Maize innovation platform
and warrantage


Maize was identified as a priority crop by the Government of Rwanda within the context of the national Crop Intensification Programme as it plays an important role in food security and income generation for the majority of Rwandese. Maize contributes to poverty reduction and has thus been particularly targeted in Nyagatare District's Performance Contracts and District Development Plans as a crop with high potential to contribute significantly to its development agenda. So, maize seemed the obvious choice for RIU Rwanda as one of its priority areas and the Nyagatare District was selected because it is a major maize producing area.

The Maize Innovation Platform was established in June 2008. Initially 55 members were recruited, drawn from along the value chain for maize. The objectives were agreed to be:

• Addressing constraints related to maize production and markets
• Promoting use of new knowledge by many people to increase profitability of the maize value chain
• Developing improved organisational arrangements in the maize value chain

The Maize Innovation Platform held a two-day workshop in October 2009 and follow up workshops in December to formalise arrangements and to enable a business plan to be completed by January 2010.

The platform's activities quickly became high profile: In October 2010 the Rwandan cabinet decided that the World Food Day activities should focus on Nyagatare District. During the celebrations the agriculture minister, Dr Kalibata, urged farmers to become involved in RIU-backed programme activities and called for these to be extended.

Addressing constraints and developing improved organisational arrangements

Market systems

RIU-facilitated research identified inadequate trading and marketing systems as key bottlenecks for maize development in Nyagatare District. To be successful the platform needed to play a pro-active role in policy dialogues, such as the District Joint Action Forum. RIU therefore appointed a consultant to support the programme to help to strengthen the capacity of the Maize Innovation Platform. What emerged was the commercial trading arm of the platform which is called NYAMIG - the Nyagatare Maize Investment Group Ltd.

Access to credit and tackling exploitative trading

The platform highlighted a major constraint as the lack of access to credit. This meant getting fertiliser and paying for labour was difficult.

Profitability is hit as many famers sell crops when they are still in the field to ease their cash flow. This practice is called 'kosta imyaka' and is a major cause of poverty in rural area. Independent reports have commented on the exploitative nature of this way of trading as the price is lower than the price at harvest and much lower than the price post-harvest. The issue for the platform was that unless they could stop kosta imyaka there was no chance of farmers being able to purchase improved farm inputs such as better seed, fertiliser or labour.

In December 2009 the platform met with representatives of banks and other financial institutions in order to agree on specific actions for improving agricultural financing, especially for maize farmers. This involved setting up a programme known as warrantage.

Promoting new knowledge

The Maize Innovation Platform has been exploring ways of promoting new knowledge and increasing profitability along the maize value chain.

The platform reviewed the information needs of the value chain. The most commonly expressed needs were: details of government programmes and instructions; information on plant diseases; news of innovations; and details of markets.

The platform initiated a communication campaign to promote best practices related to crop husbandry, targeting proper use of improved varieties of seeds and appropriate fertilisers.

The platform facilitated farmer learning events during December 2009 and a Farmer Field School was established in March 2010. This is an approach which supports community learning in areas of husbandry and crop intensification through 'learning by doing'. The platform also organised a Maize Innovation Day.

The platform has specifically targeted local authorities as they are increasingly involved in conveying messages and advice to farmers.

To tackle the issue of an ineffective extension service, the platform piloted a community-based system whereby volunteer farmers act as coaches and advisors to their neighbours. These were recruited by the District Agricultural Officer and representatives of the Rwanda Development Organisation - with training taking place in January 2010.

To drive demand for research outputs, RIU worked with a consultant to undertake a comprehensive review of RNRRS and other research outputs that are relevant to maize in Rwanda. A participatory process for assessing the relevance of these research outputs will lead to the selection of a few of them to be processed into user-friendly materials for wide dissemination.

The platform proposed setting up at least three Maize Innovation Centres in areas with the highest concentration of maize farmers in Nyagatare District. This initiative uses group of farms around the maize drying yard/sheds, constructed under RIU support, as its nucleus. The intention is to use farmers' fields and other existing infrastructure to test and demonstrate a series of relevant research outputs and contribute to take up of appropriate innovations. Maize Innovation Centres also serve as community interaction fora for learning and sharing lessons. A concept document defines how different stakeholders coordinate their interventions in order to develop this into a powerful institutional innovation.

RIU provides financial support for the establishment of two post-harvest and processing infrastructures for the benefit of platform members.

