Something as simple as a bank account for a barley farmer in Ethiopia can help improve the entire supply chain. This is one example of Corné de Louw’s daily work as an advisor at Rabobank Advisory Services (RIAS).
Corné de Louw comes from a family of bankers. His father and grandfather were both Chairman of a Boerenleenbank and Corné himself was director of a local Rabobank before he started working at RIAS. Nowadays he spends most of his time abroad, especially in Africa, where he literally has his feet on the ground.
Rabo International Advisory Services (RIAS) is part of Rabo Development. Corné’s team, which consists of eight project managers, often works for large international clients in the food and agri sector, such as coffee, cocoa and beer producers. Companies such as cocoa producer Barry Callebaut or malt burner Boortmalt, have a strong interest in the sector and are often dependent on small-scale farms in emerging countries such as Ethiopia, Ivory Coast, Ghana, Vietnam, Chile and Thailand for their raw materials. To safeguard the supply of cocoa and barley, they rely on the knowledge of Corné and his colleagues at Rabobank Group.
Why do these companies enlist the help of a bank?
"Many banks in emerging countries are not yet professional. They often lack the knowledge and resources to provide loans to small farmers. When the local banks fail, small farmers cannot borrow money to invest in better seeds, pesticides etc. This means they can’t improve their harvest."
How can you be of help to them?
"We can support the local banks with advice and banking products. We teach them how to assess credit-worthiness and how to foster the preconditions that ensure that a loan is repaid. For example, we help with the introduction of mobile banking. Farmers then have less physical cash, so they spend less money on other things. This allows them to pay off their loans more easily and spend their money on a better harvest with a higher yield. Step by step we contribute to the ecological and social sustainability of the food and agri sector. We know the local markets and can also call on the knowledge of our other Rabobank Group colleagues if needed."
“I literally have my feet on the ground”- Corné de Louw, advisor at Rabobank Advisory Services (RIAS)
Where do you start, when you are new to a region?
"My colleagues and I always start with an extensive assessment, mapping the value chain. We want to know what really happens in a value chain. For this I go to farms and I visit village communities, cooperatives and banks. I literally have my feet on the ground. I want to know what the financing needs are and what it takes to keep a farm running. We can only reach a targeted solution if we understand the situation on the ground properly."
What is a typical problem you come across in your work?
"Side selling is a very common risk: the farmer does not sell his grain to his cooperative as agreed, but to other buyers, the so-called middle-men. This means a buying party like Boortmalt is not guaranteed enough barley. And what Boortmalt, and similar parties, certainly want is certainty about the supply."
How do you tackle such a problem?
"I am currently working on an innovative idea using satellites. The satellite measures the biomass of a piece of land, even small plots of ten by ten meters. If you know that barley grows on the plot, then you can calculate what that piece of land will yield and what the farmer will earn, based on the biomass measurement and other data from the area. I know the market price and the costs of sowing and harvesting. This means I can facilitate the farmer from a distance, so I can greatly reduce the transaction costs and the financial risks. We have already proven that it works. Now we are developing the solution further so that banks can put it on the market as a banking product."
What makes your job challenging?
"Every market, every country and every community is different and requires a different approach. Take distances for example, ten kilometers does not seem far until your car gets stuck in the Ivory Coast’s San-Pédro region and you have to wait hours for help because the roads are so bad. Ten kilometers suddenly becomes a great distance and you then realize that the villages are actually quite far apart. You need to take this into account in your planning and you must have an integrated approach."
What do you mean with an 'integrated approach'?
"On the one hand, I mean that you need to involve all the local parties in the chain in your plans. Farmers, cooperatives, governments, banks, business partners ... On the other hand, I mean that you must look at all the challenges that a local farmer has to deal with. They are much broader than just a question of finance."
Can you give an example?
"In Ethiopia, barley is becoming an increasingly important crop, because beer consumption rises every year. Boortmalt asked us to help streamline this chain. We extensively mapped the value chain and saw that there are two times when farmers have financing needs: at the time of sowing, for high-quality seeds and fertilizer, and at the time of harvesting, to bridge the financial gap until the product has been sold. The farmer is the most vulnerable in this last period. The money he earned during the previous cycle is gone. But he needs cash to pay his children’s school fees etc. The middle-men profit from this. They offer the farmer much-needed cash for his harvest, but at a price below the market value. In view of his acute financial shortage, the farmer accepts."
How can you solve this?
“We have devised an integrated solution for financing the purchase of farm inputs (seeds etc.) and the harvest, whereby we work with electronic vouchers. It works like this: a farmer buys the seeds and other supplies for his barley from the cooperative to which he is affiliated. This cooperative cooperates with a bank that we also work with, in this case CBO Bank. The farmer pays a cash amount to the bank or takes out a loan and receives a voucher. The advantage of such a voucher is that it can only be used for the products needed for sowing crop. He cannot spend his credit on other things, which sometimes happens. Using this voucher he buys what he needs from his cooperative. After harvesting he goes back to his cooperative and declares his yield. He then receives a different voucher, with which he can repay his loan and withdraw cash, or - and this we try to stimulate - he opens a savings account. We try to foster a savings culture this way. Because financing starts with saving.”
Corné: “This Ivory Coast farmer is about to open a bank account. A special moment that is preceded by a whole ceremony."
Why does a big concern like Boortmalt find this important?
"Boortmalt is a company with a long-term vision. The beer market in Ethiopia has exploded in recent years. To meet demand, the local brewers import a lot of malt. The government would rather see it the other way around, because foreign currencies are very important for the country. Instead of importing malt, barley from Ethiopia would have to be processed into malt in Ethiopia itself. The potential is there. There are more than a million farmers who could grow barley. And with special, high-quality seeds the yield can double or triple. To secure the long-term supply of barley, Boortmalt needs a sustainable chain that delivers a high-quality product. If that works, you have a win-win situation as it also guarantees the continuity of the farm. By making the entire value chain more sustainable, you have a huge impact on most of the population - on families, fathers, mothers, children. I have seen up close what it does to people when they acquire certainties. At that moment you make a difference."
Do you need special characteristics for this work?
I think that as a RIAS employee you have to combine two extremes. On the one hand, you must be flexible, because things never run as you expect. On the other hand, you have to be 'wisely stubborn' and tenacious, otherwise you will not get anything done. You must have knowledge of local markets in emerging countries and have a large network. You have to be inventive and be able to transfer your knowledge about banking topics and food and agri to people who are not specialists in those areas.
Do you think you have a great job?
Absolutely, it gives me the feeling that I can really make a difference in the world. I enjoy it when I see that a farmer has money in the bank, with which he can finally pay his children’s school fees. If I then come up with a solution to reach even more farmers, I will become even happier. It is great that we at RIAS fully reflect the cooperative principles of Friedrich Wilhelm Raiffeisen: stimulating self-reliance in communities.
Read more about the work of Rabobank International Advisory Services.