Boosting horticulture businesses: Access to finance as the last piece of the puzzle to mass production

Introduction

Smallholder farmers face many hurdles in setting up competitive and inclusive agribusinesses and achieving sustainable mass production. When they join forces and form farmer groups and organisations, they have a higher chance of success in becoming solid business partners that can engage in the food value chain.

Empowering MUVIKIHO farmers

Over the years, Rikolto has been supporting the farmer organisation MUVIKIHO (Muungano Wa Vikundi Vya Kilimo Cha Horticulture) to strengthen their business and negotiation skills and to ensure quality production. MUVIKIHO is an apex organisation that promotes horticulture production as a commercial business. Fully owned by smallholder farmers, they support their members to improve the quality of the produce, to access domestic & export market and to access finance and other inputs. In addition, MUVIKIHO conducts market research and creates horizontal linkages for their members who produce a variety of fruits and vegetables in Arusha and Manyara.

MUVIKIHO landbouwers oogsten sperziebonen. Foto door Philippe Leyssens

Currently, MUVIKIHO brings together 11 farmer groups, which - in total - consist of about 500 individual farmers. The farmers are cultivating horticulture produce on more than 200 acres of land that has access to water for irrigation. The members of MUVIKIHO are engaged in the production and joint marketing of three export horticulture products: Green beans, snow peas and chili. For the future, they are also planning to expand the export to baby corn. At the same time, the farmers also produce many other fruits and vegetables for the local markets. To ensure that the horticulture production adheres to food safety and quality standards, the organisation coached farmers to change their farming practices to make them more sustainable. After extensive coaching and with the support of Rikolto, TAHA, and Government Agricultural Officers, MUVIKIHO was able to obtain the Global Good Agricultural Practices Certification. This enables members to export and sell their produce for a better price to interested export companies.

Quality produce in high demand

MUVIKIHO has succeeded in the production of quality vegetables in compliance with international standards. However, a shortage of working capital is still a hurdle to achieve mass production and fulfil the market needs. Following an increased demand for greens beans, peas, and chili from exporting companies, MUVIKIHO farmers were unable to meet the demand and consistent supply of produce due to the inadequate working capital for production expansion. Exporting companies such as Serengeti Fresh Ltd, Home Veg Tanzania Ltd, Mara Farming, and Beth Equisolutions Company Ltd have buying contracts that are not being fulfilled by MUVIKIHO. For example, 4 tons of chili per week for Beth Equisolutions Company Ltd and 10 acres of green beans per week for Serengeti fresh have not been supplied by MUVIKIHO due to shortage of working capital to engage in farming activities. The main uses of the working capital include hiring land, farm preparation, purchasing farming inputs (e.g. pesticides), and payment of casual labourers for picking and grading of produce.

Sperziebonen klaarmaken voor uitvoer. Foto door Philippe Leyssens

Finance enabling mass production

To support MUVIKIHO to solve their financial struggles and related breaches of contract, Rikolto in East Africa has signed a memorandum of understanding with the Private Agriculture Sector Support Trust (PASS). As an organisation that facilitates access to financial and business development services for agribusiness entrepreneurs in Tanzania, PASS agreed to assist MUVIKIHO in the process of obtaining working capital.

PASS has now linked MUVIKIHO to NMB Bank to provide the working capital as loans to farmers. Also, PASS has supported MUVIKIHO through the whole process of obtaining working capital by for instance preparing business plans for farmers. In the first phase of the programme, 72 farmers have requested a loan, for a total of more than 300 million Tanzanian Shilling. This amount of money will be used for the cultivation of export crops, such as chili, green beans and snow peas, for which MUVIKIHO has supply contracts with exporting companies.

This loan enables farmers to engage in mass production and therefore MUVIKIHO can meet the market demand for fresh vegetables. The whole process has also been supported by interns from Moshi Cooperative University that work directly with the Farmer Business Organisations to ensure a close follow up with the banks, PASS and Rikolto and to guarantee farmers get timely technical support, such as the preparation of gross profit margins for their crops and estimating the amount of loans farmers should get depending on their farming capacity.