PrOpCom

Making Nigerian Agricultural Markets Work for the Poor

Market Report on Adamawa State Rice Value Chain

By Md. Rofiqul Islam and Sadia Ahmed

Funding for this programme is provided by the United Kingdom’s Department for International Development (DFID)

40 Mississippi Street, Maitama, Abuja, Nigeria • Tel: +(234) 9 413 8291/2 • Fax: +(234) 9 413 829 PrOpCom

Mapping of Adamawa State Rice Value Chain

Contents Executive Summary ...... 3 Introduction ...... 5 1. a. Background ...... 5 1. b. Kano Rice Value Chain Intervention ...... 6 1. c. The Parboiler Scale-out Intervention ...... 7 Objective and Scope of the Market Assessment ...... 8 Methodology ...... 8 Background of Adamawa ...... 10 Background of Standard Microfinance Bank ...... 11 The Bank at a Glance ...... 11 Collaborative Partners ...... 11 Client and Product Portfolio...... 12 Loan Appraisal Process ...... 12 Embedded Services with Loan ...... 12 Adamawa Rice Value Chain ...... 13 Definitions and Roles of the Actors ...... 14 Farmers: ...... 14 Paddy traders: ...... 15 Parboilers: ...... 15 Millers: ...... 16 Processors: ...... 16 Agents: ...... 17 Wholesalers: ...... 17 Retailers: ...... 17 Processors cum Traders cum Retailers: ...... 17 Fabricators: ...... 18 Prominent Markets, Locations and their Characteristics ...... 18 Highlights of Adamawa Rice VC ...... 20 Constraints and Opportunities in the Value Chain...... 22 Possible Interventions and Next Steps ...... 24 Intervention 1: Introduction and promotion of threshers ...... 24

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Intervention 2: Access to improved milling technology ...... 24 Intervention 3: Access to modern parboiling equipments ...... 24 Intervention 4: Development of loan model for Paddy traders and parboilers ...... 25 Intervention 5: Access to safety information and tools the actors involved ...... 25 Intervention 6: Linkage among all the Rice VC actors under SMFB client portfolio ... 25 STRATEGY SESSION ...... 25 Constraints ...... 25 Bank’s vision ...... 26 Collaboration vision (SMFB / PCom) ...... 26 Strategy ...... 26 Intervention Plan ...... 26

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Executive Summary

First set of interventions have shown a positive result i.e. access to finance has enabled the parboilers to gain more control over their business and increased their profitability and the change in processing practices have improved the quality of local rice to some extent which also attracted better price in the market. Traders and wholesalers have also recognized that the average quality of rice have improved in the target clusters. On the other hand, an average increase in price of the rice is also observed at the trader to parboiler level. This success has driven PrOpCom to think of scaling out the intervention and it has come up with three possible options for scale-out – I. Access to finance through NACRDB for more parboilers in Kano II. Partnering with new financial institutions to create access to finance for parboilers III. Replicating the said intervention model to new states / geographical locations with necessary improvements in the model

In view of above mentioned options, PrOpCom started to explore for opportunities and in this process it has come in contact of Standard Microfinance Bank (SMFB) who has its operation in Adamawa state. SMFB has shown interest to work with parboilers and to explore how PrOpCom can contribute in their objective of reaching more poor people and increasing their competitiveness to ensure their economic development. SMFB fits in the option II and III for scale-out. After exchanging views and objectives, both parties agreed to conduct a Market Assessment study in Adamawa to acquire better understanding of its rice value chain.

The primary objective of this market assessment is to learn about the Rice value chain and the market system in Adamawa and understand its dynamics. Before proceeding to design any strategy or initiate any intervention, it is imperative to understand the characteristics and dynamics of the market itself and how the actors are involved in the value chain. The primary objective can be further broken down to the following parts – I. Identify the actors involved in Adamawa Rice Value Chain (VC) II. Understand the functions of the actors III. Mapping the VC IV. Understand the market dynamics V. Analyzing the constraints and challenges in the VC

The study mapped the crucial actors that shape the rice value chain in Adamawa. It identified the transactional relationship that exists between them and how their operational constraints influence the overall rice value chain. Some of the constraints identified include the farmers’ lack of access to threshers. It was observed that paddy traders have limited access to finance. There was also limited financial capacity of the parboilers during dry season while the millers and processors use outdated and low capacity milling machines. Finally there was no availability and usage of better parboiling equipment. The strategies

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Mapping of Adamawa State Rice Value Chain for addressing the constraints consequently formed the basis for the proposed set of interventions outlined in the end.

