Turning Coffee Farmers into Entrepreneurs

Development of organised smallholder coffee enterprises and the introduction of sustainable agricultural practices are improving the livelihoods of 1700 farmers in Southern Tanzania. A farmer-to-farmer extension system, market linkages and access to credit are key elements of the initiative.

'We are not working for the project – we are working to improve our life. A better understanding of and access to the market means a lot to us', says Rabon Njema, Chairperson of Coffee Group in Muungano.

In Tanzania, many smallholder coffee farmers lack knowledge of modern production and processing techniques as well as market information. The results are low yields, poor quality and low prices. Low incomes have led to low investments in the coffee fields and a declining spiral has begun. To turn the tide for coffee farmers in Mbeya Rural and Mbozi Districts, International Coffee Partners (ICP) launched a coffee project in May 2006. One thousand farmers benefit directly but more than 1700 farmers participate in the project. The project focuses on capacity building in the production, processing and marketing of coffee as well as on developing strong producer organisations. Two of the main challenges faced by the project are to change the mindset of farmers and the marketing of coffee.

Organisational setup
The 1000 farmers are split into 60 groups. Each group is a member-owned, democratically operated private business enterprise organised to meet the economic and social needs of its members. In order to ensure the sustainability of the project, a depot consisting of three to eighteen coffee groups has been established in each ward. These depots are responsible for assessing the group’s eligibility in business activities, coordination of bulk buying of agricultural inputs and bulk marketing of coffee. By increasing the size of marketed lots of coffee, farmers can negotiate better deals with buyers. The idea is that depots will slowly take over the management responsibilities of the project, which is due to end in May 2009.

Farmers train farmers
One important method of ensuring the development of viable, sustainable business enterprises has been to introduce a farmer-to-farmer extension system, in which a ‘contact farmer’ and a ‘farmer promoter’ are elected by each group.

Contact farmers are responsible for transferring knowledge about sustainable coffee production to fellow farmers. This is primarily done through hands-on training of recommended practices like mulching, pruning, weeding, erosion control, shade tree planting and the effective use of fertiliser, in demonstration plots owned by the contact farmers. Farmer promoters are responsible for organisational and business development activities in the group. They also enforce the contractual agreements of the group and provide support to the contact farmer and the executive committee.

Contact farmers and farmer promoters are represented in each depot by a lead contact farmer and a lead farmer promoter. Lead contact farmers ensure that colleagues follow recommended practices, provide technical support and link their depot to other agronomical training and support institutions such as the District Agricultural & Livestock Development Office. Lead farmer promoters are responsible for the organisational development activities of the depot.

A contact farmer
Nasha Mwalingo is the contact farmer in the Muungano group in Mbeya Rural District. Part of his 1.5 acres of land is used as a demonstration plot. A plot is a visual sign of how well a group is performing and this group is doing very well. The yield of coffee per tree has increased by ½ kilo. As a result, other groups come to look and learn. Nasha believes one of the major challenges faced by contact farmers is to ensure that other farmers apply the new practices to their own plots. 'One of the main reasons for our good performance is that we practice what we have learned', says Nasha.

Access to loans helps farmers
Smallholder coffee farmers in Tanzania have difficulty getting bank loans. As it takes several weeks from the time coffee is picked until farmers receive payments from the sale at the auction in Moshi, many are forced to sell their cherries straight off the tree to middlemen for a very low price.

However, the financial situation for the farmers looks better now. Through Private Agricultural Sector Support Ltd (PASS), they can get a one year loan from Cooperative & Rural Development Bank (CRDB) to buy agricultural inputs. But even though the bank loan is of great value to the farmers, some of the groups hesitate to apply for one. 'Before applying for a loan we want to screen all our members and make sure they are capable of repaying it. We put great emphasis on only admitting trustworthy farmers', says Chairperson of the group in Muungano, Rabon Njema. 

Criteria for getting a loan
In order to qualify for a loan, a coffee farmer must first be registered in a group, which must be registered with the responsible ministry and legally recognised. The local government and MS Tanzania have assisted the groups through the whole registration process, but this can take a long time. The group in Muungano has been trying to register since 2002 but only succeeded in 2008. In order to approve a loan, CRDB also requires a business plan. To help prepare and submit these plans is one of PASS’ main services.

In most cases the money from loans is used wisely, but a few farmers have been unable to resist the temptation presented by relatively large sums of cash. To avoid this, it is proposed that the bank transfer the payment for agricultural inputs directly to the supplier, instead of farmers withdrawing millions of Tanzanian shillings in cash. Other proposed measures are to disburse money in stages instead of paying one lump sum, and to ensure that before money can be withdrawn from the bank a group must have documented that its members have agreed to the withdrawal.

