Pulling Together to Beat the Middlemen

10/13/14 – This post is written by Armand Tossou, a Fulbright scholar from Benin who is an MBA Candidate in the Global Social and Sustainable Enterprise MBA program at Colorado State University. Armand and his co-founders Aaron and Leana are starting a social venture that will support rural farmers in Nicaragua through increased access to financing and agricultural technologies. See their original post here.

Growing Capital team meeting with a Nicaraguan smallholder farmer

The Growing Capital team meeting with a Nicaraguan smallholder farmer

“United we stand, divided we fall” is an old saying which holds true in most smallholder farmers’ daily experience. From lack of technical skills or affordable financing, to increasingly unpredictable climatic cycles, farmers face many challenges. And yet, what of those who navigate this labyrinth only to find that they cannot market their produce profitably at the end of the harvest season? This is typically where middlemen step in and provide a crucial service by purchasing the produce, but often at extortionate rates. In recent field work with my Growing Capital venture we were exploring an affordable financial solution for low income farmers by providing income producing agricultural assets – such as irrigation systems – on a lease to purchase basis, and I had a chance to learn from the smallholder farmers of Nicaragua and observe their adaptations to this market challenge.

The stereotypical smallholder farmer

In the small community of San Ramón – a municipality in the Matagalpa department – Don Isael lives alone on his farm in a tiny mud house. He ekes out a living on a two manzana (roughly 1.2 acres) plot of land by growing various crops throughout the year. He can only sell three quarters of the harvest through middlemen or at San Ramon’s market square. Lacking credit from the formal financial system, Don Isael resorts to usurers for loans each season in order to pay for necessities such as seeds and fertilizers. These loans of 2,000 – 3,000 cordobas (approximately $80 – $120 USD) bear interest rates as high as 15% a month.  Don Isael’s challenges are representative of a large percentage of farmers in this region of Nicaragua. Even simple tools to ease the burden, such as a bicycle, are out of reach. In Don Iseal’s own words, “I cannot afford the repair cost when it breaks down.”

A bright spot just a mile away

A couple of steps away, Don Cidar owns a six manzana (roughly 3.5 acres) farm. The contrast is shocking; not only does he own cattle, but in the luxury of their higher quality home Don Cidar enjoys TV with his family. Unlike Don Isael, Don Cidar grows high value perishables such as tomatoes and sweet peppers in three micro-tunnels equipped with irrigation. He supplies two high-end supermarkets located in the capital of the department of Matagalpa. His success is no mystery, and Don Cidar owes it to his affiliation to the UCA San Ramón: a farmers’ cooperative which provides multiple benefits to its members, including credit for agricultural production, technical assistance and, above all, marketing. Through affiliation with the cooperative, Don Cidar and other farmers have solved the distribution puzzle and hence get a fairer price for their produce. Don Cidar’s immediate goal is to expand his

business by acquiring more micro-tunnels.

The most uplifting case of all

The Growing Capital team touring a greenhouse in Nicaragua

The Growing Capital team touring a greenhouse in Nicaragua

Of the various cooperatives which I was fortunate to visit during my time in Nicaragua, the success of COPROEXNIC clearly stands above the rest. Incorporated in 1995, it has grown into a 3,000 member organization, and is Nicaragua’s largest exporter of sesame and sole exporter of organic cotton. By selling on the international market under the Fair Trade label, farmers in this network get more for their crops.  The benefits of pulling together into collectively owned organizations such as COPROEXNIC are obvious for smallholder farmers. By selling as larger groups, they not only achieve the huge volume of crops required to enter major commercial contracts, but also avoid getting stuck in the middleman-supported extortionate loan cycle, and increase their bargaining power.

In summary, it is no wonder that the recent Rockefeller Foundation initiative’s report on Reducing Global Food Waste and Spoilage highlights bulking and group marketing in the top 10 potential solutions to help smallholders escape the middleman trap, and thereby better reap the fruits of their efforts. The implementation of this solution however calls for innovative mechanisms to help farmers like Don Isael, who are too impoverished to afford the entrance fees and periodic membership fees required by cooperatives. While that task might look daunting, Growing Capital is committed to give it a shot.