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Introduction

1. a. Background Promoting Pro-poor Opportunities in Commodity and Service Markets (PrOpCom) is an innovative project funded by the Department for International Development of the United Kingdom (DFID) to facilitate functionality and efficiency of Nigerian commodity and service markets in such a way as to assure these markets benefit the poor. It is implemented by SAII Associates Ltd/Gte, an associate company of Chemonics International Inc., a Washington DC based consulting firm.

PrOpCom’s goal is to improve livelihoods by facilitating growth and pro-poor outcomes in commodity and service markets and to contribute to the overarching (DFID/Nigeria) goal of poverty alleviation in support of NEEDS and the attainment of the Millennium Development Goals. PrOpCom will use a “Making Markets Work for the Poor” (M4P) approach to address the systemic reasons that prevent commodity and service markets from functioning effectively for the poor in Nigeria. In doing so, it will contribute to delivery of the vision for growth in the non-oil economy outlined in NEEDS. The project purpose is to support systemic change in markets on which the poor rely to produce pro- poor outcomes and opportunities such as: • Enhanced incomes; • Increased jobs; • Improved access to markets; • More options and choices; and • Reduced risks.

During the first two-year pilot implementation phase, PrOpCom will focus on rice as the primary commodity and soya bean or cashew as secondary commodity. PrOpCom is mandated by DFID to facilitate, not implement, change. The programme facilitates change with and through local structures, firms, and individuals. Effort will be made not to displace existing organizations. PrOpCom is therefore just a catalytic agent. Like all catalysts, it merely speeds up the process while leaving the intended beneficiaries (local market actors) to run the show. It is about Nigerians taking charge of their own development. For this Nigerian ownership to occur, the programme aims to create a vision that can motivate and direct the programme’s Nigerian partners to reach goals that are mutually agreed upon.

PrOpCom would contribute to removing constraints to efficient market operations and linking market actors to work together and serve each other on a sustainable basis. PrOpCom would rather not dole out inputs and grants that could lead to perpetual dependence on hand-outs. PrOpCom therefore emphasizes market development over and above granting of subsidies.

The programme will address poor market functioning along selected commodity chains, with the objective of improving access and returns to the livelihood assets of the poor.

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PrOpCom will not however directly support the poor; rather programme activities will work with business associations, service providers and other intermediaries who already serve functions along market chains in which the rural poor have a stake. By facilitating fundamental changes in the functioning of markets and the rules of the game governing access by the poor, systemic change will be encouraged.

PrOpCom will also address cross-cutting issues that are of major concern to DFID such as: gender, conflict, the environment and HIV/AIDS that are. Therefore all our activities will attempt to ensure that these issues are adequately identified where they exist in the economic or social sector being targeted. To ensure this, all contractors and facilitators will be required to address these issues as and when appropriate and relevant.

PrOpCom current focus of work consists of – • Kano rice value chain • Fertilizer value chain • Agricultural mechanization • Financial services • Rice policy

1. b. Kano Rice Value Chain Intervention Based on numbers of research and studies PrOpCom found the following constraints in the value chain – • In traditional drums (aluminum parboilers), without false bottom, rice is cooked unevenly if not properly stirred. Overcooked and unevenly dried, soggy grains get more easily damaged and broken in the milling process. • Drying on the ground or roadside results in impurities and stones in the rice. • Parboilers find it difficult to negotiate a better price for their better quality parboiling when doing contract parboiling (often the clients are their husbands or relatives from the same village)

These factors made local rice less competitive compared to imported rice. Improvement in processing technology through introducing new parboiling system could solve these problems. Also familiarizing the parboilers with different improved processing practices to keep the paddy clean and a series of steps to keep the rice clean could help them improve the quality of local rice. A financial support seemed quite essential for the parboilers, which would enable them to get into trading and allow them to control their own business. This would also allow them to sell the rice in the market to 'outside' traders and negotiate a better margin. Along with these activities, the social capital of the parboilers could be improved through training on record keeping and groups’ cohesion and supported in accessing the bank loan, which would ensure their access to information, participation in the market, recognition and mobility. Finally, this set of activities would enable the parboilers to process more local rice and increase their income. Increased volume of processing of local rice by the parboilers would also create more demand for

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Mapping of Adamawa State Rice Value Chain the paddy in the long run, meaning the farmers would sell more paddies and increase their income.

