Embracing Change to Facilitate Inclusive Market Systems
The blog highlights a case demonstrating a specific model for connecting smallholder producers with a larger market actor. It raises some interesting considerations emerging from a system's resilience and change perspective, particularly how scale is evolving to mean something different from a systems perspective. Traditionally, scaling up an MSD program has meant increasing the number of people taking on a behavior or business model. From a systems thinking perspective, scaling up is more about how an orientation or capacity emerges and normalizes across all scales in a system (i.e., micro, meso, macro, and meta). A systemic understanding manifests in multiple ways where market actors begin to drive better outcomes (such as access to inputs and how smallholders sell their farm output). Systemic resilience suggests that while it was good to catalyze the partner to test the model, one should take caution before pushing a single business model as that may limit diversity. Rather, systemic resilience suggests systemic change objectives should be related to changing the attractiveness of engaging smallholder poultry producers on a shared-valued basis, so multiple business models emerge that integrate shared-value supply chain management schemes. MSS2022 highlights emerging learning and thinking from practitioners, including how new ideas and concepts are being applied.
Running a poultry feed business in Rwanda is a challenging endeavor. Finding ways to improve profitability and stay abreast of consumer demand is hard to focus on when keeping the business running occupies the bulk of your time. Within this context, the Feed the Future Rwanda Orora Wihaze team, a Venture37-implemented small livestock Market Systems Development (MSD) Activity, connected with Ruvimbo Chikwava, CEO of AfriSol, a poultry feed mill operator in the Eastern Province of Rwanda, to discuss business strategy and mutual interest in increasing smallholder access to quality inputs. AfriSol found it challenging to reach and sell to small producers, who themselves lacked the resources to buy the product and understand why better feed and improved rearing practices — among other resources — could be valuable for their broilers and increase their profitability.
Orora Wihaze is implemented by Land O’Lakes Venture37 in collaboration with consortium partners Catholic Relief Services, MarketShare Associates, The Manoff Group, and Urunana Development Communications and aims to sustainably increase the availability, access, and consumption of animal-sourced foods in Rwanda by developing a profitable market and facilitating a shift in consumer behavior. Using an MSD approach has enabled this team to work through local market actors, support services, and the enabling environment to stimulate system changes towards these goals. As development practitioners seeking to foster systemic change using this highly facilitative approach, finding and partnering with the appropriate change and scale agent is not always immediately apparent. Finding the right scale agent takes flexibility and adaptation, and a market systems approach prioritizes profitable, inclusive, and scalable models. The following example from an Orora Wihaze co-investment in a poultry outgrower model illuminates how this process can work to identify and support change and scale agents.
The solution…take one
As a first step, AfriSol and Orora Wihaze co-created an approach to test and gradually scale an outgrower business model with smallholder producers. Producers would receive feed and day-old chicks on credit then purchase their chickens after a six-week production cycle. Orora Wihaze provided technical assistance and a small co-investment grant. Initially, 10 farmers participated, and the grant was later expanded to 84 farmers who produced 30,030 birds. The grant stipulated that at least 25 percent of producers should be women. In designing and carrying out the second phase, scale was a prerequisite to improved cost efficiencies and profitability. Though the second phase enabled AfriSol to increase profitability, the business was forced to confront a market shock that led to lower than expected income. Nonetheless, it disrupted an otherwise stagnant market dynamic by ensuring that smallholders had assured access to inputs (feed and day-old chicks), technical assistance, and also a buyer they could sell their successfully raised chicken to. This also increased access to chicken meat at the household level, an important objective of the activity.
Too many chickens…
During the second phase of the outgrower model, AfriSol confronted an unfortunate oversupply of chicken on the market, which negatively impacted prices. The firm invested in temporary cold storage in the hope of an increase in prices down the road. However, the market remained saturated for an extended period, compelling AfriSol to sell its remaining stock at a lower price. As this second phase ended, AfriSol adapted to the evolving market dynamic and scaled back the outgrower model to pursue more favorable ventures within the animal-sourced foods sector. This decision was encouraging, as it demonstrated the market actor’s ability and willingness to test, learn, and pivot.
What did we learn?
Despite the adverse effects of the market shock, the model created linkages that were formerly absent and became increasingly profitable for producers. It is too early to tell whether the system at large has changed based on these newly established relationships and whether the market system will have a new orientation as a result. Testing this model demonstrated the conditions that would be required to sustain and scale, and that support services are the core to its success.
Change versus Scale Agent
Afrisol was a great change agent that tested the model and unlocked learning opportunities and new pathways for an inclusive business model. However, due to its informed decision to pursue alternative opportunities, AfriSol will not be the scale agent of this innovation. In an MSD Activity, one co-creates, pilots, and tests various innovations with different change agents, recognizing that ultimately, there may be other second movers who have the will, skill, and capacity to adopt the innovation at scale. In this current market context, the project is exploring scaling pathways with other market actors who may be more appropriate scale agents for the poultry outgrower model. A scale agent refers to an entity that mobilizes, supports, aligns, and/or coordinates the efforts of individuals, firms, and institutions system wide. For example, the activity is beginning conversations with another market actor who has the offtake capacity to weather market shocks and move product in bulk. The willingness of market actors to adopt and adapt this outgrower model presents a step in the right direction to stimulate systems change that is inclusive of smallholder poultry producers.
Last-mile constraints are challenging, but not insurmountable
The partnership successfully incentivized an input supplier such as Afrisol to orient a business model centered around micro-backyard producers, and it gave management an insight into their constraints and opportunities to engage an otherwise overlooked group. This effort promoted elements that are core to the market systems development approach - connectivity, cooperation, and inclusion.
A positive aspect of the facilitative approach central to market systems development is the opportunity to test new ideas with market actors though it may or may not lead to a runaway success. The learning generated by such partnerships enables all parties involved to adapt, and ideally pursue inclusive models. Shocks present a litmus test for newly introduced models. The true test will be whether new norms and incentives will be adopted by market actors in the Rwandan poultry market system which enables innovation, inclusion, and cooperation when confronted with future price shocks and other unforeseen events that will inevitably come. The scaling pathways that Orora Wihaze plans to pursue, specifically for this poultry outgrower model, intends to uncover and stimulate those changes with other potential scale agents.