The document discusses approaches to achieving sustainable cocoa production in Ghana by 2020. It identifies several challenges in the cocoa sector including low productivity, rural poverty, and deforestation. It analyzes different stakeholder approaches and finds they mainly focus on increased productivity, while social and environmental issues are addressed less. Inclusive business models include many smallholder farmers but benefits are not always equitable. Responsible finance from impact investors and social lenders has potential to leverage more equitable models and landscape restoration, but investments have not been well adapted for cocoa sectors. A "multi-chain approach" is proposed to better leverage finance through a portfolio of value chains at the landscape level.
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Leveraging finance for sustainable cocoa in Ghana
1. Transforming Lives and Landscapes with Trees
Not all roads lead to Rome:
Inclusive business models and responsible
finance in pursuit of sustainable cocoa in Ghana
Dietmar Stoian, World Agroforestry
Gianpiero Menza, Bioversity International
4th World Congress on Agroforestry
"Agroforestry: Strengthening Links between Science, Society and Policy"
Montpellier, France, May 19-22, 2019
2. Transforming Lives and Landscapes with Trees
High stakes: chocolate industry aims to achieve
sustainable cocoa sector by 2020
Challenge – persistent problems in cocoa sector:
➢ persistent rural poverty (cocoa income below 'living wage')
➢ low productivity
➢ limited producer organization
➢ competing land uses (food/cash crops, mining)
➢ deforestation to expand production
➢ child labour
➢ aging farming population
➢ poor rural infrastructure and services
➢ climate change
3. Transforming Lives and Landscapes with Trees
Proposed solutions – divergent views of sustainability
4. Transforming Lives and Landscapes with Trees
Objectives of the study
1) Identify synergies and trade-offs between
different approaches to cocoa sustainability
2) Determine the potential for inclusive business
models and the leverage of responsible finance
3) Based on possible blind spots, develop scenarios
for the way ahead toward sustainability
5. Transforming Lives and Landscapes with Trees
Some definitions
Inclusive business models
Business models that include and substantially
benefit large numbers of poor people – often
smallholders, but also artisans or small-scale
retailers – as well as their business partners.
Responsible finance
Investments made by companies, organizations,
and funds with the aim to generate measurable
social and environmental impact, in addition to
financial returns
6. Transforming Lives and Landscapes with Trees
Methodology
1) Analysis of secondary information
2) Collection of primary data – key informant interviews (n=26):
➢ Government agencies: COCOBOD, Department of Cooperatives
➢ NGOs and projects: Solidaridad, Agro Eco, SNV, IDH, MEDA, RA Climate
Cocoa Project, CARE
➢ Certification bodies: Fairtrade, Rainforest Alliance, Utz, ISEAL
➢ Impact investors and social lenders: FAST, Bridges Funds,
MustardSeed, Clarmondial, OikoCredit, Shared Interest
➢ Cocoa buyers: Ecom/Armajaro, PBC, Transroyal, Tuton
➢ Cocoa coops: Cocoa Farmer's Cooperatives and Marketing Unions in
Fanteakwa and New Juaben, Kuapa Kokoo
3) Validation: stakeholder workshops in Accra and Kumasi to feed
back preliminary results and corroborate information
7. Transforming Lives and Landscapes with Trees
Coverage of approaches to sustainable cocoa
Challenge Coverage How addressed
Low productivity Strong Most stakeholders through technical
assistance and inputs
Low degree of producer
organization
Medium Mainly by NGOs, projects and
certification systems
Competing land uses
(food crops, mining)
Limited / Medium Some NGOs and projects supporting
smallholders beyond cocoa
Deforestation Limited / Medium Mainly by certification systems, NGOs
and projects (recently also by companies)
Child labour Limited / Medium Often no explicit approaches
Aging farming
population
Limited / Medium Some NGOs, projects and companies
with explicit focus on youth
Poor infrastructure Limited / Medium Mostly government investments
Climate change Limited / Medium Research into adapted germplasm and
AFS; dissemination by companies/NGOs
8. Transforming Lives and Landscapes with Trees
Inclusive business models
• Smallholders dominate production (>90%), but weak position in value chain
• Large number of unorganized farmers
• Even when organized, cocoa cooperatives with limited
technical and financial capacities and bargaining power
• Certifications require smallholder organization, but conditions vary:
➢ Legally established organization for Fairtrade certification
(benefits: minimum price and fixed price premium)
➢ Relatively loose organization for Rainforest Alliance/Utz certification
(benefit: negotiable premiums)
➢ Emerging private labels (benefits not subject to third-party scrutiny)
• Arrangements with companies (inputs, training, advances) vary widely
9. Transforming Lives and Landscapes with Trees
Responsible finance
Impact investors
▪ interested, but yet to become engaged in Ghana's cocoa sector
▪ main focus on energy, transport and related sectors
▪ limited engagement in agricultural sector (coffee, responsible oil palm)
▪ funding volume: US$4-8 million (or more) per investment case
Social lenders
▪ some active (e.g. Shared Interest)
▪ others interested (e.g. OikoCredit)
▪ funding volume: US$ 500,000 - 1 million per coop or company
▪ type of funding: short-term loans (working capital) at below-market rates
?
10. Transforming Lives and Landscapes with Trees
Conclusions (1)
• Approaches to sustainability vary widely across sectors ➔ increased
productivity as least common denominator; environmental and social
challenges mainly addressed by NGOs and projects
• Business models inclusive (large number of smallholders) but not equitable
• Cocoa incomes are critical, but limited and seasonal ➔ need for supplemental
income and global review of pricing ('living wage')
• Price volatility partially managed through COCOBOD, but price risks remain
… and production risks borne exclusively by smallholders
• Value adding (milling): currently out of reach for smallholders
• Value adding (certification) ➔ welcome supplement but not significant
• Need for inclusive & equitable business models ➔ stronger mechanisms for
sharing benefits and risks
11. Transforming Lives and Landscapes with Trees
Conclusions (2)
Potential to leverage responsible finance
➢ Impact investing incipient, with limited current engagement in cocoa and
other land use sectors
➔ High leverage potential, but investments yet to be adapted to the
realities and needs of the cocoa and other land use sectors
➢ Social lending clearly geared toward smallholders, with concrete options
for cocoa and related sectors
➔ leverage potential given, but more limited funding volumes
➢ Need for large-scale investments in cocoa-based agroforestry systems
➔ landscape restoration, climate investments, multi-sector focus (blended
finance; beyond cocoa)
12. Transforming Lives and Landscapes with Trees
The way ahead: Multi-chain approach – Leveraging responsible
finance for inclusive & equitable business models at landscape level
Global value chains
(e.g. cocoa, coffee,
nuts, honey)Regional value chains
(e.g. timber, fruits,
livestock)
Local value chains
(e.g. fuelwood,
staples, livestock)
Image credit: Landscapes for People, Food and Nature
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Key aspects:
• Portfolio of value chains
• Private-public finance and
associated services
• Smallholder organization
• Equitable business models
• Credible metrics
• Continuous improvement
13. Transforming Lives and Landscapes with Trees
World Agroforestry (ICRAF),
United Nations Avenue, Gigiri,
P.O Box 30677-00100, Nairobi, Kenya
Phone: +254 20 722 4000
Fax: +254 20 722 4001
Email: icraf@cigar.org
Website: www.worldagroforestry.org
Thank you!
Emails: d.stoian@cgiar.org & g.menza@cgiar.org