After that, when the interventions were initiated 1156 parboilers were organized together in 46 groups and they got training on groups' dynamics, record keeping of their own account and monitoring their activities and got support in applying for bank loan. In the first phase from November 2008 to March 2009 total 387 parboilers have got bank loan from NACRDB where buying the Tadco parboilers was mandatory. Tadco Ltd. also organized 10 demonstrations of the process in six clusters where 927 parboilers were present. However, the first batch reported that the Tadco system was not producing as good result as it was expected due to some operational problem and they returned to their earlier practice. This development was communicated with the bank, they agreed to exclude the Tadco system from the mandatory condition for loan, and 146 parboilers got loan as working capital in the second phase under this new arrangement from April 2009 to June 2009.

All the parboilers who got loan have invested the money in rice trading where they went for buying their own paddy, processed them and sold them to the local traders or in the market. The capacity building of the female in the group had a great influence in this development and as a result, parboilers' social capital was improved. This access to finance and improved process knowledge enabled the parboilers to improve the quality of local rice and process more than before, whereas only access to finance for the second phase of parboilers enabled them to process more volume of local rice. The parboilers started to get at least NGN 8 more per kg of improved quality local rice whereas getting into trading stretched their range of profitability. The parboilers got on an average NGN 27,000 of profit per month from the trading compared to only NGN 3000 per month from contract parboiling.

NACRDB disbursed total NGN 45,670,000 as loan to 533 parboilers which means average NGN 85685 loan for each of the parboilers. The parboilers managed this loaned working capital really well and proved the concept, that they are not bankable, wrong. They invested in trading, increased the volume of processing by 1 bag then before, sold the rice and successfully repaid the amount to the bank within 18 months through regular installments.

1. c. The Parboiler Scale-out Intervention First set of interventions have shown a positive result i.e. access to finance has enabled the parboilers to gain more control over their business and increased their profitability and the change in processing practices have improved the quality of local rice to some extent which also attracted better price in the market. Traders and wholesalers have also recognized that the average quality of rice have improved in the target clusters. On the other hand, an average increase in price of the rice is also observed at the trader to parboiler level. This success has driven PrOpCom to think of scaling out the intervention and it has come up with three possible options for scale-out –

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IV. Access to finance through NACRDB for more parboilers in Kano V. Partnering with new financial institutions to create access to finance for parboilers VI. Replicating the said intervention model to new states / geographical locations with necessary improvements in the model

In view of above mentioned options, PrOpCom started to explore for opportunities and in this process it has come in contact of Standard Microfinance Bank (SMFB) who has its operation in Adamawa state. SMFB has shown interest to work with parboilers and to explore how PrOpCom can contribute in their objective of reaching more poor people and increasing their competitiveness to ensure their economic development. SMFB fits in the option II and III for scale-out. After exchanging the views and objectives, both the party have agreed to conduct a Market Assessment study in Adamawa to acquire better understanding of its rice value chain.

Objective and Scope of the Market Assessment The primary objective of this market assessment is to learn about the Rice value chain and the market system in Adamawa and understand its dynamics. Before proceeding to design any strategy or initiate any intervention, it is imperative to understand the characteristics and dynamics of the market itself and how the actors are involved in the value chain. The primary objective can be further broken down to the following parts – VI. Identify the actors involved in Adamawa Rice Value Chain (VC) VII. Understand the functions of the actors VIII. Mapping the VC IX. Understand the market dynamics X. Analyzing the constraints and challenges in the VC This is an exploratory study and qualitative in nature. However, a minimum level of quantitative information will be captured to better understand, justify and analyze the inter-actor relationships and challenges they face.

This assessment is done with the intention to use in designing the strategy for parboiler scale out intervention in Adamawa. This assessment will also be helpful for Standard Microfinance Bank (SMFB) or any other financial institution in understanding the market around the Rice VC, actors who can be potential clients and designing financial products for them. Finally the analysis will help understanding the reasons and justifications behind the interventions.

Methodology The study team comprised of 4 people from PrOpCom, 7 from SMFB and 1 from a government organization (SPPU).