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In the News: Keeping Tabs on our Social and Sustainable Entrepreneurs

As an alumni and employee of the Global Social and Sustainable Enterprise MBA program at Colorado State University, I am in the lucky position of receiving updates from our grads who are out making the world a better place through business. And so I am delighted to share some of those recent successes with you:

Patagnoia's Truth to Materials endeavor

Patagonia’s Truth to Materials endeavor

-Kat

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Kicked off Fargreen’s first farmer training workshop. Let the journey begin…

College of Business, Colorado State University:

Part 3 of Tanmay Telang’s impressions and experiences with Fargreen in Vietnam. They’ve made such amazing progress, and have won incredible competitions, and we are very excited to see the next updates to this impressive social enterprise.

Originally posted on The journey to a prosperous green:

Hai Duong, June 29th, 2014 – written by Trang Tran, Fargreen CEO & Cofounder (trang@fargreenvn.com)

Today marked an important milestone of our Fargreen journey: our first farmer training workshop was kicked off. For the founding members of Fargreen, it’s more than a dream come true. We just can’t believe that over a year ago Fargreen was purely an idea floating in our minds. Now, it is a registered business and has officially started its journey involving not just us but also our neighboring farmers in the village. What a moment!

Today was the first day of our month-long training workshop. We will walk our farmers through every single step involved in cultivating mushrooms on rice straw. Right from how to select the high quality straw, how to dry, store and treat it and what to do when they see mushrooms sprouting out of the straw. The idea is…

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Fargreen’s new found inspiration: Nhi Pham

College of Business, Colorado State University:

Phase 2 of Fargreen’s blog, courtesy of Tanmay Telang, a GSSE graduate from Cohort 5 of the Global Social and Sustainable Enterprise MBA. Great insights into the realities of actually starting a social enterprise. Enjoy! -Kat

Originally posted on The journey to a prosperous green:

It’s been almost fifteen days since the last blog. The days in between have been hot and sweaty for the most part, with the exception of an occasional shower of rains to beat the heat (Thank god!). Our days have been spent meeting prospective customers in Hanoi, getting the site in the Thuc Khang village ready for pilot production and farmers training and researching about packaging & labeling for our products. Busy but exciting stuff! Our aim is to establish the best practice of growing mushrooms on straw and simultaneously train the farmers to produce mushrooms. We have an ambitious plan to launch the minimum viable product by the year end. Go Fargreen!

Our pilot is based in Thuy’s (one of the cofounders of Fargreen) village – Thuc Khang in the Hai Duong province. Her family has been supporting us graciously in the task of our production pilot. They have…

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First impressions of Vietnam: Simple, Warm and Beautiful

College of Business, Colorado State University:

We wanted to repost this blog by Fargreen to help tell their story as they develop into a full-fledged social enterprise generating income and impact in Vietnam. This is the first of 3 posts.

Originally posted on The journey to a prosperous green:

Written by Tanmay Telang – Fargreen’s co-founder on his first trip to Vietnam in June 2014

It’s been almost a year that I’ve been a part of the Fargreen team . However, 8th of June 2014 turned out to be the first day of my life in Vietnam. Initially I was feeling a bit nervous about being in Vietnam. But then I decided to go there with a clean slate – an empty mind with no prejudices at all. And it did turn out to be the right decision, for, as I cleared the immigration and visa interview in Hanoi in fifteen minutes, I realized that the attitude of people here is easy going and I am going to have a good time.

