Helping Horticulture Sector Buyers Access Finance

In Siem Reap province, the 37 members of the Banteay Srey Safe Agricultural Cooperative grow primarily cashew nut and mango on 200 hectares of land. Mr. An Som Ol, the agricultural cooperative (AC) committee leader, says one of the group’s main constraints to increasing its sales is working capital investment. “I want to borrow ten thousand dollars to collect cashew from our members and other producers, as well as expand our production to other crops, but I don’t know how,” he said.

Lack of finance has limited Cambodia’s horticulture sector actors—especially buyers of horticulture products—from expanding their businesses and increasing their sales. Many actors don’t know how to access appropriate services. For those that do know, they may still need a facilitator to help them identify the best financial products or prepare loan applications.

Harvest II staff met with Banteay Srey Safe Agricultural Cooperative committee members to discuss their constraints.

©Feed the Future Cambodia Harvest II/2018/Solina Kong

Feed the Future Cambodia Harvest II (“Harvest II”) is helping horticulture sector actors address financing constraints and seek lending options from financial institutions. Harvest II linked Banteay Srey Safe Agricultural Cooperative with Idemitsu Saison Microfinance, a Japanese micro-finance institution that provides financing for Cambodia’s agricultural sector. In discussions facilitated by Harvest II, Idemitsu Saison Microfinance agreed to disburse a $12,000 loan with a lower interest rate (1.3% per month, compared to 1.5% normally) and with no collateral requirement. As part of this facilitation, Harvest II conducted a short training for Banteay Srey Safe Agricultural Cooperative on how to prepare required documents, like financial statements, to apply for this and future loans.

“I could not have received this loan without Harvest II’s support,” Mr. Som Ol continued. This is the first time this AC has received a loan, and it will help them expand their business to buy more produce from internal and external members, as well as expand their crop production. With these additional resources, the committee has started discussing a production schedule that aligns to the needs of their customers in the wholesale market. They have started to plant mixed fruits and vegetables such as watermelon, chili, cucumber, and other leafy vegetable so that they can harvest – and earn money - year round.

Harvest II aims to accelerate growth of Cambodia’ commercial horticulture in Pursat, Battambang, Siem Reap, and Kampong Thom provinces. The project currently works with buyers and producers in the horticulture sector to establish or strengthen relationships, increase sales, boost investment, and create more jobs in the sector.

Helping Buyers and Producers Work Together

Cambodia is now a lower-middle income country, with a growing demand for fruits and vegetables. Many farmers could work their way out of poverty if they could increase sales, yet many buyers find it easier to source their produce from neighboring countries. USAID’s Feed the Future Cambodia Harvest II project (“Harvest II”) is working with buyers to make it easier to do business with local producers.

Chanthan and Nam are vegetable wholesalers working with Harvest II. Nam collects about one and half tons of mixed vegetables every day, including cucumber, eggplant, pumpkin and chili from 25 farmers in his local community and send them by bus to his wife, Chanthan, working at a market in Phnom Penh, 200 kilometers away. Together, they earn barely enough to make a living, but they know they could sell even more vegetables. Nam wants to increase his sales to three tons per day because the demand in high, but it requires a lot of works with producers. He says “Farmers do not always have a regular supply. We have the market, but lack the produce.”

vegetable producer Chun Sokhom
©Feed the Future Cambodia Harvest II/2018/Solina Kong

Under its buyer-led approach, Harvest II helps with buyers of all sizes, including Nam and Chanthan, increase sales by entering into a win-win relationship with local producers, based on a clear understanding of buyer demands. Harvest II first helped Nam and Chantham diagnose constraints to increased sales among their existing farmers and identify new farmers to work with. Then, they all met to devise solutions to increase sales in the immediate term and envision how they could grow their businesses over the longer term.

To date, Harvest II has connected Chanthan and Nam to ten new farmers. Sokhom is a farmer who can produce 200 kg of cucumber per day. She supplies cucumber to four different buyers including Nam but is willing to supply more to him with a fair price agreement. By adding these new producers, Chanthan and Nam can increase their sales to three tons per day. However, supply is not stable due to a lack of technical know-how at the farmer level.

Vegetable buyer Lach Nam collects eggplants from farmer Chun Sokhom to supply to the wholesale market in Phnom Penh.

©Feed the Future Cambodia Harvest II/2018/Solina Kong

Harvest II will help improve the production capacity of Chanthan and Nam’s farmer clients by arranging a production schedule that aligns to the needs of their customers in the wholesale market while providing targeted capacity building on technical production and business management, as well as access to finance.