Next week I will be joining the Nestlé CSV team on their stand at World Water Week 2010 in Stockholm, on Monday 6 September (11:30 – 13:00 CET) and Tuesday 7 September (09:30 -11:00 CET).

As Country Director of IDE Cambodia, I will be talking about the essential role of water in agriculture and in rural communities. This is from our experience of setting up the Farm Business Advisors Project, for which we won the first ever Nestlé Prize in Creating Shared Value this year.

In Cambodia, where scarce water resources and poor water quality are a pervasive constraint to rural development, we have been using water as a strategic entry point in our programs addressing poverty.

If you are attending World Water Week, please stop by the Nestlé booth to say hello.

Michael Roberts is Country Director of IDE Cambodia. In May 2010, IDE Cambodia was awarded the first Nestlé Prize in Creating Shared Value for its innovative Farm Business Advisor (FBA) project, which aims to improve the living standards of the country’s rural population by increasing agricultural productivity and income. Here, he explains some of the ideas and background behind it…

Agriculture in Cambodia is at a very basic level with some of the lowest yields in the region. Consequently even very simple improvements in the quality of inputs or cultivation practices can have a big impact on productivity. Since the mid-1990s, we have been working to help Cambodian farmers increase their incomes. We began by introducing small-plot irrigation devices like foot powered treadle pumps and low-cost drip irrigation systems.

Incomes improved but even when their water constraint was solved, farmers would quickly run into another wall, which would limit profit. We spent a lot of time listening to them and found that to get the maximum benefit from better water control they needed to be able to access a more integrated package of agricultural inputs and advice.

Originally, we used our staff to deliver these services but then we realised that if a few inputs and a little advice could create significant value for small farmers then there must be a viable business in there somewhere. In 2005, we began to train and support a network of small rural entrepreneurs to become Farm Business Advisors (FBAs), selling a range of products and services to help small-scale farmers improve their farming techniques and income.

The surveys we have conducted with FBA clients demonstrate that on average, their income has increased by about USD 150 per year. This is a significant change in areas where cash income in an average household is only about USD 30 per month. The average monthly income for an FBA is currently about USD 60. This has been increasing month by month but is still too low given the amount of work they do. For now, most FBAs are content with this because of the high value that they place on the training that they receive. In the long-term, we estimate that FBAs will be able to make more than USD 200 per month as their client base, range of products, and experience grows.

IDE differs from the traditional NGO model in that we take a market-based approach to all of our projects. We treat people as customers, not beneficiaries. This simple change in perspective has profound implications on how we work. If I have to convince someone to purchase something, then my success is absolutely dependent on listening to them, understanding them, and responding to their highest priority needs.

This also means that we don’t provide direct subsidies to our customers. If we have done a good job of listening to their needs (including that for affordability) then even very poor people will be able to purchase items that improve their well being.

The Nestlé CSV Prize will help us to expand the current project, adding an additional 36 FBAs toward our ultimate goal of more than 500. We will also be leveraging the Prize to attract additional funding from several donor agencies that are planning substantial investment in the agriculture sector in over the next several years.

Once the project reaches the scale of 500+ FBAs, we expect that the franchise enterprise will be able to operate independently without additional donor funding. As we move from a successful pilot into a scale up phase we expect a number of challenges.

For instance, the FBAs have seen a rapid growth in clients over the past dry season. To ensure that most of these become repeat customers, the FBAs must find the right balance between client numbers and the amount of follow-up service that can be provided to ensure that the clients are successful.

Creating Shared Value is the very heart of this project. FBAs work with their farmer clients to increase agricultural production and improve incomes. If the farmers are successful, the FBAs are successful. If the FBAs are successful, the franchise enterprise is successful. The system flourishes only if there is real value being created at the farm level.

— Michael Roberts, Country Director, IDE Cambodia

The prize of 500,000 Swiss Francs (about $433,050) will improve the project by recruiting and training an additional 36 advisors, generating approximately US $1.9 million in new income to positively impact 20,000 people in more than 4,000 rural households across Cambodia.

Nestlé Chairman Peter Brabeck-Letmathe, who presented the award to the IDE, said: “We congratulate IDE Cambodia on being the first to be awarded the Prize. The work they do is inspirational. The support and training from IDE ensures that all involved work together to create sustainable farming enterprises.”