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SMFB, through its work of giving microfinance loans had some idea of the areas where the rice sector was predominant and hence helped selecting areas to cover in the study. Ten areas were selected in three markets. The markets are: • Yola market: consisting of the areas of Gerio, Jimeta, Bachure, By-Pass, Dan’du, Lokko • Gurin and Fufore markets • Mubi market

PrOpCom, from its prior experience of working in Kano, developed a rough list of the kinds of actors that could be found involved in a rice value chain. Based on the list of actors a checklist was developed outlining the data to be collected for each actor. The checklist was prepared by the M&E team for each of the possible actors in the value chain in collaboration with the market team. It was then shared with the partners (SMFB and SPPU) to get them conversant with what kind of information the study would attempt to capture. The checklist of information to be collected covered a mix of qualitative and quantitative data, focusing on understanding the businesses of the actors being interviewed, their position in the value chain and their connection with other actors in the chain.

Information was collected through in-depth interviews and group interviews of the actors found in each of the locations. In instances where an actor was found who was particularly knowledgeable on the sector, key informant interviews were carried out to get a picture of the area.

For the purpose of conducting interviews the team was broken up into four groups of 3 people. Each group was consisted of a member of the PrOpCom team and two others from the partners. Generally 2 groups were sent to one area to gather as much information as possible and cover as many actors as could be found in each area. At the end of the day after data collection was completed, the groups convened together to discuss their findings and understand what the actors were doing and why. The PrOpCom team members wrote up the interviews done by their teams to keep a record of the information collected per respondent.

On the second day of data collection a rough value chain of the rice sector in Adamawa was drawn up, and the characteristics of each actor was discussed. Gaps in information were identified and those gaps were covered in subsequent interviews the following day. On the fourth day, all findings of the study were discussed, constraints faced by each actor were identified and possible interventions were discussed. Some of the interventions will be taken up immediately as part of PrOpCom’s currently ongoing interventions, and a few will require a bit more study to clarify incentives and business models.

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Background of Adamawa Rice is one of the principle crops grown by farmers in Adamawa State particularly in the areas visited for the study. The National FADAMA Development Project defines the landscape of Adamawa State as consisting of mountains, and land traversed by big river valleys of Benue, Gongola and Yedsarem with the valleys of Cameroon, Mandara and Adamawa mountains forming a part of this undulating landscape. The existence of low valleys and rivers makes the topology of Adamawa ideal for the cultivation of low land rice, and hence it is one of the prime states where rain-fed lowland rice is cultivated. Moreover, the Upper Benue River Basin Development project has created irrigation schemes along that river which creates more opportunity for rice cultivation, and a large number of farmers residing around the project area cultivate rice. A similar undulating landscape interspersed with rivers exists in the neighboring parts of Cameroon that borders the state and hence paddy cultivation is also dominant in those areas of Cameroon.

Being at a border to rice growing areas of Cameroon also means that paddy farmers in Adamawa can easily source inputs for paddy cultivation from Cameroon, which they do quite frequently claiming that the inputs got from there are of better quality than those available from within the country. In addition to conditions supporting the cultivation of paddy, rice is one of the main staples of the people of Adamawa state, eaten by the locals as tuwo. Rice is also a good cash crop for farmers in Nigeria and there is a huge demand for rice within the country1. Hence farmers in the area have the motivation to grow paddy for both their own consumption and to earn money. The major rice growing areas in Adamawa include Mubi, Minchika, Madagali, Muchila, Kiriya, Betso, Gurin, Malabo, Tinno, Cigari and Lamurde.

All of the above conditions mean that the state has access to sufficient supply of paddy, both from within Adamawa and from Cameroon. Therefore Adamawa also has a number of large and vibrant rice processing hubs to process the paddy supply that the state has access to. The processed rice is then sold to buyers who come to source processed rice in Adamawa from mostly the southeastern states (Akwa Ibom, Enugu, Calabar, Onitsha etc) and northern states (Gombe, Kano, Katsina, Yobe, Nasarawa, Borno etc). A large number of actors have thus developed in the state around the activities that involve the production of paddy, its conversion to processed rice, and its delivery to consumers. The big rice markets in Adamawa include Tinno, Gurin, Fufore, Lokko, Malabo, Mubi, and Jimeta.