The platform has also conducted a multiplication of an early-maturing variety of maize. It is estimated that some 4,000 households will benefits from this new variety as a result of RIU's investment.

The Nyagatare Maize Investment Group Ltd

The platform developed a commercial arm known as the Nyagatare Maize Investment Group Ltd (NYAMIG). NYAMIG is working to support the long-term interest of maize farmers. This means securing contracts for the supply of maize which offer a good return, but also which have the potential for steady growth and expansion.

One of the initiatives of NYAMIG has been the development of the warrantage programme but it has also been seeking out new markets for maize.

With the support of RIU Rwanda, NYAMIG has become one of only 140 farmer's organisations worldwide to benefit from an initiate of the World Food Programme (WFP) called Purchase For Progress Programme (P4P).

In 2010 NYAMIG secured a P4P contract for 400 tonnes of maize. This contract was successfully completed in late 2010 and this resulted in an additional contract for a further 825 tonnes.

P4P is a new initiative that enables the World Food Programme (WFP) to locally purchase agricultural products and provide market opportunity to local farmers. To facilitate this, the WFP has changed its tendering rules. This programme, which operates in 17 countries, also provides an opportunity to address issues related to quality of the produce, specifically for maize in RIU's case, with related implications in terms of training, post-harvest treatment and facilities which support capacity building of the maize sector.

The price paid by WFP for the first/second contract was Rwandan Francs (RWF) 135,000 per tonnes (US$ 228). NYAMIG and Duterimbere had a choice to wait for another month and sell their maize stock to other buyers for RWF 150,000 per tonnes, but they deliberately decided to sell it to WFP in order to strengthen the partnership with such an important and reliable client, which should pave the way for increased business in the future.

Warrantage

RIU Rwanda facilitated meetings of the Maize Innovation Platform. They were concerned about the plight of cash-strapped maize farmers who were selling their crops whilst they were still in the fields, in a process known as 'kosta imyaka'. In the journal African Studies Review researcher An Ansoms described this practice as the "most exploitative system I came across... pure exploitation of their vulnerability to the benefit of the better-off party in this transaction."

This approach resulted in very low prices being paid: Rwandan Francs (RWF) 70,000 per tonne (around US$ 100) when sold in the field to traders compared to RWF 150,000-160,000 per tonne (around US$ 250) when traded in post-harvest markets.

RIU realised that they could not get poor farmers to purchase better farm inputs or invest in new techniques without addressing this issue, because the farmers concerned were trapped in cycles of poverty. RIU Rwanda looked around for an approach and within the RNRSS database they found details of the warehouse receipt systems from the Crop Post Harvest Programme. They developed plans under the francophone name - warrantage.

Warrantage is an approach originally used by European farmers in the 19th century. According to FAO, to operate it needs three essential elements to be in place: 'a well functioning farmer's association, an interested local bank or other financial institution and a safe place where to store the produce. Crucially too, the crop used to guarantee loans must be non perishable and its price must have a proven record of rising in the months after harvest. Finally, agricultural produce as a guarantee for a bank loan needs to be recognised by the banking legislation of the country concerned.'

RIU Rwanda facilitated the establishment of a warrantage scheme. This involved bringing in consultants with the required expertise and then removing the bottlenecks to the introduction of warrantage, including providing an initial grain supply as surety. RIU Rwanda had already supported the establishment of the Nyagatare Maize Investment Group (NYAMIG) Ltd) and soon recruited Duterimbere IMF (Institution de Micro-Finance) as its banking partner. Duterimbere IMF is a microfinance institution that is committed to promote/improve agricultural financing in Nyagatare District. RIU Rwanda also invested in a storage facility. So, RIU had all the pieces in place for the warrantage programme to be established.

RIU's approaches often involve the private sector. But in some situations there is such an imbalance between the buyers and sellers that these weaknesses can easily be exploited - as in this case. RIU Rwanda saw this problem and realised that warrantage offered a practical way forward. Instead of allowing excess profits to be generated by the traders, a partnership between the Nyagatare Maize Investment Group (NYAMIG) Ltd (a commercial offshoot from the Maize Innovation Platform) and the Duterimbere IMF bank has allowed farmers to get loans at preferential interest rates using their grain as surety. The bank and the farmers decide on the most appropriate time to enter the maize market to maximise the income to the farmers. The warrantage scheme has also meant that many previously un-banked farmers have opened bank accounts.