Accepting the award, IDE Cambodia Country Director Michael Roberts said, “It is an honor to receive this recognition from Nestlé. The prize will help us further IDE’s mission to create income opportunities for poor rural households. We hope to leverage the Prize to reach more than 75,000 rural Cambodian households in the next few years. On a global scale this is still very small but we think there are big implications in what we are learning.”

The CSV Prize – which received more than 500 applications from 79 countries – was awarded during Nestlé’s Creating Shared Value Forum, an international gathering of leading experts in water, nutrition, rural development, and the role of business in society which took place in London on 27 May. The Prize was created to provide financial support of up to 500,000 Swiss Francs to individuals, NGOs, or small enterprises who offer innovative solutions to nutritional deficiencies, access to clean water, or progress in rural development. The prize money will be disbursed over a three-year period to assist in the scaling-up of the project.

Learn more about IDE’s Farm Business Advisor Program.

Watch Nestlé’s video on the award below.

The Sakala children with their harvest

Zambia’s rainy season began last week. Maize, tomatoes, and watermelon are being harvested now from Lusaka north to Copperbelt province where IDE trains several farmer groups in best agronomic practices. Tomato prices are down this month, but watermelon are now fetching high prices at market. A couple photos here show some harvest from the Sakala family farm on 20 November 09 outside Kabwe in Central Province. The Sakalas have wisely hedged, planting both tomatoes and watermelon, and Mr. Sakala has an additional field of tomatoes which are timed to harvest in December when tomato demand will be much higher.

Bennett of IDE Zambia helps Harrison Sakala load produce to take to market.

Below is text from AGFUND’s official announcement in Istanbul.

The Arab Gulf Programme for United Nations Development Organizations (AGFUND) announced the winning projects of its International Prize for Pioneering Development Projects, 2009, in the field of Development of Agriculture through Technology, at its meeting, which was held under the chairmanship of HRH Prince Talal Bin Abdul Aziz, AGFUND President, on 14 October 2009, in Istanbul.

The Prize Committee approved three winning projects from among 39 projects from 33 countries on four continents:

The First Category Prize: allocated for “The role of international organizations in supporting the developing countries’ national policies and programs to improve agricultural output through adoption of innovative technology solutions” was won by PRISM (Prosperity Realized Through Irrigation and Smallholder Markets), implemented by IDE – International Development Enterprises in 10 developing countries: Bangladesh, India, Nepal, Myanmar, Vietnam, Ethiopia, Zambia, Zimbabwe, and Nicaragua.

The AGFUND International Prize is not only a developmental tool for highlighting successful examples and their propagation among peoples, but is also an instance of developmental support introduced by the Arab Gulf Program. The organization of the prize ensures the funds allocated are utilized to further develop winning projects, and to increase the beneficiary categories.

The AGFUND International Prize Committee membership is comprised of a number of renowned world figures, namely: Mrs. Mercedes Menafra de Batly, former First Lady of Uruguay, President of the All for Uruguay Foundation; Baroness Emma Nicholson of Winterbourne MEP, Vice President, Foreign Affairs Committee, European Parliment; Dr. Ahmed Mohammed Ali, President of the Islamic Development Bank Group, Professor Muhammad Yunus, Founder and Managing Director of Grameen Bank; Dr. Y. Seyyid Abdulai, former Director General of the OPEC Fund for International Development.

I am an avid follower of TED podcasts. Now playing on my iPod is Acumen Fund CEO Jacqueline Novogratz, who, in her June 2009 TED address, cites IDE as an example of “patient capital” – her term for a third way between pure, market-driven capitalism and socially-driven philanthropy.

While her version of IDE’s history leaves a few gaps, her positioning of IDE in this in-between space is largely consistent with the way we view ourselves and the environment in which we operate.

One the one hand, there is a growing chorus of voices (interestingly, many of them from aid-recipient countries) proclaiming the massive failure of international aid to address poverty – especially in Sub-Saharan Africa. Economists Zambian Dambisa Moyo (‘Dead Aid’), Peruvian Hernando DeSoto (‘The Mystery of Capital’) and American William Easterly have all put forward compelling arguments for the scrapping or complete reformation of our current approach to international aid. Despite spending over a trillion dollars on aid to Africa over the past 60 years, we have seen little real growth, and in many cases even contraction and growing poverty. Aid has too often lined the pockets of corrupt officials, undermined local businesses by flooding markets with free or subsidized products and created a dysfunctional handout culture, where recipients’ ingenuity and creative energies are diverted into gaming naïve programs, rather than creating goods or services of real local value. Whether you believe in reform or wholesale abolition of international aid (if you have a couple of slack hours, check out the [June 2009 Munk Debate] in Toronto on the future of international aid), there is no question that the current system is broken.

