Module 2 Session 1Actor Situation Cards for Mapping and Working/Not Working

For Facilitators:

Prepare one set of the actor name cards for the mapping exercise and one set with the situation information for the working/not working exercise.

See Module 2 Facilitator Notes for further instructions.

Module 2 Session 1: Actor Situation Cards 1

Importer of Long-Grain White Rice

You import large volumes of long-grain white rice for the urban market primarily from Southeast Asia. The urban market for long-grain white rice of consistent quality in terms of color, grain size, and percentage of breakage has been growing quickly. Even with the high transport costs you are not having trouble selling all you import. You sell primarily to retailers that sell through fixed stores (as opposed to open-air markets). You are now starting to import lower-quality long-grain white rice with less uniformity and more broken grains to push further into the peri-urban and even rural consumer markets.

Your rice importing business has grown substantially over the last five years and you currently import around 100,000 MT or about a 25% of the imported rice. You are one of three large importers in the country. You cater mostly to urban consumers, who buy three times the amount of rice compared to rural consumers, who grow about 60% of their own consumption. (It is difficult to know the exact figures as the government does not maintain quality statistics on production and consumption.) So while you are bringing in lower-quality imported rice to move further into rural consumer markets, you see continued growth in rice sales to urban lower middle and upper middle class consumers. You are interested in local rice production, but since you already serve a growing urban market through reliable suppliers, you see no real business reason to invest in local production, given all the risks and uncertainties.

Local Rice Trader

You buy directly from the very few commercial millers that can mill paddy into short-grain white rice at a reasonable quality. You have difficulty buying white rice of consistent quality, but you can typically sell all that you buy from the millers. Even though you could sell more, you tend not to talk with your suppliers (either millers or farmers) at the start of the season about how much they are

planting, nor at harvest about their actual yields when you need to negotiate the purchase.

While you see the opportunities in the rice trade, taking advantage of them would require developing your own network of small-scale paddy farmers. Your experience with small-scale farmers has been they are hesitant to invest or apply new growing practices that are necessary to get the yields and quality needed to compete against imported rice. They are unreliable in that they may or may not sell to you even if you have an agreement with them. You have even heard that they often do not supply rice to their buyers even when the buyer provides the inputs. On the other hand, you have seen a growing number of emerging commercial small-scale farmers who try to adapt improved practices to meet commercial requirements. You would be interested in more links to those types of farmers, but you are not going to invest a lot of your own resources at this point.

Local Paddy Trader

You buy paddy from small-scale farmers. You focus on quantity over quality as you know small-scale paddy farmers do not use high-quality seeds or invest much in inputs. You also trade in other crops, so you see little value in helping small-scale paddy farmers, although you will provide some informal finance for personal or input purchasing reasons. Since you have cash most of the year, you are confident that farmers will sell to you, repay your loan and ask for help from you again. You buy both paddy and hand-milled rice. The paddy you buy is toll milled (milled for a fee) at one of few smaller millers in the area. Quality is typically not good, with a lot of stones and high levels of variation. Given these

uncertainties from year to year, it is important for you to maximize returns from each transaction—even if it means you have to wield your power to force the farmer to take a lower price. You often cooperate with a few other traders in the area to make sure prices are low enough to make good money. For the most part the other traders agree and follow through on the agreement to keep prices to farmers lower. The farmers are often aware of what prices farmers receive in other parts of the country. However, since they do not manage their cash very well from a business perspective, they are typically desperate to sell at harvest time and will accept your low price. You also use your available cash to provide informal finance to small farmers for their social/personal use. Farmers rely heavily on their family and extended networks, but that requires them to support family members. As a result, farmers—especially those who are known to be better farmers—are often called upon to cover funeral, wedding and other costs for their extended families. They frequently come to you to ask for a loan against future crops sales. You are happy to provide the loan, as you can charge interest that is very high (in the form of a low price or extra bags of paddy delivered). The farmers are aware that they pay you a high price for such financial services, but they seem fine with it given they need such service almost every year.

Large-Scale Rice Miller

You supply rice to two types of consumers: 1) those that prefer higher quality and 2) consumers who prefer lower prices. Your equipment can produce high-quality rice that could compete with imported rice, but there are very few commercial farmers (with more than 50 hectares) growing enough high-quality paddy. There are a small number of emerging commercial farmers (with 10 to 50 hectares), but still not enough to utilize your equipment at more than 40 to 50% capacity. You have trouble obtaining consistent quality, but you can still sell all that you buy. Even though you could sell more and you have a lot of excess capacity, you tend not to work with your farmer suppliers to increase yields or increase land under cultivation. In some seasons, you have had trouble managing your working capital and failed to buy what was available for lack of cash.