RIU organised training in the operation of the warrantage programme which attracted over 60 members of the Maize Innovation Platform. They worked with facilitators from the International Fertilizer Development Center's CATALIST project and met with representatives of Duterimbere IMF and the Rwanda Development Organisation.

To start implementing the warrantage system on maize in Nyagatare District, farmers and cooperatives pledged 250 tonnes of maize and NYAMIG and Duterimbere IMF agreed to set up a stock management committee to manage the maize stock and ensure its security. They also ensured industry-standard storage procedures are applied to ensure high quality of the produce.

RIU agreed financial support for poor maize farmers who cannot contribute to the initial stock through NYAMIG by providing additional resources as a start-up/trigger in constituting the maize stock. It was also agreed that this becomes a revolving fund to enable other poor farmers to benefit from the system beyond RIU's existence.

The District of Nyagatare committed support to the initiative by providing storage facilities to NYAMIG. This was facilitated by the Maize Platform as part of its advocacy role.

The pilot scheme in 2010 worked in partnership with six farmer's cooperatives, representing 210 members, and 81 individual farmers. They generated 129.3 tonnes of grain to NYAMIG. Geographically, the pilot warrantage scheme has operated in 9 of 14 sectors of the District of Nyagatare: Matimba, Gatunda, Rwimiyaga, Musheri, Nyagatare, Rwempasha, Karangazi, Tabagwe and Katabagemu.

On delivery of their maize harvests to the warrantage warehouse, Duterimbere IMF advanced loans totalling RWF 9.3 million (US$ 15,775) to farmers, which represented 60% of the value of their crops. The second payment (40%), less interest and warehouse charges, will be made in January 2011. Beneficiaries decided on that particular period for second payment as by then they will be in need for cash for critical family expenses such as school fees for their children, labour for the next maize harvest or contributions to medical insurance schemes.

Individual farmers and farmers' cooperatives were recruited through several meetings, visits to the warrantage site, visits to specific farmers' cooperatives and through a weekly broadcast on Nyagatare Community Radio.

The farmers were responsible for the delivery of their own maize to the warrantage centre. They used a variety of transport including bicycles, animal traction and small trucks.

A further 120 farmers joined the scheme later in 2010. This was in response to a need that emerged when a group of farmers refused to sell their maize at the rate offered by traders tied to the repayment of their fertilizer loans. So, NYAMIG and Duterimbere IMF intervened and bought the maize at nearly twice the price offered by the local traders. This meant that a further 35 tonnes of maize went through the warrantage scheme.

The World Food Programme is also keen to partner NYAMIG on scaling up the warrantage programme. To this end NYAMIG was invited to share lessons with WPF partners and donors during a national workshop held in Kigali in November 2010.

So far only Duterimbere IMF is involved in the warrantage pilot and the partnership were made at local level. The money is paid directly to the beneficiary in case of individual farmers or to the cooperative representative in case of a cooperative. In case of a cooperative, it is expected that the representative distributes the money to farmer members. Other financial institutions are, however, interested to scale up warrantage as indicated in the recent workshop organized by the Ministry of Agriculture.

So far, there have not been any repayment problem as the agreement between NYAMIG and Duterimbere IMF on warrantage provides for one repayment at selling time. It is assumed that the repayment rate should be 100%

Quality control

The maize quality control is conducted in the warehouse compound by knowledgeable staff, trained by World Food Programme (WFP) and Rwanda Bureau of Standards (RBS). The quality control aims at effective compliance with relevant RBS standards for the purpose of consumer protection and trade promotion. When the produce shows general compliance, it is accepted and re-packed into polypropylene bags weighing 50 kg each. If the quality does not comply with requirements of relevant standards, the farmer is given a choice to clean up his consignment once more so that he/she upgrades it to acceptable level. In the worse situation, the produce is rejected (refused) and the consignment takes it back home or he/she is advised to sell it to other buyers for different uses e.g. animal feeds.

The minimum standards of grain accepted by the scheme are as follows:

Maize specifications	Maximum allowable %
Moisture content %m/m	13.5
Pest damaged grain, % m/m	1.0
Broken grain, % m/m	2.0
Rotten & diseased grains, % m/m	2.0
Immature/shrivelled, % m/m	1.0
Discoloured grains, % m/m	0.5
Foreign matter, % m/m	0.5
Organic matter, m/m	0.25
Filth, % m/m	0.1
Total defective grain	4.0
Fumigated free from live weevils and containing not more than 10 dead weevils per kilo.

