Background
In April 2021, the Kraing Leav Samaki Agricultural Cooperative loaned USD 30,000 from the ARISE-Farmers program to purchase organic rice and conventional rice from their members. With this amount, the Cooperative was able to buy 170 metric tons of organic rice (consisting of 110 tons of Romdul and 60 tons of red Jasmine rice) and 20 metric tons of conventional rice from 244 households that are members of the cooperative.
From the 110 tons of organic Romdul rice, the Cooperative supplied 25 metric tons to AMRU Rice Company following the contract with the company. The cooperative was paid with a premium price–with additional amount of around US 37-55 per metric ton depend on the quality.
Impact
The members that sold rice to the Cooperative were happy with the efforts of the cooperative committee because they received the payment of rice immediately as compared to what happened in 2020, when they waited for 20-30 days for the payment after selling rice to the Cooperative. The organic rice producers commit and strive to scale up the organic rice field and produce good quality to sell to the cooperative and AMRU Rice in the next years.
This business also provided jobs to 11 people in the locality who each earned an additional daily income around USD 2.5 per day.
In addition, the cooperative members who involved in vegetable, chicken, and pig production also received benefits from the by-products of rice from this business such as broken rice, rice husk, and rice bran. From this, they were able to purchase pure and quality by-products that are USD 0.05-0.075 per kilogram lower compared to that in the local market. This resulted to a lower cost of production for them.
Amid the COVID-19 pandemic, the cooperative contributed to social economic development by giving discounts for rice to their customers. The price of Jasmine rice went down from USD 0.875 to 0.825 per kg and price of Romdul rice went from USD 0.825 to 0.75 per kilogram.
Currently, the cooperative is supplying their milled rice, free-range chicken, vegetables and pork to six different markets in Phnom Penh and Kompong Chhnang including Udom Rice, Sna Dai Mie, Krovann, Koh Pich, Toul Pong Ro Market, and union market.
Innovations/Good Practices
- The timing of requesting for ARISE loan is crucial for agriculture cooperatives or farmers organizations (FOs) so they can operate their business on time and follow their scheduled activities.
- The ARISE loan should be mainly disbursed to cooperatives/FOs that are producing organic rice or other organic products and with a contact with a private company. This ensures that the private company is committed to buy the commodities with a premium price as stated in the contract. This will give cooperatives/FOs members and committees confidence and commitment to produce quality commodities as well as mobilize the resources from inside and outside to accomplish the objective of contract farming completely.
- The cooperatives/FOs will be responsible in paying the producers with premium price once the products are sold. The ARISE loan is used for paying the producers and the private company reimburse the amount to cooperatives/FOs following the agreement/contract. After that, the cooperatives/FOs reimburse to the ARISE national implementing agency (NIA). The private company creates and signs on the “eating loan agreement” with NIA and guarantees to reimburse the amount of ARISE loan lent to cooperatives/FOs by the NIA.
Facilitating Factors
- The private sector partner AMRU Rice Company is the key actor in collecting the products from the cooperative following the agreement of the contract farming.
- The agriculture cooperative committee played as important role in mobilizing the farmers to form as a producer group, to communicate with the private and public sectors and development agencies to support them in terms of technical, knowledge, experience, business concept, and perspective, etc.
- The Farmer and Nature Net (FNN) as the development agency acts as the coordinator between the private company and the cooperative. FNN also plays an important role in supporting the cooperative in terms of logistics and technical requirements.
- The Provincial Department of Agriculture, Fish and Forestry (PDAFF) as well as local authorities (Village Chief and Commune Council) are the power actors that provided support to the farmers so they can join agriculture cooperatives or farmers organizations in order to strengthen the collective of small households to negotiate with private sector.
Challenges
- The milled rice business involves a long process of operation, thus the period allotted for ARISE loan, which is 4-5 months, is not enough to generate the cycle completely. This kind of business needs time to buy, to stock, to dry, to mill, to package, and especially to sell the rice with a proper price to markets or customers. The market has to compensate for the price of rice to the FO after 14-30 days of receiving the rice, thus collecting cash from customers to reimburse ARISE Loan within 4-5months is very challenge for FO committees.
- In order to reimburse ARISE loan on time, the FO committees decided to postpone loan disbursement for a while to FO members that caused some members unhappy and complain to FO saying that the loan in small yet it is not easily available.
- Since the process of ARISE loan disbursement needs approval from the committees of FNN, it took a longer time–around 30 days–thus it was challenging for FOs to collect 20 metric tons of rice from 20 members.
Lending Experiences of NIAs to FOs
- Transferring ARISE Loan from NIA to FOs was made via credit (USD account to FO account). In order to avoid losing profit (Exchange Rate and Service Fee) during the reimbursement, FOs must create a USD account (ACLEDA Bank Account) before requesting a loan from NIA.
- All FO committees should understood well the system of ARISE loan and should be qualified for the loan before making decision to request the loan. If this is the case, the FO will be confident to manage the loan effectively and will be able to reimburse it on time.
- All required documents for loan disbursement should be prepared as a rolled-model in advance and it should be clearly explained to FO committee to fill out the necessary documents before and after loan request.
- Supporting FO to develop their Business Plan with assistance from NIA can show the ability of loan management of FO. It either helped NIA to see the FO business process through their business concept and they can also help with the weakness of FOs and provide guidance on management to make sure the business is profitable business and the loan is returned.
Lessons Learned
- FO evaluation should be done before loan disbursement. The evaluation should focus on FO management structure, management style, loan history, market segment, cash flow in and out, risk management.
- FO Business plan should be supported by Business Development Officer (BDO) and fully participated in by FO Committees so that could they could provided deeper understanding of the whole process of business as well as the responsibilities of relevant stakeholders in the business.
- Regular field follow up and support every two months with monitoring and evaluation sheet to measure business progress such as number of FO members that sold rice, amount of bought rice, amount of milled rice, number of clients, cash flow (in and out), accounts payable and receivable (AP&AC), and profit and loss of the business. FO needs and concerns should be expressed in the record.
- FOs can borrow for two or three times, but the second one should be based on the first session evaluation.
Recommendations
- The period of loan should be longer than 4 months or based on the type of businesses of FOs.
- The fund or grant should be scaled up more than USD 200,000 and at no interest rate.
- The fund or grant using policy or procedure should be participatorily designed by implementing agencies.
- The funding agencies should conduct field visit quarterly or yearly to evaluate the implementation.
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