The poor banking environment is a real problem for growing your business. You are confident you can compete with imported rice, but only if you have more finance. You have even thought of increasing your milling capacity, but bank finance is too expensive and too hard to get. You previously had a loan for purchasing crop, but there was not enough quality crop so you used the money for something else. In the end the loan was so expensive that you did not pay it back. Even though that loan was a problem, having another more affordable loan now would allow you to really grow your business. Another issue is the production – and therefore your supply – of high-quality paddy. The seeds are not easy to get. You could import them directly and provide them to your farmers. You face this quandary: you need to reach out to small farmers to expand volumes but you also know they have a history of unreliability. You have seen a growing number of emerging smallholders that seem more reliable, but they are small in numbers, so the volumes required would mean shifting practices of many small farmers. You realize that small-scale farmers would need partners like you to upgrade paddy production, but you would prefer to work through a paddy trader for dealing with small-scale farmers. You just do not want to take on that task. You think you could find some reliable traders, but then again securing a loan is the key starting point.

SME Agro-Input Dealer

You are a very small agro-input dealer who buys a few chemicals, tools, and fertilizers to resell in the rural areas near your shop. Your shop is small and you have very limited money, so you can buy only a small amount of inventory at a time. This is a problem since you need to recover your transport costs from that small amount of inventory. You try to provide advice when farmers ask, but you are unsure of exactly how to use some of the products that you sell. You do not keep records or track where your customers come from. You generally have an idea of what your customers want, but some products are not worth keeping in stock. For example, fertilizer is too risky because of the government program to subsidize it, which typically means SME agricultural input dealers like you lose out because you are not connected with the right people. You are also unable to sell quality seeds as the seed law makes it very hard for you to source from the quasi-government monopoly that supplies better seeds. You have made no attempt to bundle other services (like spraying or tilling) with the sale of your products because you believe the risks far outweigh the benefits to your business.

Essentially you are a trader, buying and selling agricultural inputs and small equipment. You have minimal capacity or resources to develop more in-depth services for your customers and if you found another product to trade, that would be your priority over adding service to your sales. If you could become more closely linked with or even directly work for your main input supplier, you could provide more knowledge and even services like spraying. Moving tiny lots of inventory is expensive and makes you an unreliable source for your customers. At the same time, the larger suppliers are not actively moving out into the rural areas, so many of your customers have no other convenient option—if they did not buy from you, they would have to travel 30 or more kilometers to buy inputs.

Large Input Supply Firm

You are a larger retailer/wholesaler of a range of agriculture products (chemicals, seeds, tools, small equipment). You sell through your own network of retail stores as well as to other retailers. You are interested in expanding sales to smallholders in rural areas, but you have not tried many new promotional or marketing efforts except for a bit of radio advertising. The main issues you see in expanding the smallholder market are farmer know-how, government and donor policies to subsidize inputs to farmers, and the distance to your customers. Despite these challenges, you see an opportunity to expand sales by targeting the small but growing emerging commercial farmer segment of paddy producers. You know you cannot afford to serve this segment by opening more stores or offering credit—contrary to the view held my many experts in the field. Bank finance is expensive if you could get it, which does not seem possible based on the few meetings you had with bankers. You have heard of the ideas to increase sales through community agents or representatives at local markets, but you have not tried these ideas. You have also noticed the growth of informal spraying services and see this as a possible opportunity to sell more crop protection products, but you are concerned about appropriate application and safe handling, especially if the sprayer ruins a farmer’s field and you or your product get blamed. A real issue for you is the government’s control of the seed industry resulting in only one variety for white rice that is not bad, but has not been improved for years. You are sure that the seed from imported rice is much better.

Small-Scale Paddy Farmer

You farm about 1 hectare (ha) using traditional methods and have gotten yields around 2.5MT/ha from your upland rice field. You have family and friends who plant lowland rice and get higher yields of around 3.5MT/ha. But they work much harder, and traders often take advantage of their need to sell during harvest time. You try to manage your cash better, but you just cannot refuse a family member in need if you have cash in your pocket. You wish you had options to use available cash—like buying next year’s inputs during harvest time—but none are available to you. Traders seem to know when you run out of cash and use that against you during negotiations. You have learned about better farm and cash management practices in training courses given by various donor programs. They make sense but you are discouraged by very real risks in putting them into practice: the social risk of postponing or limiting some responsibilities in order shift resources to your rice field and the economic risk in terms of the uncertainty and distrust with other actors with whom you will have to relate (agro-dealers, traders, etc).

