapted by additional companies without IMSAR support.
Impact on poverty
IMSAR interventions helped 111,721 rural households to increase their incomes. Of these, 38 per cent are living below the extreme international poverty line (earning less than USD $1.90/day) while the remainder fall under the international poverty line (earning less than USD $3.20/day). This is in line with the expectation that IMSAR would largely reach farmers endowed with sufficient resources (land and some capital) that can, under better functioning markets, engage in commercial agriculture.
IMSAR generated USD $8.27m of cumulative net attributable income increase for smallholder farmers.
The range of net attributable income increase varied across interventions - from USD $47/season from using crop specific fertiliser; USD $80/season for maize farmers engaging with commercial agents; and USD $129/cycle for pig farmers doing contract farming.
Innovations which simultaneously improved access to inputs and markets achieved the highest net attributable income increase.
It should be noted that the short duration of the programme, as well as the budget cuts, implied that for most farmers IMSAR was only able to capture the increase in net income generated from one agriculture season, and not over multiple seasons or years. As partners have continued investing and expanding their reach, it is reasonable to claim that the increase in incomes generated by IMSAR is much higher.
[uploaded March 2023]