Trang came to receive me at the airport, and we went back to her home town of Phu Ly in a hired Taxi. The air here is…

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Igniting Entrepreneurship in Latin America

Yesterday we were honored to receive a visit from a delegation of entrepreneurs, government officials, and academics visiting from Latin America. The 12 guests were invited by the US Department of State, and hosted in Colorado by World Learning. Their purpose was to understand how we promote and teach entrepreneurship, and to make connections that can further their work back in their home countries. After introductions, Q&A, and a reception, we toured campus and managed to form a bond. Although our interaction was brief, I was struck by the connections entrepreneurs share. We all work towards the same goals of promoting economic development and income generation, and it is amazing how having that in common draws you together.

Igniting Entrepreneurship in Latin America.

Igniting Entrepreneurship in Latin America.

¡Muchisimas gracias por visitarnos!

-Kat

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Foodcarts, Mushrooms, Solar Energy, and Pill Packs: It’s Been a Busy Summer!

In addition to all the great work out current cohort of GSSE students has been undertaking around the world, it’s also been an exciting summer for GSSE alumni. A few intriguing updates:

  • MamaCarts has launched in Benin and is selling clean, healthy, and delicious meals from foodcarts! Check out their photos on their Facebook page to see their progress.
  • Fargreen is training farmers in Vietnam to produce mushrooms – check out photos from their first training session here.
  • Our of the first ventures to come of the GSSE MBA, PowerMundo, was recently awarded a $100,000 prize from the Inter-American Development Bank for their work enabling rural Peruvian families to access solar energy. Read the announcement here.
  • And finally, we are proud to introduce you to the newest GSSE venture, ASCENT Global Market Solutions, founded by 3 GSSE grads from Cohort 6 to enable access to low cost, affordable health care solutions, starting with the Jeena Iron Pill Pack.

-Kat

GSSE Alumni Venture Progress

Clockwise from upper left: ASCENT Global Market Solutions, MamaCarts, Fargreen, and PowerMundo

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Adversity Breeds Innovation

07/30/14 – This guest blog is Part 2 of  Eric Byington’s post. He is part of the Global Social and Sustainable Enterprise MBA, is a co-founder of H2.0, and is spending his summer doing research in Kenya.

Eric Byington

Eric Byington

Behavior change is a hot topic in WASH. If you’ve always dug pit latrines with no understanding of its impacts on the local water tables, have collected water from a local river your whole life, or don’t understand how clear water can contain unseen contaminants, what would prompt you to change your learned behaviors? Changing deep seeded habits takes time, but if you start that process young and en mass, it can serve as a catalyst for widespread change. For this reason, we have come to believe the utilization of schools is paramount. There are thousands of primary and secondary schools throughout Kenya. In every school meeting we have had, the teachers and leaders of these institutions are clamoring for the proper technologies to be installed at their locations to provide both clean water and proper sanitation. These leaders spend many hours with their students, often having a deeper influence over them than their own parents, and will be the foundation for the behavior change when the proper WASH technologies are installed at their facilities.

CREATIVE FINANCING

Gatina Slum in Nairobi

Gatina Slum in Nairobi

The NGO/non-profit model has long dominated this space, and for many good reasons. Because the technology and infrastructure development are so costly, donor based models have long provided for WASH needs, often bringing thousands of products at a time to the field. Unfortunately, this modus operandi for many of these philanthropic based projects has seen thousands of products or techniques fail to be adopted by the communities they intend to impact. Ownership and education are two of the major issues that plague these freemium model projects. This is where we see creative forms of financing coming into play. Before you make a $1,000 purchase you often read a few consumer reports and do a little research, right? You understand what it is you’re buying, how it works, what to do if it fails you in any way. After the transaction the item holds some sort of value to you and more often than not (we all make those poor purchase decisions from time-to-time) you use that product because the need or want of its use was a strong enough impetus to cause you to pull the trigger on the purchase. Now this idea is neither new nor revolutionary, but a financial transaction is needed to bring ownership to the table and to, in many ways, force education and training to take place. Here’s the but that always exists; so much of this technology is way out of the price range of most users or entrepreneurs. This is where we get creative. Let’s say purchasing and installing a clean tech toilet with a biodigester at a school costs $30,000 USD. The school doesn’t have the cash to buy the product outright and a conventional loan would either be inaccessible or daunting at best. Let’s say we can cut that price in half by bringing together government and non-profit money to subsidize the labor, transportation, fees, and general overhead expenditure. The school spends approximately $6,000 USD per year on fuel for cooking and digging new pit latrines. At the new cost of $15,000, the school could use the money they’re saving on fire wood and pit latrines to pay off their $15,000 loan for the clean tech toilet and biodigester in approximately 3-4 years, including paying an industry standard interest rate. To hedge our risk, we finance only the physical product that is being installed and use those assets as collateral, and we have an assurance that the school cannot up and disappear on us the same way a sole proprietor may be able to. There are many stakeholders at play here with many details to attend to, but if we get creative, we can find ways to make a serious shift away from freemium models and towards a more sustainable market based approach.

