Competitive Co-Advantage: In an iDE initiative ‘farm business advisors’ help deliver products and profits to Cambodian farmers
Editor’s note: Contributor Erik Mandell visited Lors Thmey in Cambodia with Portland State’s Impact Entrepreneurs program.
When Cambodian farmers buy fertilizer and seeds, they can also get helpful advice about how to increase production and gain better access to reliable markets to sell their crops.
It’s all part of a bundled package that provides farming necessities and technical know-how to smallholder farmers through a business model designed to boost incomes, share knowledge and create value at each step of the supply chain.
Lors Thmey, which means “new growth” in Khmer, teaches local entrepreneurs to become farm business advisors (FBAs). That means that in addition to selling products to farmers, they’re trained to be consultants, too. Their clients, rural farmers, pay them for supplies, like seeds, fertilizers, shade screens and drip piping, as well as advice and information on everything from weather patterns to soil care to up-to-date market pricing. As a result, farmers produce better crops and make more money, and the FBAs expand their businesses and boost their incomes, too.
The micro-franchise model of Lors Thmey was started in 2005 by iDE, an international organization with a mission to improve livelihoods for rural households. Recognizing that rural farmers were missing out on opportunities to make more money because they lacked quality inputs, irrigation supplies, credit, agronomic know-how and current market information, iDE saw an opportunity to create a profitable business with tangible benefits for its clients, as well.
“The core offerings of the business should create social value,” said Michael Roberts, the Cambodia country director for iDE.
And, Roberts pointed out, very small improvements can create a lot of value for Cambodia’s farmers. “Because it’s relatively easy to get the gains, that’s a great opportunity for social business,” he said.
That’s what farmers are seeing, too. For less than $50 per year, Lors Thmey’s 14,000 clients earn, on average, $250, a return of five times their initial investment.
“It’s much easier to make enough money now than it was before,” said Siey Mai, who farms rice, beans, tomatoes and melons on a plot of land that has been in her family for generations.
Even as prices for seeds and other supplies increase, Mai and her family have seen their profits grow faster than their costs in the two years that they’ve been working with a local advisor who has a Lors Thmey franchise. “He comes to the farm to teach us little things, like how to use plastic to keep the land soft,” she explained. “With softer land, we grow better food and sell more crops.”
Another benefit of working with the advisors is that farmers can keep working instead of traveling to distant markets to sell their crops.
“Now customers come right to the house to buy our food,” Mai said. “They know what we grow, and they like it, so we know people will come here to buy it.”
That’s because the advisors know what their clients are growing, and help to spread the word in local communities. While some crops still are sold in central markets, farmers like Mai now can trust information they get about current market prices and are more comfortable selling from home. And it’s in the advisors’ interest to advertise their clients’ products well: The more the farmers earn selling crops, the more they invest in additional inputs and advice, meaning better business up the supply chain.
The franchise model generates income at three different points along the supply chain of agricultural production. Small-scale farmers, half of whom are from the poorest third of the Cambodian population, earn higher incomes through use of quality supplies and up-to-date methods. As independent entrepreneurs, advisors earn margins on the sale of products and build their customer base by providing advice that works. And Lors Thmey turns a profit selling products to its franchises, as it continues to build and support the advisor network throughout the country.
Business is growing for Lors Thmey, which currently operates as a separate for-profit business within iDE’s operations in Cambodia. Active in five provinces and expanding into three more, Lors Thmey aims to employ 400 FBAs and be entirely self-financing within two more years.
Lors Thmey capitalizes on using the market to sell knowledge, as well as physical goods. “You can’t donate people out of poverty,” Roberts said.
“The only thing that’s given free in this project is training to the [advisors]. The small farmers need to invest in the seeds, fertilizer and irrigation equipment,” he added. “But it’s still able to reach very poor households, because the minimum investment is actually very small.”
And, according to farmers, the investment is worth it.
Read more stories from the field with farm business advisors and their clients. Check out this video about iDE’s Farm Business Advisor program in Cambodia, made as part of Nestle’s Creating Shared Value Prize: