Large areas of highly fertile volcanic soil have made bean production a centuries-old staple of the Nicaraguan economy and food supply. Although small bean producers have inherited a rich and important legacy, they have often struggled to earn a fair profit due to low productivity rates, lack of credit access and difficulty in organizing cooperative farming mechanisms.
To help combat these pressing problems, the Inter-American Development Bank recently approved a $13.6 million loan to Agricorp, Nicaragua’s leading distributor of staple foods such as beans and rice. More than $3 million of the loan will come from the IDB’s Opportunities for the Majority initiative and will be used to improve the competitive position of small bean farmers in the country.
Although close to 60% of farms in Nicaragua are dedicated to bean production, most operate informally and on a small scale. This system leaves the typical producer with inconsistent yields, no collateral with which to establish credit and no integrated organizations for collective action. Farmers often operate in isolation and are vulnerable to intermediaries who create market and price distortions.
By providing access to credit, improving collective associative mechanisms and implementing agricultural training, Agricorp and the IDB are helping empower Nicaraguan bean farmers to increase their productivity and earning potential. Access to credit is vital to a well-managed production cycle. Only when famers can be sure that they will have enough funds to buy a consistent amount of quality inputs, like certified seeds and fertilizer, can yields be stable and reliable.
“Access to working capital creates opportunities for farmers,” says Opportunities for the Majority team leader Susan Olsen. “It allows resources to be invested in their production techniques and gives them more time to sell their produce at fair prices instead of selling on the spot to the closest intermediary.”
Agricorp project manager Edgard Cuadra agrees. “Providing farmers with credit opportunities allows them to build an image and reputation to lenders. These are things they will be able to draw on when acquiring additional credit from third parties once the project ends,” he explains.
To improve the strength of associative networks, Agricorp aims to build on the relationships established by its partner company, Ramac, through the FrijolNica program, by working with local cooperatives to share knowledge, improve pricing mechanisms and reinforce the use of solidarity guarantees for working capital loans. Agricorp has also committed $300,000 to develop training programs focused on income and crop diversification, the development of best agricultural practices, environmentally friendly production methods and healthy nutrition habits in producer communities.
“One of the program’s main goals is to help producers transition from subsistence to profitability, through a combination of acquiring best agricultural practices, increasing yields, gaining a higher return on their investments, creating more disposable income and ultimately, a better quality of life,” says Cuadra.
These are the type of initiatives that contribute to position Agricorp as a stable and transparent partner to Nicaragua’s small bean producers and as a reliable buyer when farmers start delivering larger yields.
Susan Olsen further explains the impact of the company’s new approach to to managing its supply chain. “Bean production has been important to Nicaragua for hundreds of years, but only now are farmers becoming a part of an inclusive value chain. Agricorp is making a long-term investment in farmers to reach more efficient, larger yields while improving collective production practices—investments that pave the way for a stable, long lasting, and mutually beneficial relationship”.
This is good business practice for Agricorp and a true double bottom line approach. By contributing to the development of small bean farmers, Agricorp gains access to a stable source of supply, which limits price distortions. In turn, small producers not only can access financing to growth their business units but also have the long-term commitment of Agricorp to buy their crops.
Thanks to this win-win scenario, the company expects to almost double its purchases during the next five-years, thus reinforcing its leading position in the Nicaraguan grain market. In a country where agriculture is one of the largest economic sectors and employs 56% of the poor, a healthier bean supply chain means a healthier, more prosperous Nicaragua.
