In this context, the Enhancing Sustainable Income in the Philippines (ESIP) project of Swiss Solidarity, implemented by Helvetas, PIN and ACTED, has been facilitating the development and strengthening of a local service provision system, which offers a package of fee-based services and products to farmers. A recurrent question for the ESIP project’s team has been “how can businesses thrive in an aid-intensive context?’’ Promoting a new business model can be extremely challenging in a setting where direct, in-kind support is widespread among international organisations and government departments.
Against this backdrop, the service providers are experiencing a rapid diffusion of their services and products among farmers, generating better income both for themselves and for the farmers. Here, we share the reasons and strategies behind the challenge and the success.
The challenge: working in an aid-intensive context
An aid-intensive context is one that is characterised by projects with direct delivery and others with an approach to engage and facilitate local players. The main challenge is the lack of coordination between the two. Often large-scale grants and free handouts swamp projects that engage actors to perform their functions in improved ways beyond the lifespan of projects.
Since the inception of the ESIP project, more than 25 international organisations have set up operations in Eastern Samar to contribute to restoring poor farmers’ livelihoods after Typhoon Haiyan. Some international NGOs and UN agencies are currently phasing out their operations. However, there is still delivery of direct support without a vision and strategy of how farmers can restore their livelihoods after the free handouts are over. The assistance is distribution of free provisions, such as seeds, tools and fertilizer, as well as cash and food for work. Similarly, local government departments, as part of national policy plans, are actively involved in the free delivery of inputs at both municipal and regional levels. This led to over-dependence of farmers on external assistance and less willingness to work with local market actors.
In contrast, the local service providers’ system, currently composed of 47 individuals spread over Eastern Samar, delivers a bundle of services to strengthen the agricultural system – from promotion of financial services, such as crop insurance and micro loans, to linking farmers to retailers and processors. The service providers offer technical guidance, sell agricultural inputs to farmers, and aggregate the products from farmers. They also create awareness and link farmers to opportunities from local government units such as the provision of challenge funds.
The strategy: starting small and adapting to aid intensity
The service provision system has been operative for more than ten months. The project facilitated the selection and training of local traders, input sellers and active famers in the different municipalities. The project staff initially offered the training, and gradually rolled over this function to other training providers. The service providers reached ten thousand farmers through their different services and, by further developing their ties with the communities, built a system of regular clients.
Despite the free in-kind distribution from other NGOs and government departments, the business model has adapted and responded successfully to direct delivery. Farmers were initially happy to get free seedlings and farming implements from other NGOs and government departments. Yet they could not sell what they produced – they were not linked to traders and other buyers, and the volume and quality did not meet the demands of buyers. This was an opportunity to fill the gap by promoting the local service provision model.
The service providers have a good understanding of the demands of individual farmers in their localities (barangays).  International NGOs do not possess the same level of understanding of local needs and therefore direct assistance does not always meet the requirements of farmers in the long term. Government departments also have an acute shortage of extension workers and do not often respond to farmers’ demands.
Some local service providers decided to target different areas. Other providers started coordinating and partnering with government units like the department of agriculture. The partnership consists of service providers delivering free inputs on behalf of the local government units. This approach was seen by different providers as a strategic decision to get closer to farmers and build a long-lasting network of clients in the community. Furthermore, service providers throughout this operation marketed their other services, such as consolidation and promotion of financial services and technical support. Thus, by adapting to the aid-intensive context, the service providers have managed to transform challenges into opportunities and increased farmers’ awareness and incentives of their services.
Not just supply and demand: working around the agricultural system
The ESIP project also understood from its assessment of the agriculture system that the success of the service provision model will depend on other interconnected functions around it. In other words, the model aimed at stimulating growth and expanding access of the services through improving or transforming the agricultural system.
In concrete terms, this meant working with financial institutions, inputs distributors, training providers and government agencies. In-kind support tends to substantially decline or end, and key actors including farmers understand and acknowledge this. Whilst farmers still accept in-kind support, they also consider it a first priority to start production after the disaster and bond with service providers and develop their own business networks. Similarly, financial institutions have entered into agreements with service providers to facilitate the diffusion of their financial products among farmers. In this context, there is a general perception that the service provision system will play a key role in bringing a positive contribution to livelihoods of the farmers once international NGOs have exited Eastern Samar. Such positive contribution includes better income from diversification/shifting of livelihoods (coconuts to vegetables, livestock), and better resilience to vulnerability (increased saving and insurance).
Identifying root causes and not just symptoms
Facilitating the development of a successful business model requires a good understanding of the demands of key market actors, including farmers. The initial assessment of the underperformance of the agricultural system was an essential step in the introduction of a tailored service provision system. Similarly, assessing the feasibility of the business model in such a context was also important. The project carefully followed these steps in order to make the business model better respond to shocks stemming from an unpredictable and dynamic environment.
Different stages of coordination involving key stakeholders could avoid risking the market-based initiatives. Coordination was firstly among donors to avoid overcrowding of aid in a single area, as well as minimising the risk of clashing activities. The coordination also established the exchange of information among international NGOs active in the field. The project was seen as a ‘trusted partner’, and it actively brought together different actors, such as local service providers, inputs retailers and local government departments.
Being flexible and adapting to changes
One of the factors for the success of the service provision system has been its flexibility and orientation towards grabbing opportunities. Entering the market as a small actor allowed the service provision system to be more nimble and reach scale quickly. Unlike larger businesses whose decision process is slower and more cautious, the service provider model has the capacity of changing its strategies and adapting accordingly to the demand of the market. This has been instrumental in increasing the likelihood of sustainability of the impacts, especially in a changing and fragile context.
- Systemic approach: what it is and what it is not
- Reality check: applying a systemic approach in a fragile context
- Navigating density: market facilitation in aid-intensive contexts
- Video: BEAM Conference 2016 – Market Facilitation In Aid Intensive Contexts
 Smallest administrative division in the Philippines.