Ethiopia – Smallholders Linkages Program

Creating Farmer-Member Linkages to Local and National Markets

Recognizing Ethiopia’s economic dependence on coffee exports, ACDI/VOCA, with the USAID Microenterprise Development Program, launched the three-year Smallholders Linkage Program (SHLP) in the horticulture subsector of Ethiopia. This subsector was identified as a major alternative agricultural profit source. Development in horticulture provides opportunities for farmer-members of cooperatives and exporter-producers to integrate themselves in the broader economy. Building on this, SHLP also helped the private sector and farmer-members diversify export options and create upstream linkages to local and national outlets.

SHLP was implemented with help from the Oromia Cooperative Promotion Bureau. ACDI/VOCA helped establish commercial relationships between farmer cooperatives and producers and exporters so that farmers could move their products into higher-value market channels to get increased returns. The program helped farmers access these markets by providing market information and business skills. It strengthened the capacity of cooperatives and small- and medium-scale producer-exporters to deliver services to ease movement of the microenterprise products into higher-value markets.

Some of the major accomplishments of the project include the following:

• A total of 5,847 farmers, horticulture producers/exporters, and staff of the Oromia Cooperative Promotion Commission and the Oromia Agriculture and Rural Development Bureau participated in a variety of training programs including study tours, practical demonstrations, mentoring, and field- and classroom-based trainings over the life of SHLP.
• A survey of 123 SHLP beneficiary households, conducted by ACDI/VOCA in 2006, indicated that the project’s support of horticulture growers had resulted in significant improvements in household asset accumulation. In particular, farmers reported the following results:
  • construction of new houses (35 percent)
  • increased livestock (24 percent)
  • increased household assets such as furniture (16 percent)
• In 2006, 95 percent of farmers reported using inputs such as improved seeds and fertilizer, up from 33 percent in 2003.
• ACDI/VOCA strengthened the internal control systems at the cooperative level to enable participation in outgrower schemes with commercial farms and enter into contractual agreements for the sale of their products.
• The program helped upgrade production through technical assistance and installed 15 drip irrigation systems at demonstration sites, resulting in the sale of 8,878 MT of horticultural products valued at $1,233,095 to higher-value markets.

Through SHLP, ACDI/VOCA facilitated the delivery of sustainable business development services to SME producer-exporters and marketing cooperative unions. The services helped the groups create and maintain profitable linkages, significantly increasing the incomes of microentrepreneurs dependent on agriculture. A large percentage of the income realized through SHLP partnerships went back to the SMEs in two ways. First, the SME’s price for their high-quality products already “sold” in the high-value markets was higher than in any local market. Second, the co-ops paid dividends of up to 70 percent of the net proceeds from transactions to the farmer.

The Meki Batu and Alemaya cooperative unions were critical components of the program. The structure of these unions enabled them to deliver services to large membership groups, thereby reducing the cost of program implementation. The Meki Batu and Alemaya unions continue to serve members by ensuring that all transactions are based on cost-benefit analysis, providing quality control, creating market access opportunities and facilitating relationships with producer-exporters. The unions add business services on demand and members are required to pay for the services. The unions also serve the SMEs as local and export market finders. The new outlets reduce price and market dependency on the SME producer-exporters and bring about beneficial business relationships between farmer-members and exporters.

The cooperatives and the SME producer-exporters developed relationships based on mutual economic benefits that will continue as long as it is profitable for both groups. Unions rely on the SME exporter-producers for their market linkages and contacts, while SME producer-exporters depend on the unions for reliable supplies of high-volume and high-quality products. In addition, SME exporter-producers provide technical assistance to the unions in packaging, quality control, production and market information sharing, input financing and cold transport. Although the unions will pay for these services, the costs will be covered by the profits gained by selling to the higher-value markets. The symbiotic linkages between unions and SME producer-exporters will increase sales and market share, raising profits for both groups as well as the individual farmer.