Entrepreneurs driving productivity and capacity in smallholder rice farming

SNV; Helvetas; Government of the Lao PDR

Improved rice production is key to development and food security in Lao PDR. While paddy rice production has increased, less attention has been paid to improving productivity both on-farm and in post-harvest handling, including milling. One kilo of paddy rice milled in Lao PDR used to produce significantly less edible rice than in neighboring countries. Poor quality has meant lower prices, reducing profits for both millers and farmers. Production of better quality paddy rice and improved milling practices can increase the supply of rice in Lao PDR, open new distribution channels and improve theprofits and livelihoods of both millers and smallholder farmers.

Development results

Within 18 months of starting, the Enhancing Milled Rice Production project in Lao PDR brokered fair trading relations between 21,360 smallholder rice producers and 21 selected rice mills. The project has seen some highly encouraging results, including a 10 percent increase in milling recovery rates and a 20 percent productivity increase in production per hectare, due to quality input and extension provided by millers.

Farmers say that the benefits include input and extension, an agreed minimum price at the start of the season, and a premium price for higher quality at harvest time.

Eight of 21 Enhancing Milled Rice Production project millers have gone on to organize new Miller Groups outside the programme – without additional support – involving more than 100 new millers. This spontaneous up-scaling strongly multiplies the outreach and impact by sharing approaches, exploring new markets, and supporting sustainability. Some Miller Groups are now able to access subsidized interest rate loans and institutional market actors like the World Food Programme.

The project represents a shift in approach for capacity development in farming communities. It deliberately uses business relations as a driver for capacity growth and improved relations in the value chain. Government agencies have embraced the approach and are now starting to appreciate that Lao entrepreneurs – in this case, millers – can actually be capacity builders themselves, when they adopt an inclusive business approach.

Enhanced performance

Socially committed and capable millers were selected to be the engines of the project. The project helped them to develop an Inclusive Business Plan, which described steps to increase productivity, and to support farmers to produce high-quality paddy rice. Millers received training and advice on farmer group formation and strengthening, extension techniques, input provision, and business management skills. This enabled them to expand their traditional trading role to incorporate the provision of seed, fertilizer and extension services. It has resulted in a steady supply of quality paddy rice, along with higher revenues for farmers and millers. Millers now have the capacity to support 1,000 smallholder farming households and to stimulate self-organization. Farmer groups are better able to make informed decisions, share learning, and negotiate.

Regular consultation between millers and farmers enables trust and fair trading relations. A small, but significant, intervention is that millers help purchase communal weighing scales and facilitate their certification by government authorities to foster transparency and avoid cheating by either traders or farmers.

A co-investment fund helps millers to upgrade their equipment and improve rice production and post-harvest handling, which has contributed to increased recovery of milled rice.

The selection of socially committed millers and the creation of competition between them have been crucial to the project’s successful implementation. For instance, if a miller underperforms according to the programme criteria, he is given an initial warning about his performance and is suspended from the programme if performance does not improve, on the recommendation of provincial and district authorities. His place is then filled by two other rice millers. When new millers are selected to participate in the programme through an abbreviated selection process, local governments and project staff invest time to train them and get them on track.

The project works closely with provincial Agriculture and Forestry Offices, the departments of Industry and Commerce, and the private sector. Government agencies have increasingly realized the value of alignment with the private sector. In Bolikhamxay Province, for example, the Government exempted fertilizers from import tax as an additional incentive for millers to work with smallholder farmers. The provincial authority has supported millers by officially approving Miller Groups in line with government policy.

Support to the capacity development process

National investments

The Lao PDR government has demonstrated its vision as it has steadily commercialized agriculture and promoted smallholder farming, but has struggled to find effective operational approaches. Launched in January 2010 by the Ministry of Agriculture and Forestry, and jointly implemented with Helvetas and SNV, the Enhancing Milled Rice Production project piloted a new approach. It used existing Lao entrepreneurship and competencies. Leading at the provincial level are the provincial Agriculture and Forestry Offices, and the departments of Industry and Commerce in six target provinces. They build trust, encourage fair trading relations between millers and smallholder farmer groups and – with national government – organize and facilitate public- private policy dialogue between stakeholders in the rice sector.

Development partners’ support

The project operated on a budget of €2.3 million: 90 percent came from the EU Food Facility, with Helvetas and SNV providing the other 10 percent. About one-third was used to co-invest in milling facilities, one-third supported farmers, capacity building, and training, and one-third went to human resources (two international and 12 national advisers, covering six provinces). The development partners offered substantial guidance on the overall approach of inclusive business in the rice sector, and supported capacity development of government stakeholders and rice millers to work efficiently with the smallholder farmer groups.

Find out more

Please contact Robin van Kippersluis, Portfolio Coordinator, SNV Lao PDR
Email: rvankippersluis@snvworld.org
Phone: +856 (0)21 414091


Ranjan Shrestha, Sector Leader Agriculture, SNV Lao PDR
Email: ranjan@snvworld.org
Phone: +856 (0)20 55312080

Web: www.snvworld.org

Year of publication: 
LenCD "Capacity: Results"

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