July 2011
I remember exactly what I thought the first time I read the Terms Of Reference for my EWB Junior Fellowship placement with the Agriculture Value Chains team in Malawi this summer.
“Oh no, I don’t understand… anything”.
It wasn’t until right before our mid-placement retreat that I finally felt I had a solid grasp of what our project’s goals were and what AVC’s purpose in Malawi is.
I, along with another JF, Jocelyn Light, was partnered with the Malawian NGO, the Rural Market Development Trust (RUMARK) in an effort to strengthen the distribution system within an already established agrodealer network. The agrodealers we have partnered with are small business owners who provide agricultural inputs such as fertilizer, chemicals and seed to smallholder farmers in rural Malawi.
The strategy currently being pursued by RUMARK is one of targeting larger agrodealers who have the capacity to be successful distributors of agricultural inputs in their area. This focus on high capacity agrodealers with well established connections to suppliers, the community in which they operate and other important players is being followed in an effort to better serve remote agrodealers and farmers who struggle to gain access to inputs.
Once I had an understanding of the strategy behind our placement, it came time for me to determine if I believed in it. Would helping those who had already had some success in the agricultural field really help those rural smallholder farmers with such little access to the inputs they needed? Would the benefits actually trickle down?
About two and a half months into my placement, I traveled north from Lilongwe to a trading centre, Dwangwa, just a few kilometres inland from the shores of Lake Malawi. Standing for most of the eight hour trip, I was ecstatic to see the vast sugar cane fields that fuel Dwangwa’s economy spread across the horizon. I traveled to Dwangwa to interview an agrodealer, Mr. Watson Mkute, who had been identified by RUMARK as a promising distributor. As I investigated the history of his business’ development and the relationships he had established within the community, I found compelling evidence of a strong distribution system already having been built.
Mr. Mkute’s main shop specializes not only in agricultural inputs but in hardware and construction materials as well. He owns two 15 tonne lorries which he uses to transport farmer’s sugar cane to the sugar cane processing plant and deliver anti-retro-viral drugs to remote regions of the country. This diversity of business allows him to tap into several markets within his own community, district and surrounding districts. Once mapped, I found that Mr. Mkute’s distribution network stretched beyond his own outlet shops to include smaller agrodealers and farmer’s groups from Dwangwa and the surrounding area.
Mr. Mkute has built strong relationships with supply companies based in Malawi’s major centres over the past few years and uses these connections to help those smaller agrodealers also operating in the Dwangwa area. The supply companies are comfortable dealing with a familiar client whom they already have a good credit relationship. Therefore, Mr. Mkute acts as a buffer for the companies by distributing goods to the smaller agrodealers and taking the risk of defaulters upon himself. Mr. Mkute is of high standing in the community and knows his clients well. Therefore, he is able to implement a screening process of his own when distributing goods on credit. In this way, he is able to protect his own business interests while still assisting those not able to secure lines of credit from the larger distributors.
There are many examples of Mr. Mkute’s contribution to the agricultural input community in Dwangwa but the one that I think encompasses the root of RUMARK’s strategy occurred in 2006. After being elected as the chairman of agrodealers for the area, Mr. Mkute realized that most of his fellow agrodealers were going out of business due to a lack of capital. In order to remedy this problem, Mr. Mkute consulted with the Malawi Rural Finance Committee and was able to negotiate small loans for the agrodealers in the area who were part of the agrodealer association. At the time, CNFA RUMARK vouched for the selected recipients as trained agrodealers. In order to ensure the loans, Mr. Mkute put his truck and his houses up as collateral and was able to secure 300 000 MK ($2000) for himself in addition to the smaller loans for his colleagues.
This kind of cooperative working relationship within the community of agrodealers has encouraged Mr. Mkute’s business to thrive along with the businesses of others in the agricultural input sector. The small-scale agrodealers present a secure market for Mr. Mkute to target while Mr. Mkute provides a convenient and consistent flow of goods and services to his clients. The success of these relationships has allowed Mr. Mkute to assist those smallholder farmers in the area with little access to transport and inputs by providing the use of his lorries for a reasonable price and providing goods on credit to farmers who are members of particular farmers’ associations in the area.
Mr. Mkute’s business model is a great success story on its own, but he has also proved to me that a hub agrodealer distribution system can work. By investing in high capacity agrodealers such as Mr. Mkute, I believe EWB and RUMARK will be able to increase not only the strength of the Malawian agricultural distribution system but also its reach.
Love from Southern Africa,
LG
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