On the other hand, while unfettered markets have tremendous power to create wealth – and are doing so for many formerly impoverished populations – they often bypass or ignore particularly vulnerable and poor populations. The truth is that many of the populations we work with – poor, rural families who depend on small parcels of marginal land for their livelihood – live with the reality of market failure. The farmers we serve are incredibly resourceful, hard-working and savvy. However, their communities are a high-risk proposition for most would-be investors and service-providers: poorly served by local communications and transportation infrastructure, subject to a variety of nuisance and exploitative policies and engaged in scattered production of low-volume, low-margin products far from major markets. This is by no means “low-hanging fruit” for businesses looking to fill a niche. At the same time, markets are where poor people already fight for survival. And we like the fact that markets, by definition, treat poor people as customers – listening and responding to their needs and priorities, rather than parachuting in ill-suited ‘solutions’ to grateful ‘beneficiaries’.

Novogratz’ definition of patient capital is investment that is risk-tolerant and long-term, seeking social return in populations – like poor rural households earning less than a dollar-a-day – that are notoriously risk-averse and focused on short-term returns. With the exception of a few, incredibly committed social entrepreneurs, willing (and able) to persevere in difficult environments and forego years of potential returns (like my friend Dan Ball of Forest Fruits Honey in Zambia), patient capital is a rare commodity in the open market. Organizations like Acumen – and IDE – stand in the gap between the social aims (but often limited effectiveness) of philanthropy and the power (but often limited social motivation) of the market.

I am often asked why – if IDE’s products are sold to farmers by local businesses and we emphasize the importance of viewing farmers as customers, not objects of charity – we are organized as a charity, seeking personal donations and grants from governments, companies and foundations. In fact, when Bill Gates visited IDE in India last year, his father asked exactly this question. Like Novogratz, we might describe the answer as patient capital. The money we receive as grants or donations allows us to invest in creating products and services for marginal populations that might be considered too risky or otherwise unattractive to businesses. We are not using the money to give stuff away, but we are able to make investments that might not be possible for a business driven by next quarter’s income statement.

These investments include research and development – designing and bringing to market new or modified products that meet the needs of poor customers, marketing – getting the word out among difficult-to-reach communities, training – helping farmers and local service providers develop the specialized skills they need to succeed, and connecting – linking farmers to better markets for what they can produce (a ‘dating service’ for small farmers and prospective buyers). We have demonstrated that, with these investments, formerly subsistence farmers can move into a thriving cash economy, creating wealth for their families and for a growing local service industry that sustains and drives further growth.

As Novogratz says at the end of her talk, this is how we “…build solutions that start from the perspective of those we are trying to help, rather than what we think that they might need.”

Today the United Nations Food and Agricultural Organization (FAO) announced that, for the first time in human history, more than one billion people worldwide are suffering from hunger. This is a sobering, even frightening statistic. It’s also a dramatic reminder of why IDE’s mission is so important.

IDE’s PRISM methodology confronts the very structural basis of hunger by enabling poor rural households to increase their income through micro-irrigation, high-value crops and better access to the value chain. The increased income allows families to purchase food and to acquire improved inputs for their farm production. The hunger cycle is broken.

Today’s FAO press release has a table listing the main effects of the current economic crises and household responses in five sample countries. Four of the five are places where IDE has programs: Bangladesh, Ghana, Nicaragua and Zambia.

What are the FAO’s recommendations for solving the present crisis? Here is an excerpt:

“In the short term, small‐scale farmers must be given access to indispensable means of production and technologies ‐ such as high‐quality seeds, fertilizers, feed and farming tools and equipments ‐ that will allow them to boost production. … In the medium and long terms, the structural solution to the problem of hunger lies in increasing production particularly in low‐income food deficit countries.”

This is PRISM. This is exactly what IDE does. Let’s get on with it.

— Bruce McCrae, IDE VP/Asia