You would like to make more money from your paddy production and you know new investments are needed, but given your social responsibilities, the investments are expensive and risky. You can get inputs from a local SME dealer, but she has only a few things and they are expensive. Often she can’t even tell me how to use the products. You usually prefer to travel the 30 km to the next closest input shop, but they are busy during planting season and uninterested to provide much advice. You have heard that some farmers hire sprayers to apply pesticides and you have even heard that they can spray directly on your crop to kill weeds. It seems like these services are hard to find and would be expensive. At the same time, you are interested to learn more about spraying, but not sure where to find good information. You have a mobile phone on which you can get pricing information, but your priority is often getting paid quickly for your crop. So you often do take a lower price than you know is paid elsewhere. To compensate for the way traders take advantage of your desperate cash position, sometimes you add some stones and other stuff to increase the weight.

Small-Scale Emerging

Commercial Paddy Farmer

You have the problems of both the commercial farmer and the smallholder farmer in that you do not have the resources to import your own seed or your own equipment directly. As a result, you have to use the best seed available locally and access the equipment you need second-hand or through service providers. As is also the case for commercial farmers, the bank loans are very expensive and the terms would make it very difficult for you to repay. Even with these issues, you are still able to achieve reasonable yields of 4 to 5MT/ha for non-irrigated, but mostly mechanized paddy production. You would really like to expand as well as move to irrigated rice production, but you would like to do so on contract with a buyer. Building a link with a reliable buyer that could work with you to grow your production would be ideal, but you are unsure how to develop such a relationship.

Paddy production has provided you with increasing income over the past few years, but you are hitting limitations on moving to the next level. Bank finance is very hard for you since banks want collateral you don’t have. At the same time there are few equipment dealers and even fewer viable second-hand equipment options, so equipment is expensive—especially if you factor in your time and travel to investigate options. On the market side, there seems to be a lot of demand for quality paddy, but millers and traders rarely engage you in a way that leads to a more reliable market. Their cash flow and negotiating tactics always result in substantial uncertainty. If you could improve the market side of your business, you would consider organizing nearby small farmers to help them improve their production and sales for a small fee or commission. At some point, if you remain limited in your ability to grow your paddy farm, you may need to move to another crop that has fewer obstacles to growth.

Tractor Service Provider

You own a tractor that you received from a special program run by the last government. You had family in the regional government, so they helped link you to the program. The tractor was imported from China and works pretty well, but spare parts are very hard to find. You have a town mechanic who has helped keep your tractor running most of the time. You own/operate the only tractor in the region, and there are no places to purchase tractors nearby. There are a few equipment outlets in the capital city but they are not organized for people like you to go in and buy equipment. Bank finance is not an option as it is expensive, or at least that is what you understand. More importantly, bank staff do not provide any assistance or support in helping you access a loan. The first priority for your tractor service is your family and friends. Once you are finished with them, you can sell your services primarily to the larger farmers in the area. Because there are few tractors, you get many requests for your service and you see a real opportunity to expand your business if you could get another tractor. You price your service by hectare. You know this price covers the cost of petrol and a bit for you or the driver, but you are thinking you might need to also factor in spare parts and maintenance costs when pricing. You think that a small price increase would not matter too much to demand given the pretty big jumps in yields from your services—sometimes as much as 20%.

You are concerned that if a part breaks and is not available or cannot be creatively fixed, which is likely, it would be months before you could get the tractor up and running again. You are also aware that there is a good chance that some parts might not be possible to import at a reasonable price. The opportunity to grow your business is there, but many key elements (equipment, spare parts, financing) are missing or not working well for you to take advantage of the opportunity.

Ministry Of Agriculture

Official

You are in charge of a government program designed to bring farmers together on a single piece of land so that they can get services such as tillage, tractor maintenance and repair. You have met with some international experts that have questioned the wisdom of a government program that sell inputs and buys crop from farmers in competition with private sector entities. You are not too concerned because this program because it is good politics and good for the smallholders to have a sure market at a good price. Still, it is unclear even to you how to pay for this scheme since you are aware that paying above market prices for paddy in the past has resulted in large losses for government programs. Your program is also linked to a program providing tractors at preferential financing rates to regional constituents who will provide services to these organized farms. You are not directly involved in that program, but know that without mechanization, the value of bringing farmers together on a single large piece of land is less valuable. You are well placed in the Ministry and you realize that this position can get you even further in your political career. Given that the private sector seems unable or unwilling to engage small farmers, the government had to do something. Your first pilot resulted in some problems in buying the crop because funding was not secured in time. But you did get 100 tractors to constituents in the regions at deep discounts and with very good (well below market) interest rates. The tractors went to important and very influential regional party members that the Government could trust to deliver the services. With this program and the fertilizer subsidy program, the farmers should have no problems generating a good return on their crop. You have not organized the funding to grow this program, although you have stated targets to substantially increase the program over the next two years. In recent meetings with private sector processors, you were surprised by their very negative response: “this programs hurts our business”, they said. You chose to ignore their concerns because it is commonly known in your circles that most processors exploit small farmers.

