Lessons learnt from AFD support to smallholder rubber plantations

1. Lessons learnt from AFD support to smallholder rubber plantations Panel 2 : Different types of support programs for smallholder rubber plantations J. DELARUE– N. NOEL AFD

2. Smallholder rubber plantation projects • What were the projects’ outcomes and how were they achieved? • What’s next? • How can good quality plantations be achieved in the long term? • Should we support a greater number of smallholders in the future? Who and how? • Are rubber plantations a good way to alleviate poverty?

3. AFD support to rubber sector1993 - 2009 13 interventions including 3 loans to private sector (PROPARCO)

4. Pilot phases followed by a rapid development Pilot phase Context Activities New areas Prove the feasibility of SRP Low rubber prices Build capacities Absence of extension services Create first quality plantations Absence of LT resources for banks Deliver services Development phase Context Activities Better rubber prices Build capacities Extension services need money Create more quality plantations Absence of LT resources for banks Deliver services Reach smaller farmers Prepare a national policy Outcomes

5. Implementation Guarantee for bank Mitigation of risk for farmer Coordination with national programs LAND Core aspect of projects (50 – 65%) Long term with grace period Covers all plantation monetary costs RURAL ROADS CREDIT FARMER INPUTS EXTENSION Advice to farmers, nurseries, banks… Plantation, immature period, tapping period Research/Development Costs covered by credit Planting material Inputs delivery on field

6. High yields and profitability

7. High yields and profitability • Cambodia: • 4 ha farm • real rubber prices until 2008, average price of 0.77 $/kg DRC after 2008 • 2007 prices for other products

8. Assessment of the situation SRP technically feasible Sustainable loans repayments and profitability Price forecast not so pessimistic in the long run Many spontaneous plantations But Beneficiaries still need credit and technical advice: Many non beneficiaries also have needs (quality planting material, technical advice, credit) Risks on the plantations Difficulties to get banks involved on a long-term basis  Dependence on donor’s financing and immature period not fully covered Operational constraints  Short-term projects don’t fully fit long-term needs

9. What’s next? How can good quality plantations be achieved in the long term? Should we support a greater number of smallholders in the future? Who and how? Are rubber plantations a good way to alleviate poverty?

10. Smallholder Private Company Bank How can good quality plantations be achieved in the long term? Engaging perennial stakeholders in a contractual scheme is promising Delivers rubber to the company at a fixed price Needs rubber supply : Co-finances extension Support nurseries Tapping training Sanitary control • Risks • land ownership • environnemental impact • negociation capacity Attracted by the company’s involvement, takes commercial risk, pre-finances Possible options: Favouring the contract farming scheme in various countries Increased support to producers’ organizations

11. How can wesupport a greater number of smallholders in the future? (1) Absolute priority : quality planting material Adapted clones available Large demand for planting material (2) Large-scale extension : necessarily through national extension services (Vietnam) or producers’ organizations (3) Financing needs Possible options (1) and (2): Support nurseries development and certification system Support producer’s organizations Funding : attract bigger donors? Levy on rubber exports (?)

12. How can we support a greater number of smallholders in the future? (3) Financing needs: • Current situation: • Plantation costs are mainly covered • The loan is reimbursed by rubber production and profitability remains high • Difficulties to get banks involved in the first place (Cambodia) or on a long-term basis (Vietnam) (subsidized rates) • The financial scheme depends on donor’s provision of long-term resources (limits number of beneficiaries) and the immature period is not fully covered • Possible options (3) • For 60 to 75% of the farmers, we could probably adapt the credit … Financing needs • - Basing it on existing credit offer • Reducing the total amount of credit through targeted plantation cost reduction • posscredit

13. Are rubber plantations a good way to alleviate poverty? • Current situation: • Projects have served about 20% poor SEprofiles • Land scarcity is the main problem • Rubber has long immature period • Rubber has high plantation costs / access to credit Poorcst But rubber is highly profitable! Possible options: Political decisions: Land distribution could be done as in Vietnam, Thailand… High plantation costs : targeted subsidies for planting material Within small-scale projects : Study pro-poor crop associations Propose low-cost plantation techniques Direct scarce long-term credit resources to the poor

14. Conclusions • Technical success was achieved thanks to intensive project support • Short-term projects do not fit long-term needs • Contract farming is a promising way of engaging stakeholders in the long term • To serve more smallholders, credit product offerings for plantations should be adapted to integrate the constraints of the banks • National policies are necessary to develop smallholders’ plantations on a larger scale or to target the poor

15. Financing needs Moreover, rubber smallholders usually reimburse in advance Retour

16. Socio-economic profiles of beneficiaries 72% Retour

17. Poor people face strong constraints Land constraint Credit selection Retour

18. What credit was proposed for the next phase in Cambodia? Credit over 8 years / Interest rate : 19%/year Retour