Developing solutions for smallholder farmers in Mexico

Slideshow Transcript

1. Slide 1: Everyone a Changemaker Developing solutions for smallholder farmers in Mexico Business with Four Billion: Creating Mutual Value at the Base of the Pyramid Sep 9-11 2007 Ann Arbor, MI
2. Slide 2: About Ashoka – Founded in 1980 Organization – Non-profit organization active in 62 countries in 5 continents – Pioneered the development of the profession of social Ashoka’s work entrepreneurs – Has invested in over 1,700 social entrepreneurs who are advancing system change solutions to social problems Investors – Business entrepreneurs – 64% 1998 - 2004 – Private foundations and companies – 22% – Other individuals – 14% – Government – 0% – Leading social entrepreneurs Main Clients – Business entrepreneurs focused on social system change Global Strategic – McKinsey & Company Partners – Hill & Knowlton
3. Slide 3: Advancing Full Economic Citizenship (FEC) through a Three-pronged Approach HYBRID VALUE CHAIN™ Serving low-income consumers CLASSES OF SMALL PRODUCERS Improve products and services FEC to low-income communities Support the restructuring of around the world thanks to production and distribution systems business social hybrid for a whole cluster of small producers collaborations to allow them to get an increased value for their production Transforming small producers’ economies Enable a faster development of mechanisms that allow low-income people and organizations to leverage the economic value of their assets Leveraging assets of the poor WEALTH OF THE POOR
4. Slide 4: The Hybrid Value Chain Word of Introduction How to generate business models that are sustainable, symbiotic and transformative Low-Income Populations Gain: Improved livelihoods Citizen Sector Businesses Organizations Gain: Creation of new markets Gain: New sources of revenue Hybrid Accelerated social impact Pioneering corporate image Value Chain Core assets include: model Core assets include: – Ability to operate at large scale – Understanding of – Investment capacity community needs and – Operational capacity dynamics – Infrastructure and logistics Ashoka/ FEC – Behavior change capacity as broker – Social networks – Enabling/complementary services
5. Slide 5: Reality on the Ground Rural Mexico • Drop in production, productivity, and market prices; • Deterioration of the environment; • Unemployment; insufficient health and education services; • Malnutrition; • Lack of public policies to mobilize rural development; Poverty & Forced Migration
6. Slide 6: Irrigation: Existing Value Chains Are Not Serving Small Farmers A Package of Integrated Services Is Needed 1. Product Development: Most solutions are not affordable because they require or were not designed to address the needs of small farmers 2. Manufacturing: Very high relative cost of inputs given the type of “makeshift” solutions 3. Distribution and logistics: Only informal or highly inefficient distribution channels who tend to have high profit margins 4. Sales and marketing: Purchasing decision requires persuading the farmer first that he or she can aspire to have a more profitable farm (not a technology) 5. Financing: Does not meet conditions of financial institutions or approval process is too complex and costly. A financial “broker” is needed 6. Marketing of Agricultural Products: Clients are dispersed and require an intermediary capable of aggregating production and negotiating on their behalf
7. Slide 7: Size and Economic Impact of the Small Farmer Irrigation Market in Mexico 700,000 • If capturing the US$ 1.75 billion BOP market Ha BOP would take 50 years, this would still increase current market by 50% Capturing the BOP market in … +77,000 10 years Ha/year • If the aggressiveness of +42,000 players and other 20 years Ha/year factors accelerate the process of +21,000 capturing the 50 years Ha/year market to only 10 Traditional market: years, this would ~50,000Ha/year triple current total market size * Avg. price per hectare is US$2,500. Current total market size for ALL the irrigation market is estimated in US$125 millions for 2006 Source: Amanco, Simonsen study and team analysis