COLLABORATION

Eric  with local children

Eric with local children

It’s amazing how much is happening in the WASH sector here in Kenya. It’s also amazing how little collaboration is going on. Shared learning, creative partnerships, and sector specific incubator spaces would serve the progression of improved water and sanitation well. People are talking about it, but we haven’t seen a lot doing it…yet. One Acre Fund is becoming an agriculture sector specific financial institution that maintains a lot of institutional knowledge specific to improved agriculture production and food security. The WASH sector could benefit greatly from a similar sort of entity, and we are working to see that happen. Bringing best practices, creative thinkers, and shared technology together and then offering creative financial products to fund collaborative work will serve to accelerate the progress this sector is screaming for.

The future of the WASH sector looks exciting. It won’t be easy and there is a great need for patient capital, flexible expectations and lots creativity, but our time in Kenya has convinced us that market based approaches must be the next step in the WASH sector, and we’re ready to work our tails off to find and build them.

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Jamii Funding: The Art of Crowdfunding

Graham Goodman

Graham Goodman

07/28/14 – This guest blog is written by Graham Goodman. He is part of the Global Social and Sustainable Enterprise MBA and is a co-founder of Jamii Funding.

Innovation. Cultural awareness. Appropriate technology. Co-creation. Bottom of the Pyramid. Value creation. These buzzwords are used daily in the GSSE, where we are challenged to think outside the box when considering how to “be the change we wish to see in the world.”

When conducting research, I often times find myself forming hypotheses on issues far greater than I feel qualified for. Subsequently, we are encouraged to present as if we were pitching to investors. This is, after all, a business program. One thing that we haven’t been taught yet, is how to actually get in the room with an investor. Landing a meeting with an angel investor or venture capitalist feels like this unrealistic dragon that I, as an infant entrepreneur, may never conquer. As a co-founder of Jamii Funding, the closest my teammates and I have gotten to such an opportunity was submitting our application for Shark Tank. This financial obstacle is shared among aspiring entrepreneurs around the world. So many bright ideas drown because they fail to generate seed funding. It’s not their fault, but VCs, angels, and banks fund only 10% of startups in Kenya, where we are piloting this summer. While many view this as a problem, GSSE teaches us that this is an opportunity. So, why can’t the other nine out of ten startups benefit from alternative finance mechanisms, such as crowdfunding? #blueocean

Jamii Funding founders meeting with the Maasai in Kenya.

While donations, fundraising, and charities have been around for centuries, the modern version of crowdfunding is a relatively new concept, and close to unheard of in Eastern Africa, as our research in Kenya and Tanzania has suggested. While Kickstarter is only five years old, this website has raised over $1 billion in contributions towards incredibly diverse projects including technology, product design, food, and the arts in North America and Europe.

The point is this: crowdfunding works. As of yet, no crowdfunding platform has shown that they can reach the proper scale to maximize impact on the African continent. Another common GSSE lesson: don’t reinvent the wheel.

At Jamii Funding, our mission is to support entrepreneurs who are creating social assets to be shared within their communities.