1 The national average per capita consumption is 32 kg per annum, and in urban areas the average per capita consumption is 47 kg per annum

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Background of Standard Microfinance Bank

The Bank at a Glance The bank has its head office in Jimeta, Yola North Local Govt. Area. Yola is the administrative capital of Adamawa state while Jimeta is the nerve centre of both public and private activities. Following are the details of the bank at a glance – • Established in 1992 • Incorporated in 1995 • Issued CBN Community Banking Licenses in 2002 • Rated by New Africa Rating Agency in 2006 • Upgraded its MIS to AFFAS compliance in 2006 • N20 million authorized share capital fully subscribed • Issued Approval-in-Principle for conversion to MFB on 14/02/2007 • New name incorporated September 2007. • New Board members appointed in 2007 in compliance with CBN guide lines for a term of five years • Issued MFB licenses in 2009 • Operational areas consist of Jimeta, Yola, Ganye, Jada, Song, Mayo-Belwa, Mubi, Gombi (Garkida) & Madagali LGAs of Adamawa State • Maximum individual loan is N500,000.00 or 1% of shareholders fund. • Maximum group loan is 5% of shareholders fund

The bank has increased its authorized capital to 1 billion in 2009 and now is exploring the opportunity to source equity investment from institutions. It has an expansion plan to cover 21 LGAs in Adamawa state by 2010 and open offices in Taraba, Yobe and Borno by 2011.

SMFB is looking forward to increase the share of agricultural sector in its loan portfolio from 2% to 16% in next five years. This is why they have decided to invest in rice sector which is one of the prominent agriculture sectors of Adamawa.

Collaborative Partners SMFB has working collaboration with both Govt. and private institutes like – • Ford Foundation West Africa , Lagos • Center for Micro-enterprise Development (CMD), Lagos • Development Alternative Resource Center(DARC), Lagos • National Poverty Eradication Programme (NAPEP) • United Nations Development Programme (UNDP), Adamawa State Office. • Special Projects and Programmes Unit (SPPU), Adamawa State. • Yola North Local Government • Mubi North, Mayo Belwa, Madagali,Song and Ganye LGAs

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Client and Product Portfolio SMFB has a diverse client portfolio consisting of small to large farmers, small local shop owners to medium size rice mill owners, individuals to groups and retired civil servants. However, the bank encourages group lending methodology more to the small and medium farmers and enterprises as part of their role in promoting microfinance for the economic development of SMEs.

SMFB’s product range consists of group loan, individual loan, consumer loan, pension schemes, education loan etc. however, it does not provide any business start-up loan.

Loan Appraisal Process Maximum loan amount an individual or group can get is decided through appraisal of their business, profitability, capacity to repay, maximum installment can pay etc. The entire loan approval process consists of following steps – I. Applicant/s apply for the loan II. A loan officer visits them to do the appraisal III. Bank do an enquiry of the information provided by the applicant IV. Loan officer recommends the eligible applicant and send to Internal Control division V. The recommended application reviewed by the Internal Control division of the bank VI. Internal Control division certifies the application and send to Credit Committee management for approval VII. If the amount is less than (N200,000 X 20 people) then Credit Committee approves the loan. If the amount is more than that then it is sent to board meeting for approval VIII. After approval, Loan Officer prepares the offer letter in favor of the applicant/s IX. The applicant/s sign(s) the offer letter and deposit the required amount X. Bank disburse the loan

The loan is provided based on collateral which is not land or any permanent asset but consumer goods like TV, Freeze, furniture etc. The applicant/s has to deposit one third of the loan applied to get the loan. Once the loan is granted, bank retains the deposited amount as savings in the applicants account and provides the rest two third for disposal. Generally loan is provided for six months with a weekly repayment schedule. If any individual/group finds it difficult to repay then the loan can be restructured to his/her capacity. In case of group loans, group is responsible to repay the amount for any default. It requires maximum 2 weeks from application to disbursement of the loan.

Embedded Services with Loan

The bank does not limit its services only to providing loans. It also provides number of embedded services to its clients along with the loan. After individuals or groups apply for

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Mapping of Adamawa State Rice Value Chain the loan, bank meets them 3 – 4 times and provides advocacy / training on accounting, business and group management, expenditure, savings and collection and usage of market information. Monitoring and administration of repayment are done by the Loan Officer. They support the group in keeping the track of repayment by meeting them at least once in a week. The bank provides advocacy to women clients on ‘Home Cleaning’ – helping them on how to involve her husband / family within her business – which is helpful for them in managing their business better also reduce SMFB’s risk by preventing the loan money being misused in any non productive activity by the family members.

