Insights 2011
Insights 2011

Insights emerge from the lessons we learn through local experiences in supporting pro-poor business development.

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Reducing Risk: Practical Tips for Market Linkage Service Providers Linking smallholders to markets is full of risks. Everyone knows that many things can go wrong when moving produce from farm to market. Sellers compensate for low prices with stones and debris or un-graded produce. Buyers compensate for interrupted cash flow with delayed payments. Some will cheat you completely. These are the obvious risks. But many more deals go wrong for more simple reasons: inadequate quality checks can result in buyers rejecting produce; an unplanned middle cost can wipe out any profit for the service provider; from farm to market produce passes through many hands and any one making a mistake can threaten profitability; mistakes in either the movement of produce or payments can cause failure.

Building Trust and Trade: Practical Tips for Market Linkage Service Providers Services linking smallholders to markets must build trust between all players in the value chain and grow trade volumes to succeed commercially. Building trust requires not just transparency but also proper controls. Trust only comes with control. If there is no control, there can be no trust. Market linkage services must offer price discovery to buyers and sellers alike. Control measures are needed to track both the transfers of money and movement of produce.

Cash-on-the-Bag Secure Transactions on Trial Transaction Security Services (TSS) with ‘Cash-on-the-Bag’ payments to smallholders addresses one of the most persistent and prevalent reasons for failure of agricultural supply chains in Africa: the absence of a secure and trustworthy transaction environment. Relations between smallholders and large buyers in Africa are generally characterised by significant distrust between the two parties. Smallholders are reluctant to hand over their produce without full cash payment up front, and large buyers are reluctant to make purchases without first inspecting the merchandise to ensure that quantity and quality correspond to specifications.

Traders Talk About the ‘Cash-on-the-Bag’ Business Model Over last six months some 160 traders and their agents across Kenya, Uganda and Tanzania have been testing a new business model for traders and middlemen. Traders’ use a‘buy-low-sell-high’ business model that, like all speculation, rewards lowest prices to smallholders. Smallholders respond to low prices by cheating, ignoring quality standards, and bagging wet produce with stones and debris. Buyers respond by discounting prices to cover costs of quality rejects and cleaning. Such ‘coping’ behaviour introduces huge risks and lowers product value for the middleman. The Cash-on-the-Bag (CoB) model addresses this problem by providing up-front payments to smallholders within transparent and secure transactions, which reward higher prices to smallholders for high volume, quality produce delivered on time to the buyer. This new business model promotes‘win-win’ agriculture value chains for smallholders, traders and buyers.