Building Loyalty: Does Trust Require Control?
Written by Youssouf Traore, Partnership Facilitator in Mali (maize, potatoes, cassava).
Societé Nama et Fils (SONAF) is one of the largest dry grain marketing companies in the Sikasso region in Mali. Its annual demand for yellow maize has been around 30,000 tons, but until 2014 the company managed to collect only 8,000 tons per year. The company sells its yellow maize in the markets of Niger, Senegal, and Mali to flour manufacturers, such as les Grands Moulins du Mali, local traders, or large poultry firms.
Two of the hottest issues for SONAF were the low availability of yellow maize, as farmers in Sikasso tend to produce white maize for their consumption, and the loyalty of the farmers from whom the company sources. To compensate for this shortfall in product availability, the company used to import 80% of its needs from Côte d’Ivoire, generating additional costs (transport costs, red tape). At the end of 2014, we initiated a partnership with SONAF, aiming at reversing this situation, with the double benefit for the company to cut costs by sourcing locally, and for a network of 10,000 farmers to access a remunerative and steady market in Sikasso.
But the question was then: How can we make sure farmers will remain faithful to the company and vice versa? Loyalty needs incentives, and SONAF, over the past two years, has consented to three major ones. The company not only offered remunerative prices (90 CFA francs/EUR 0,14 per kilogram against 70 CFA francs/EUR 0,11 on the market in 2015 as a bonus for farmers’ loyalty) but also provided various services, ranging from facilitating access to storage facilities and production equipment (estimated at 44 million CFA francs/EUR 67,077 in 2015) to facilitating access to input credit (126 million CFA francs/EUR 192,086 in 2015) on the basis of a contract that engages the farmers to sell the equivalent of the input credit they receive to SONAF.
To collect at least 80% of the company’s raw material at the local level, 2SCALE has co-planned and co-realized several actions. We traveled to remote villages to mobilize farmers to understand and adhere to the vision and the objective of the partnership. We worked to establish an access to credit mechanism (as a response to the most pressing issue farmers said they were facing) and conducted a capacity-building program, including training on quality standards, cost reduction strategies, post-harvest management and everything there is to know about growing maize. These activities resulted in an increase in yields from 1 ton to 3 tons per hectare in some villages. We also linked famers to other supporters of the value chain, such as the Elephant company, which commercializes an effective bio-fertilizer named FERTINOVA. For the first time in 2016, SONAF was able to collect more than 27,898 tons of maize, out of which only 300 tons were imported from Côte d’Ivoire.
But the most significant result was the mobilization of input credit worth 127.9 million CFA francs/EUR 194,983 to 1,279 farmers, including 240 women. This volume however represents only the needs of four farmer organizations, out of the 113 included in the partnership. The other loan requests were inconclusive for a variety of reasons, including overdue payments, the absence of a bank account in the name of the loan applicant, or even the late reaction of banks. However, I consider 2015 to have been an excellent year, particularly in terms of increasing productivity and the involvement of banks in this partnership.
The catch is that in January 2016, almost at the end of the new crop year, the rate of repayment of input credit was barely 60%. There are several possible reasons for this discrepancy:
- The price of a kilogram of maize varied from 110 to 115 CFA francs/EUR 0,17-0,18, but in the contract with SONAF the price was fixed at 90 CFA francs/EUR 0,14 per kilogram. This unexpected opportunity led many farmers to not only sell at other places, but also to stop repaying their credit. Would it have been necessary to fix an evolving basic price with the market to improve the farmers’ loyalty?
- An even more serious factor was the misappropriation of funds by certain leaders of producer organizations. Would it have taken a moral inquiry on each leader to attest to their bank credibility? Here, nothing would have guaranteed the reliability of the leaders’ information, because they are often seen as infallible in their communities.
- Finally, the fertilizers meant for growing yellow corn were used for other crops such as potato and sweet potato. The farmers concerned try to justify this by arguing that the fertilizers arrived too late to use for maize.
Lessons for the future?
In the light of this experience, certain lessons have been learned:
- Beyond the institutional evaluation of candidates, for those eligible for input credit based on the SONAF off-take contract, it is essential to know the individual leaders who use the credit, to conduct due diligence in determining trustworthiness, and to deeply question their bank credibility.
- As far as access to input credit is concerned, it is important to prioritize small organization (from 25 to 100 farmers). Governance within these groups is more transparent and more conducive to peer pressure.
- Monitoring the distribution of inputs at the organization level is also critical to ensure the funds are used for maize. In the end, it is customary to say that trust does not exclude control. I would tend to say that trust even requires control.