Inclusive business models are hot! A story from the Kwapa chili farmers

Inclusive business models are hot! A story from the Kwapa chili farmers

in News
Ine Tollenaers
Ine Tollenaers
Donor Communication Manager

Why source chili peppers from far away in Northern Uganda if chili can easily be grown closer to home? That’s the question MACE Foods, a Kenyan exporter of dried spices and vegetables, has been looking at for some years now.

In 2017, MACE Foods wanted to cooperate with chili farmers just across the Ugandan border in Kwapa. Farmers were very interested, since this deal would increase their income considerably, and started growing chilis. Unfortunately, MACE Foods was hit by a bad economic climate and fraudsters, leaving farmers on their own with their chilis. Farmers looked for innovative solutions to get back on track after this huge setback and decided to start processing the chilis to chili powder by themselves and sell them locally.

In 2019, MACE Foods recovered, and they were looking to reengage the Kwapa chili farmers. Together with Rikolto, MACE Foods and Kwapa farmers set around the table to make a new contract. At last, an agreement between MACE Foods and the farmers was reached. This new contract attracted a number of producers to join the Kwapa Farmers’ Cooperative, and at this moment, while Covid-19 is affecting many value chains, the chili farmers remain resilient.

When I received a call from MACE Foods, I quickly organised a business meeting between the farmers and the company for three reasons: Ironing out their grievances about the previous contractual period, conducting a cost benefit analysis of growing chili for new farmers and compare it to other value chains, and, lastly, agreeing on a few clauses to consolidate the new contract

Peter Businda Agribusiness Advisor

A trust builing agreement

An agreement was reached by both sides showing their value proposition to the other party and this included the following contractual commitments:

MACE Foods

  • Buy chili at agreed price of 12,000 USh a kilo of dry chili: 10,000 USh for the farmers and 2000 USh for the cooperative account as a commission. For comparison, previously the price was set at 9,000 USh.
  • Send the company’s agronomist to provide extension services, such as nursery preparation and post-harvest handling, to ensure product quality.
  • Avail the cooperative with genuine chili seed at an agreed price that is attractive and inclusive to the marginalised group (youth & women).
  • Provide transport and bags for the bulked chili at the cooperative store.
  • Timely issuing of cash for product sold.

Kwapa Farmers’ Cooperative

  • Mobilise many farmers to grow chili in big quantities.
  • Produce and maintain good quality chill: Red colour & 10% moisture content.
  • Bulk chili to a tune of 10 tonnes per collection from the cooperative store.
  • Increase acreage of chili grown.
  • All farmers to register their mobile numbers to ease payment by the company.

One of the challenges that had to be tackled was that farmers did not have the capital available to grow the specific chili that MACE Foods was interested in buying. Rikolto engaged the Microfinance Support Centre in the discussion to address this financial issue. The Microfinance Support Centre (MSC) recognised the business case in this cooperation, after all growing chilis pays off already after two harvests. MSC put together 10 small groups of 20 to 25 smallholder farmers and awarded a loan of 85 million Ugandan Shillings and trained the farmers on financial literacy.

The interest of the MSC was bolstered by the social impact of growing chilis. While land is traditionally owned by men, growing chilis does not require huge plots of land. Chili growing attracts mainly women and youth because it is a tedious crop that can be grown on less than an acre. Once they saw the results of growing chilis, men in the community understood that giving women and youth small pieces of land could contribute greatly to the household income. Now that women earn some money by themselves, domestic violence in the community has reduced and more kids can be sent to school.

The success of the chili farmers has led to interest from other farmer groups in the district to join the scheme. The Kwapa Area Cooperative Enterprise is now also exploring the idea to purchase their own milling machine to cater to the local market as well.