Value Chain Approach Leads to Higher Incomes in India
When ACDI/VOCA launched its Growth-Oriented Microenterprise Development (GMED) project in India in 2004, it was clear that supplying the rapidly expanding organized retail (supermarket) sector provided great opportunities for upgrading the livelihoods of smallholder vegetable and fruit farmers. This is particularly true since there are not enough large-scale farmers to meet the growing demand (80 percent of Indian farmers cultivate less than five acres). Successfully integrating smallholder farmers into the commercial fresh produce supply chains, however, proved to be a major challenge. The main obstacle was the common belief among large corporate players that smallholders could not be relied on to consistently deliver the required quantity or quality of fruits and vegetables. This was understandable, since no one had ever attempted to incorporate smallholder vegetable and fruit growers into organized retail supply chains.
Two years ago, ACDI/VOCA partnered with a major Indian corporation, ITC Limited, to disprove the naysayers. The two organizations started with 500 smallholder (two to five acre) vegetable farmers, adopting an approach that was innovative but simple. ACDI/VOCA trained ITC field extension staff to transfer packages of production and post-harvest practices to affiliated farmers, while ITC purchased their output, providing them with an assured market.
Simple and inexpensive changes, including establishing proper seedling nurseries, the use of shade netting over sensitive crops and planting on raised beds, have had dramatic results. One example is the use of a simple implement made from a bicycle wheel studded with protruding bolts. The farmer rolls the wheel along the seed bed, punching planting holes of uniform depth and spacing. This alone can increase total production from a given farmer’s field by up to 30 percent.
Such extension services have not only improved smallholder productivity, but also product quality, enabling farmers to meet stringent supermarket requirements. A survey of representative ITC smallholder farmers, conducted after only two cropping seasons with ACDI/VOCA assistance, revealed a 30 percent average increase in net farmer income. Due to its success, ITC is presently scaling up the model to cover at least 6,000 additional farmers by the end of 2007.
ACDI/VOCA is replicating model by extending its services to NGOs serving 35,000 smallholder farmers and finalizing plans to assist four more major corporate players in organized wholesale and retail to apply the GMED approach to their own fresh produce supply chains. ACDI/VOCA has also agreed to assist one of the state governments in India to develop and implement a statewide horticulture development program for smallholder farmers.
ACDI/VOCA’s Chief of Party Don Taylor explains why the GMED value chain approach to smallholder development has been successful: “It’s based on two important elements. The first is the premise that growth must be driven by increasing competitiveness for all of the stakeholders in a given value chain. Second, sustainability and scalability are achieved by helping corporate and NGO partners apply the approach themselves, rather than having ACDI/VOCA do the work for them. The result is that increased incomes for both the farmer and the corporate buyer provide an incentive to continue and scale up efforts after the project ends.”
Click here for more information about ACDI/VOCA's Growth-Oriented Microenterprise Development (GMED) project in India.
Click here for more information about ACDI/VOCA's value chain approach.