This summer, we have spent the past month visiting a variety of entrepreneurs, while vetting their businesses and projects. At the Kenyan Federation for Alternative Trade, over 100 artisan groups are trained to create new products and grow their businesses. At the Basecamp Foundation, the women of the Maasai, a historically masculine-dominant tribe, are empowered to generate income through education and communal banking. At the SEED Junior Academy in Kibera, one of the largest slums in the world, people are building a school for children living there. While their impact is immeasurable, these entrepreneurs don’t always qualify for traditional loans, investment, and finance. We have found no shortage of everyday people, who are making profound impact within their communities. By utilizing local knowledge and skill sets, we believe we have the opportunity to empower hundreds, if not thousands, of businesses in Eastern Africa, by helping fund projects that will help them maximize their impact.

As an industry, crowdfunding is not old enough to drive. By the time this industry reaches maturity, there will not be a corner of the world where crowdfunding is not creating impact. At Jamii Funding we are among early entrants into the African market. Current trends suggest that someone will become “Africa’s Kickstarter.” We have the audacity to think that we might have a chance!

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Fresco de Dentro: Experience is the Best Teacher

Members of Fresco de Dentro working with local Brazilian farmers.

 07/23/14 – This guest blog is written by Cameron Marlin. She is part of the Global Social and Sustainable Enterprise MBA and spent part of her summer working with Fresco de Dentro.

Business school and entrepreneurial education are two very different things.  The first, is a boot camp-like training designed to teach business logic and aptitude.  Entrepreneurship conversely is more complicated – repetition, memorization, and skill honing are no substitute for the experiences of spending time in theworking with farmers field, meeting our team, and communicating with people.

Through coursework and research, our team investigated the status, growth, and opportunities relating to the expanding and evolving field of urban agriculture in Brazil as we built the business concept of Fresco de Dentro.  We read countless articles and reports detailing the Brazilian government’s support of various urban agriculture initiatives, including those relating to preserving cultural food, promoting healthy food consumption, transforming public spaces, fighting poverty, and reducing crime, to name a few.  We conducted wide-scoping market research as we studied: the trends of the growing health food industry, the school initiative to source 30% of food locally, the popular restaurants, and other government supported food security programs.  We examined work of many NGOs and a handful of authors who have published related material.  We crunched numbers, calculated break even points, and compiled pro-forma statements and balance sheets.

However, no amount of traditional research could begin to prepare us for the people we met and the observations we made during our time in Brazil.

Nowhere else would we hear the story of Julia, the primary gardener for a 5,000 square foot school garden, assisted by 85 year old Amelia, and advocate for an urban agriculture association in Belo Horizonte.  Julia’s weekly market sales were limited by the theft of the organization’s vehicle to only what she could transport via bus.

We wouldn’t have learned about this school’s integration of the garden into the curriculum.  one of the school’s programs teaches students to care for and tend to a seedling at home, and later invites the students to transplant their young plants into the on-campus garden.  Janaina told us about the excited way the children took pride and ownership over the individual plants and for the garden as a whole.

We never would have understood the security system the surrounding neighborhood and self-appointed on-lookers provided as they kept track of visitors and suspicious activity at this community garden in Manguinhos, Rio de Janeiro, Brazil.

We wouldn’t have had the opportunity to observe first-hand the grin of pride on Fernanda’s face when a regular customer stopped at the community garden to purchase directly from her plot.

And we could not have otherwise felt the garden’s calming and serene respite from the bustling and chaotic city had we not spent the morning learning about the community garden plot Raquel tends to.

Equipped with little more than skeleton of knowledge regarding social ventures and management, we arrived in Brazil with an image of a business to test and explore for a potential launch there.  After countless discussions, dozens of interviews, garden visits, and exploration and observation, we came to better understand the nuances, similarities, and differences among a handful of cities, their people, the food, and the social dynamics.  This learning proved critical as it illuminated ways our original mobile market concept could, and should be adjusted to best fit the underlying intention: to support, promote, and encourage urban agriculture and the countless dedicated gardeners throughout Brazil.

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