Rural Bank Manager

You manage a small rural bank. The bank has minimal capital requirements and limited ability to take on risk in technical areas where the bank has capacity or experience like direct financing of agricultural production. Most of your loans are salary or trading loans. These loans turn over quickly, rarely default, and provide the bank a very good return. You realize that banks like yours should be trying to lend to the agricultural sector, but not at the expense of the bank’s viability. With that said, if you could get assistance to lend to the agricultural sector—and especially in rice, the primary farmed crop in your area—you would be more than supportive. Your views have hardened a bit on the dangers of agriculture lending because you know that a donor project in a different part of the country pushed a few banks to get into agricultural lending with very poor consequences for the banks. Beyond the substantial risks of agricultural lending, you have never thought farmers fully understood the requirement to pay back loans. You think that is partially because of various government programs that lent to farmers and never sanctioned farmers for failure to repay. You also know of a few donor programs that have not required farmers to repay loans at all. A good repayment culture needs to be fostered before you would be comfortable lending to farmers. If someone else took on most of the risk then you would consider providing a few agriculture loans.

Beyond the risk of lending, you would need to substantially improve the skills of your staff to understand and price risk in agriculture and to adapt the products to meet agricultural client needs. At present, the only loan products you have are inappropriate for them because the terms do not match agricultural cycles. Collateral requirements are also a problem since very few farmers or even agricultural traders have enough acceptable collateral. You have heard of lending to processors or input firms who then on-lend to farmers, but you have not had any clients like that enter your bank. You will have to be more aggressive in marketing your services via SMS technology or radio. You think the key for any marketing will be to lead with education, as financial literacy is limited in your area.

Credit Officer from a Large

Bank

You work for a large bank in the capital city. Your bank does well buying treasury bills, providing salary loans, lending to traders, and on occasion lending to larger corporate clients. You have had a few large agriculture-related firms come in seeking loans. These firms are current bank customers and have collateral, so theoretically they meet the basic requirements to get a loan. However you are still concerned about repayment. For you collateral is critical because business is inherently risky and you need to assurance that the bank will get its money back. Agriculture has additional risks, at this point you do not see the purpose of even talking to an agricultural business or farmer. Your bank probably would not lend to a farmer unless someone else took on all the risk. It is really the responsibility of the government or maybe donors to deal with farmers, since they are poor.

For your bank to change its practices, you would need to see consistent trends in growth in the agricultural sector. Local rice in particular seems to be losing market share to imported rice. If the rice sector began to compete more effectively, then as a bank you would need to organize specific capacity to deal with agricultural clients. The priorities in upgrading your capacity would include credit analysis skills, products, marketing/public education campaigns, monitoring systems, and collection processes.

Spray Service Provider

You have backpack sprayers with which you and your brother spray all your family fields. In the last few years, some neighbors have paid you to spray their fields, and that provided a little extra money. You have actually started thinking about whether you could turn spraying into a real business, as you have seen in a nearby town. You know how to apply a specific pesticide that is commonly used in the region, but you have heard that others work better. You have also heard about herbicides that could be very useful to your family and others in the community. Chemicals are dangerous, and you have seen a friend misuse a chemical and do a lot of damage to the crop and even burn himself. It would be important to learn more about safely using these chemicals if you really want to move forward with the idea of making a business from spraying. Maybe you could talk with the input firm that you buy your chemicals from, but you are unsure how to talk to them about the idea.

Agricultural Extension Officer

You are an agricultural extension officer in an area that produces a lot of rice—mostly local rice from multiple varieties at very low yields. You have a good understanding of what farmers need to change: better seeds and better on-farm practices including starting with transplanting, planting in rows and field maintenance. However, you have no transport resources and you have to cover more than a thousand farmers. You are also not very happy that you get paid inconsistently. One time last year you did not get paid for three months. Given the low and inconsistent pay, you often take side jobs with donors and on occasion input firms and aggregators. These opportunities, though well paid, are few and far between. One time, you did go on a regional radio station to talk about rice, and that worked well, but you have not gone back.