Adamawa Rice Value Chain During the one week extensive assessment the team tried to understand the inter-actor relationships and it can be described through the following value chain map –

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Definitions and Roles of the Actors

Farmers: Farmers in Adamawa grow paddy as one of their main crops, if not the number one; hence Adamawa is considered as one of the prominent paddy growing area in Nigeria. Farmers in Adamawa differ based on their cultivation practices. Farmers from low lands or near the river basin do not or hardly use any fertilizer for growing paddy and this is because every year floods cause siltation on their lands and help keep them very fertile. On the other hand the farmers from highlands or far from river generally use fertilizer. Rainy season (April – August) is the main paddy growing season; however the supply of paddy in market is scarce during that season. On the other hand dry season (September – January) is when paddy is harvested and abundance of supply is observed in the market. Very few farmers grow paddy e in dry season. The varieties of paddy grown are China, Zaranzaran, Agric, CP, Wita 4, O2, Zazzabi, Yar ai, Jamiya, Yar-sada, Yar-audu etc. In the rainy season planting starts from mid May and harvesting continues to November depending on varieties. In the dry season planting starts from January and harvesting continues to April. On an average one mudu of paddy can yield 20-30 mudu of paddy depending on variety, farming practices and seasonality. On an average farmers store their paddy for 7 months to 1 year. Farmers buy their inputs from local markets. They use tractors in most of the areas but usage of threshers is very rare. Access to banking services is not very uncommon among the farmers.

Farmers generally sell paddy to paddy traders, parboilers and processors (who buy paddy and sell processed rice). They sell their produce in the local markets as well as from the house. Mostly the local parboilers come to their house to buy paddy. Few large farmers are involved in paddy trading where they buy paddy from other farmers and sell to paddy traders, parboilers, processors.

The average price of one bag of paddy is N6000 in rainy season and N4000 in dry season. Farmers in Gerio get their paddy processed and sell in the form of white rice and according to the following cost calculations they earn more than selling in paddy rice form. They also mentioned that white rice is more demanded in this area. They sell in nearby Bypass market, which is one of the biggest rice markets in Adamawa. On the other hand, farmers in Gurin do not process their paddy before selling.

The standard cost of cultivating 1 bag of paddy in a hectare of land will include the following: Seeds 4500 Planting (labor) 4500 Land preparation by tractor 7000 Pesticides (3litres @ N900/liter) 2700 Labor 1600 (weeding) 10000 (Harvesting)

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Threshing 6000 Cleaning 1500 Transportation 1550 Total cost N52250

Income: breakdown of sales and income include: Quantity Produced 30 bags Sales @ N4200 Total sales N126000 Profit N73750

Paddy traders: They purchase paddy from different markets and locations, some large paddy traders even go to Cameroon to source paddy. They buy from individual farmers as well as the farmers who accumulate paddy from other farmers. Mostly they prefer to buy in markets but may also purchase from the farm gates. They sell paddy to parboilers and processors in different markets. During the planting season they also sell paddy to farmers as seed.

The average purchase price range is between N3,000 to N5,000 in the dry season and between N4,500 to N7,000 in the rainy season. They incur transport cost, taxes/commission in different markets. They generally keep a margin of N200 – N500 excluding all the associated costs.

Parboilers: Most parboilers in Adamawa are into trading, few of them do only contract based parboiling, except in Lokko where majority are contract parboilers. Some of the parboilers may do contract parboiling in the rainy season when the price of paddy is high in the market. Most parboilers use old oil drums they buy from oil traders for parboiling their paddy, a drum costs them about N3000 – N4000. A drum can last for less than 2 years after which it is discarded. Except for most parboilers in Yola market who get drums of greater capacity made from scrap metal.

Trader Parboilers: Most parboilers of Yola market sell their rice at milling point, parboilers of Gurin generally sell their rice at the Gurin market via their children, and parboilers in Mubi sell most of their processed rice in the Mubi market. The process of parboiling involves washing the paddy, boiling the paddy, soaking, steaming and then drying. The entire process takes 2 – 3 days generally, except in the rainy season when the rains may delay the process of drying. The main cost incurred for parboiling is the cost of paddy. This varies depending on the season. It is usually high during the rainy season when paddy supply is scarce at this time the cost of a bag of paddy can range from N 4,000 – N 7,000. In the dry season paddy supply is high and a bag of paddy can range from N 2,500 – N 5,000. Other costs include the cost of firewood (ranging N100 – N150), cost of water (ranging from N50 – N100), cost of milling (N200 for mills running on electricity and N250

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Mapping of Adamawa State Rice Value Chain for mills running on fuel), miscellaneous costs such as those incurred for transport, loading and unloading etc are usually within N50–N200. However, a point to note here is that in Mubi generally most costs are higher than elsewhere, hence paddy costs about N5,000 – N 5,500 in the dry season and goes up to N6800 – N 7,000 in the rainy season; firewood costs are at about N300, and the cost of milling is usually N350.

