There are an estimated 500 million smallholder farmers in the world living in poverty, operating at levels of productivity that are significantly below their potential, and unable to directly access formal, high-value markets for their produce. They often have little or no access to working capital, or are caught in expensive debt traps. They also often lack the knowledge on best agricultural practices and latest innovations. These factors limit their ability to improve their yields and crop quality.
Multinational corporations and large local food retailers are generally unable to extend their procurement systems and supply chains to deal directly with numerous smallholder farmers due to the associated risks and operational complexity, unreliability, and inconsistent, substandard produce. Moreover, local entrepreneurs are unable to create businesses to support and aggregate smallholder farmer production due to their scale-driven nature and relatively long payback on their investment, which is typically more than three years.
Furthermore, rapidly increasing global demand for food, climate change, and other factors are leading to increased levels of food insecurity and high levels of inflation.
The introduction of businesses that bridge the current gap between the massive latent potential of millions of smallholder farmers and the ever-growing global demand for food is perhaps one of the greatest development opportunities. According to the Food and Agriculture Organization, investment in agriculture is five times more effective in reducing poverty and hunger than investment in any other sector.
CGEP launched its first social business in Cartagena tailored towards the city's growing tourism industry with the aim of bringing local farmers and fishermen out of poverty.
This business buys, consolidates, and sells produce, seafood, and processed goods from smallholder farmers and fishermen to hotels, local supermarkets chains, and retailers.
As a first step, prior to creating the business, CGEP carried out studies to identify the demand requirements for several products. CGEP partnered with various hotels, restaurants, and supermarkets, analyzing their purchasing history, their specifications for each product category, their order schedules, their quality standards, and their anticipated growth requirements for each product line.
Next, CGEP studied the supply side to identify the current state of production for each identified product with respect to demand. When gaps between supply and demand were discovered, CGEP saw this as an opportunity to help the region’s underserved farmers and fishers.
After thorough market analysis, CGEP asked for an initial commitment from the various establishments to procure from selected suppliers that they felt could be trained to meet their specifications. CGEP identified farmers that were ready to receive capacity building, that were open to change, and those that embraced the rigor and discipline needed to be commercial providers.
To prevent supply shortages, CGEP's production plan supplies the hotels, restaurants, and supermarkets with a limited volume per week in order to maintain a more consistent supply. The hotels agreed to procure 20 percent of all goods and services over a three-year period. The hotels have since asked to scale the number of products they source locally.
By helping these smallholder farmers and fishermen improve their productivity and ensuring they receive a fair price for their products, CGEP is empowering them to work themselves out of poverty.
CGEP’s business has provided training, business resources, and technologies to farmers and fishermen to help improve their yields and productivity, consolidate their harvest, and reduce the number of value chain intermediaries, substantially increasing their income. As of December 2016, the business has generated more than 600,000 in beneficiary income for 430 farmers and fishermen.