Source: WFP contract of 29/11/2010

There are no facilities for grading or drying. Fumigation is done regularly with tablets from pesticides stores.

As warrantage is primarily dealing with giving more value to maize stocks, maintaining high quality of the produce is a prerequisite to the success of the operation. Therefore, farmers supplying their maize to the warrantage warehouse were informed and trained on quality standards required by NYAMIG. They had in particular to pay attention to moisture content and avoid any impurities, such as sand and other types of grains.

The quality control aims at effective compliance with relevant Rwanda Bureau of Standards standards for the purpose of consumer protection and trade promotion. When the maize supplied by farmers showed general compliance, it was accepted and re-packed into 50 kg polypropylene bags. If the quality did not comply with requirements of the relevant standards, the farmer was given a choice to clean up his consignment once more so that he/she upgrades it to acceptable level. In the worse situation, the maize was rejected and the consignment either taken back home by the farmer or sold to other buyers for different uses, e.g. animal feeds.

The revenue generating capacity of the scheme

The calculation below shows that the warrantage scheme generated an additional revenue of 49,240 Rwandan Francs (RWF) per tonne compared to the case where farmers are prematurely selling their maize at low price when in need of cash.

Quantity	Value at selling period RWF	Additional value compared to non warrantage beneficiaries (RWF)* (A)	Bank interest RWF (B)	Storage fees RWF (C)	Benefit RWF D= (A)-(B+C)
1 tonne	135,000	(135,000 -70,000)= 65,000	5,760	9,000	50,240 (excluding transport costs)

(*) Assuming the case of extreme exploitation when farmers sell they produce at RWF 70,000 per tonne just after harvesting.

The final sale is decided by NYAMIG in consultation with the bank. NYAMIG and the bank have to search for market information to make sure they will not miss the right time to sell, i.e. when the price of maize is at the highest level or where a beneficial relationship with a buyer can be developed in the long time. So, the although the WFP was not offering the highest price, the aim was to secure a large buyer which represented a good potential long-term business relationship. Some of the farmers research market information and make suggestions to NYAMIG and the bank about the sales strategy.

The RIU-backed warrantage scheme was presented to the national workshop organized in November 2010 by the Ministry of Agriculture and Animal Resources, where participants from various micro-finance institutions and maize farmer's cooperatives discussed promoting a large-scale warrantage programme in Rwanda.

Following the high levels of interest raised by the RIU-backed warrantage scheme during the World Food Day, NYAMIG was invited by World Food Programme to make a presentation on the warrantage pilot to a national workshop with its donors and partners in November 2010.

In December 2010, fifty people from Kayonza, Gatsibo and Kirehe districts in Rwanda went on a study tour to the RIU-backed warrantage site when practical arrangements for scaling up the experiment to these new districts were agreed upon. IFDC-Catalyst is also interested in scaling-out the programme in the Kisindi locality in the Democratic Republic of Congo.

In 2011 RIU Rwanda will expand the warrantage scheme and decentralise the collection of maize through 10 new local collection points indentified in Nyagatare District. By May 2011 it is anticipated that the project will reach an additional 5000 farmers who will benefit from higher prices and better organisation of the maize value chain by 2011. Because profits are being captured by farmers rather than middlemen, the end price paid by the consumer should not be affected. Interestingly, none of the traders who previously bought directly from the farmers under the kosta imyaka system now trade with the NYAMIG.

RIU Rwanda with its banking partner has developed a mechanism that will enable more farmers to access fertilizers using their projected maize harvest as collateral through the warrantage scheme in time for the 2011 harvest.

Apart from presenting the benefits of the warrantage during various meetings, no other incentives were given to farmers - the farmers understood and appreciated the value of their involvement as they even learned from their neighbours or friends who had participated. As in other innovations, RIU Rwanda worked with the 'first movers', and these will influence those are more risk averse. Now RIU is building on the current momentum gained by the warrantage scheme to speed up adoption by a higher number of beneficiaries. They are aiming to reach 5000 farmers by May 2011, which they consider to be just the beginning.

The partners to the Maize Innovation Platform and related activities are:

• maize farmers' cooperatives
• individual maize farmers
• extension services in Nyagatare District
• the regional centre of the agricultural research institute
• Umutara Polytechnic University
• financial institutions
• agro inputs dealers
• maize traders
• Rwanda Development Organisation