The price of parboiled rice also varies depending on the season, in the rainy season per mudu of processed rice can sell for 180-200, and in the dry season the price per mudu is about 120-150. However in Mubi the prices are 300-310 in the rainy season and 240-250 in the dry season. Generally the price difference between good quality processed rice and bad quality processed rice is about N20. After considering all costs the profit earned by parboilers in the rainy season can be about N200-N700 per bag and in the dry season the profit earned can be about N850 - N2500. Thus profit averaged out over the year for a parboiler comes to about N1200.

Contract Parboilers: There are a few contract parboilers in all locations, however they are usually not very prominent and are fewer in number. Except in Lokko where about 90% of the parboilers are contract parboilers. The contract parboilers generally parboil for processors, farmers, and for processors cum traders cum retailers. Mostly in Adamawa the contract parboilers receive a fee, and are also given separately the costs of firewood, and water. The fee for contract parboiling is about N120 per bag of rice parboiled in Lokko, in Mubi they get N400 per bag.

Millers: They only provide the milling services to farmers, parboilers and processor cum trader cum retailers. Generally they own two machines – one runs with electricity and another one runs with diesel. They mostly located near the markets and in many places the milled rice are also sold on their premises (especially in places around Yola market). They charge more for the diesel-run machine than the electricity-run machine and the difference is between N50 – N100 per bag. In some places rice is milled twice and they do it to improve the quality of the rice.

Processors: They perform the same functions as the millers, but also in addition to them they invest in buying paddy from farmers or paddy traders, get them parboiled by the contract parboilers, mill them and sell them to agents of the wholesalers or the wholesalers themselves and the retailers. Some processors are found to be seasonal where they buy paddy and process them only in dry season; otherwise they just act as millers. Few processors also stock paddy to do business in the rainy season as well.

As a processor they buy paddy at N4,000 to N6,000 depending on the season. They sometimes prefer to buy from the local farmers to reduce the cost. They incur cost of transport (N50 – N200 per bag) and cost of parboiling including firewood and water (N500 – N700 per bag). They generally keep a margin of N500 – N800 per bag excluding the

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Mapping of Adamawa State Rice Value Chain costs incurred. When they provide only milling service, then they charge same as the millers above.

Agents: They buy processed rice for wholesalers in the other states. They usually have number of regular wholesalers who communicate specifications and quantities required and send the money to them. Then the agents buy they rice from parboilers, processors and arrange to transport to the wholesalers. The cost of transport is paid by the wholesalers. The agent bears the cost of storing until he sends the rice to the wholesalers and adds this to the price of the rice. Whoever sends the money in first, they complete their order first. They keep a commission of N80 – N200 per bag irrespective of the price of the rice in the bag.

Wholesalers: There are two type of wholesalers observed in the market – one who are from other states and one who is from within the states. The wholesalers from other states usually buy rice through their agents in the local market and very often visit different markets. We have not met any such wholesalers in the market but we have met their agents as described earlier. The wholesalers within the state are the ones who buy rice from parboilers, processors and processor cum trader cum retailers and store it in their own shop in the market. They sell to the wholesalers from other states or retailers from within the states. They buy in mudu and sell in bags; hence they have to incur bagging cost. They generally keep a margin of N200 per bag on top of all costs incurred. Sometimes in rainy season they act as an agent and buy as per the requirement of other wholesalers after receiving the advance money from them.

Retailers: Retailers are those who sell small quantity of rice to the end consumers. According to this definition a number of actors in the value chain such as farmers, parboilers and processor cum trader cum retailers have performed the function of retailers. However, there are retailers who only purchase processed rice in bulk (not as big as wholesalers) and sell them in small quantity to consumers. They may have their permanent shops (in the locality) or temporary places (in the market) to do their business. In case of temporary place they have to pay the rent for that. They buy from parboilers, processors and wholesalers. They sell on an average 25 mudu per day and keeps margin of N20 per mudu.