8. Slide 8: The Hybrid Value Chain in Practice Small Farmer Irrigation Market in Mexico Small Farmers • Install irrigation system • Advice and provision of • Increase productivity & profit irrigation systems • Save significant water sources • Brings vision and • Pricing historical perspective • Distribution and • Brokers partnerships capacity building • Supports social • Promotion entrepreneurs • Understand farmers’ needs Citizen Sector • Aggregates demand • Promotes farming solutions Organization • Provides complementary services (technical assistance, linkages to (RASA) markets) • Design and application Consultants Foundations of financial models for • Evaluate social and & Financial Retailing Universities & irrigation systems and Institutions Companies economic impact Agricultural • Research and other inputs (Amucss) (Wal-Mart) Institutes document • Receives payment from Government the small farmer • Promote and sell the farmers’ final goods • Support small farmers
9. Slide 9: HVC™ Partnership Roles and ‘Business Deal’ - Small-scale farmers  Access to irrigation systems at a fair price plus value-added services Becomes an empowered consumer like financing, commercialization and technical assistance and increases his/her income  Double or even tripled incomes significantly Amanco  New rural distribution channel for serving farmers profitably Water distribution company opens an  US$ 1 million in sales during the pilot phase underserved market  US$ 30 to 50 million by 2011 (equiv. to 20,000 ha.) Social Entrepreneurs  Access to attractive wholesale prices that allow to cover expenses Serves small farmers while creating and finance complementary services sustainable source of revenue  Larger social impact for over 20 CSO’s Ashoka  Contributes to accelerate social change and Full Economic Acts as a business/social Citizenship for all broker  Commission on total sales of each new rural distributor for 3 years
10. Slide 10: The Hybrid Value Chain in Practice Picturing It
11. Slide 11: The Hybrid Value Chain in Practice Challenges Ahead to Scale Up the Model • How to leverage the initial non-profit investment (market creation) to attract subsequent for-profit investment (scaling up) • How to create appropriation of the “shared vision” within all partnering organizations – from the top to the bottom • How to get companies’ full buy-in • How to “franchise” CSO start-up operational support • How to constantly assess the needs of customers • How to deal with rampant bureaucracy and corruption
12. Slide 12: The Hybrid Value Chain in Practice Doing It Differently – Integrative/Socialized Business Plan I N T E G Vision for New Industries R Step 1 Market Potential A T I V E P R Collegial O negotiations C Sharing with CSOs for serving E S Step 2 and Companies the needs of S small O producers F A P P R O Integrating with the P R Step 3 Needs of Small I Producers/Consumers A T (ongoing) I O N
13. Slide 13: The Hybrid Value Chain Zooming In – Vital Spaces “Poverty must be seen as the deprivation of basic capabilities rather than merely as lowness of incomes .’’ (Nobel Prize Economist Amartya Sen) Community Family Organization Producer/Consumer
14. Slide 14: The Hybrid Value Chain Zooming In – Vital Spaces Culture/ Economic Technical Social Organizatory Environmental Education Awareness of the Higher More Importance of Water Productivity, Knowledge Relations Organization; Management; Value and Preserve Producer lower costs, and access with other Personal Use less herbicides Rural Culture More to Producers long-term And pesticides revenues technology plan Additional Strengthening of Develop a management Appropriation Raise awareness Revenues; Financial structures Culture to be able to of technology; Strategic About “green” Organization Access to Technical Alliances And market access; Practices and Respond to the challenges financing & Organizatory Of globalization bodies develop actions markets Long-tern Plan Importance of solidarity Develop a new Sharing with Culture for the Projects on More revenues Economic Good use of free time Other Distribution of drinking water, Family transferred for capacity Families Family wealth; Waste management Courses of painting, the well-being building Music, and sports (BIESES) Family plan And related Micro enterprises Processes to New forms of Programs for Information Increase organization for Improvement in Strengthening the rural Liquidity Alliances Awareness of production, services, Community Consumption With Needs and Education; Water services, Culture; development of Organic waste, etc Educational systems with schools joint Community Community topics actions long-term plan