The men in Igamba agree that women provide a significant portion of the labour, and acknowledge the need to increase the gender balance.

Change of mindset
Traditionally, coffee farmers in Mbozi and Mbeya enjoy a special status in the community. Owning a coffee farm is prestigious and farmers believe that coffee is coffee, regardless of the quality. But, according to Lupakisyo Masuba, Coffee Specialist from Mbeya Rural, the ICP project is slowly changing this attitude. ‘Due to awareness raising, more and more farmers are starting to appreciate the value of growing coffee of good quality. Having a coffee plot is no longer just about status - it is business’, he says.

Marketing is 'the' challenge
Marketing of coffee is without doubt one of the biggest and most complicated challenges for coffee farmers. They find the marketing system impenetrable due to lack of information and knowledge about what happens in the value chain after they deliver their coffee to the milling company.

Besides the middlemen mentioned previously, farmers can sell their coffee to milling companies who forward it to the auction in Moshi, where it is sold by the Tanzania Coffee Board (TCB). The other marketing window is for farmers to sell their coffee directly to foreign importers. One of the goals of the ICP project is to establish a link to these buyers. A first attempt was made in 2007, when the German coffee roasting company Tchibo bought all top grade coffee from the groups, amounting to 72% of the coffee produced.

Nevertheless, the farmers were discontent with the sale – due to depreciation of the Tanzanian shilling, some of them got a lower price than expected. The ICP project visited the coffee groups to exchange ideas on how to avoid similar occurrences, and Tchibo met the farmers to clarify any misunderstandings and to discuss future opportunities for cooperation. Today, Tchibo and some of the farmers have entered into long-term business relationships. Other sales opportunities may also appear as potential buyers from several international markets visited the farmers in 2008.

Taking the road to success is a choice
Great emphasis has been put into creating ownership and to enabling coffee farmers to continue the initiated activities after the ICP project ends in April 2009. Farmers are encouraged to lead the process. ‘We give the farmers a good starting point to improve their livelihoods. Whether they grasp the opportunity or not is up to them. The success of the groups depends to a great extent on the commitment of farmers and the strength of the management’, comments Webster. But both Webster and Lupakisyo are optimistic that most groups will continue to progress as the benefits gained so far are an incentive to them.

As for the coffee farmers in Igamba and Muungano, they are in good spirits and very confident about the future, though they stress the importance of finding a good buyer for their coffee.     

Teamwork with local government
The project management team of the ICP project has played a vital role in anchoring the project. But members of the team agree that if they had not joined forces and established a good working relationship with local partners, the project would have failed.

One of the first steps taken by the ICP project was to contact the District Commissioner and the District Agricultural & Livestock Development Officer (DALDO) to inform them about the project and to initiate a partnership. The DALDO highly appreciates the cooperation with the ICP team. ‘This is a very good experience for us. The communication is very open and we are informed about everything that is going on in the project. We receive status reports on a regular basis and meet to share and discuss the progress made, challenges and action plans’, comments DALDO of Mbeya Rural District, Ennock Nyasebwa.

Producer Organisation Trainer, John James Mbele stresses that the contribution of the DALDO’s office is of great importance to ICP as well. As an example, he mentions the cooperation with the coffee specialists. ‘Before our first contact with the farmers we partnered up with the two coffee specialists in Mbozi and Mbeya Rural, respectively. Without them it would have been difficult for us to be accepted by the communities’, he explains.

Gender – still a long way to go
In the Mbeya region, people live in a patriarchal society. Many men have two to four wives and traditionally men own the coffee plots and control the earnings. The biggest barrier to involving more women is that a farmer has to own a coffee plot to qualify for membership in a group. 'But if you visit a coffee field most often you will find the women and children working there and not the men', says Project Manager, Webster Miyanda.

The men in Igamba agree that more women need to be involved. ‘Women contribute with a significant portion of the labor. In order for us to improve our performance it would be an advantage to have more female members to give them direct access to training and improve their skills’, says Lusekelo Mwalukomo.

The coffee group in Igamba in Mbozi has 87 members, of which eight are women. One of them is Asha Myombe. She inherited the plot from her husband but not all women are that lucky. Asha is one of the most dedicated members of the group. She has never missed a meeting and she applies the practices learned. ‘After joining this project I have increased the coffee yield and this year I expect to harvest 1.5 tons. My life is very different from other women because of the knowledge I have gained from the direct training.’ Due to the increased yields attributed to the project, she has been able to buy two cows, send children to school and to have electricity installed in her house.