Processors cum Traders cum Retailers: This is a unique actor that was found in Adamawa, and does not exist in Kano. These actors buy paddy from different markets, get it parboiled from contract parboilers near their homes, then collect it and get it milled from millers in the market and then sell the processed rice in mudus at different milling points or at their home markets. Sometimes these actors carry out this role in addition to other roles they play in the value chain. So this actor may also be a parboiler and hence use this method to increase volumes of processed rice she sells in the market, or this actor may also buy low quality processed rice or mill white rice to sell in his area for local consumption, or they may be a job holder,

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Mapping of Adamawa State Rice Value Chain or they may be involved in other businesses in other sectors. Generally this actor does not get all his income from playing this role in the market.

In most markets the margins they make range from N200 – N300 in the rainy season. In case of Mubi the margins earned from this are about N450 in the dry season and N830 in the rainy season.

Fabricators: Generally these are very few in number in Adamawa state. The only fabricators the team could locate were all found in the Yola market, the markets of Gurin and Fufore; and Mubi market had no fabricators in their areas. The fabricator in By-Pass generally cuts open the lid of the drum for the parboilers, and later when the bottom spoils replaces the bottom to the lid so that the drum can be used again for some time. The cost of repairing a drum ranges from N200 – N1500 depending on the type of repair job being done. Usually to replace the bottom the fabricator charges N700 – N800. The fabricator in Bachure plays a more extensive role, he usually makes drum from scrap metal hence creating large drums for the parboilers that can parboil about 5–7 bags per drum, these usually cost about N17,000 per drum. In some cases the women purchase the scrap metal for the fabricator and he receives a fee for working on the metal which is about N2000–N3500. The only challenge observe with the parboiler with the 5-7 bags capacity is the lack of draining outlet for the water; which makes scouping of the rice difficult, thus parboiled rice has to stay overnight to cool enough to allow transferring the soaked rice for the steaming process; and also usually left used water at the bottom and makes the environment unhygienic.

Prominent Markets, Locations and their Characteristics

The different markets all have some unique characteristics which are outlined below: • Yola market: It is consisting of the areas of Gerio, Jimeta, Bachure, By-Pass, Dan’du, Lokko are all situated in and around Yola town. And hence have an access to the large town markets and are also a popular source of processed rice for buyers from other states, particularly the South-eastern states. o Gerio is located in the banks of the Benue River, and is the site of the Upper Benue River Basin Development project. Thus it is an important paddy cultivation area of the state. o By-Pass is a market situated just opposite Gerio, it is where most of the processors (parboilers and millers) exist and hence the place where paddy produced in Gerio, and in other areas are processed. o Jimeta is market for processed rice, and has processors, parboilers and millers. o Bachure is a village where a large number of parboilers exist, they mostly parboil in large amounts (an average of 10 bags per batch). It is also the only area where a fabricator was found who made drums for parboiling. The parboilers mill their rice in nearby Jimeta and sell it at milling point.

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Mapping of Adamawa State Rice Value Chain

o Dan’du is a village where we can find farmers, parboilers, millers and processors. Parboilers here are found to sell on credit to the customers. o Lokko is a village near Yola which has a rice market. Actors present include farmers, parboilers, rice processors, millers, agents and processor cum trader cum retailers. All year round Rice Processing area, produce a special variety called Zazzabi and farmers have good skills of selecting good variety paddy. Majority of parboilers are engaged in contract parboiling and parboil 1-2 bags in one batch on an average.

• Gurin and Fufore markets: These areas are located in the border of Cameroon. This is a low lying area and lies next to a river of Cameroon. Hence the area is usually flooded during the rainy season and is a major low-land paddy producing area. The farmers of this area generally do not use fertilizer for cultivation, as the siltation left in their land from flooding keeps the land productivity high. They also do not till their land for sowing, rather they use herbicides to kill weeds and then broadcast paddy seeds in the farms. The main crop grown by farmers here is paddy, and a few vegetables are grown to supplement their diet and incomes. No dry season farming is done by the farmers. The markets of Gurin and Fufore are important for supplying paddy to other areas. Some processing is done here but much of the rice processed here is consumed within these areas. The parboilers in these areas are unique in the sense that although most of them are into trading they do not go outside their homes. Hence paddy traders supply paddy at the parboilers’ homes, and the milling and selling of processed rice is done by their children. The quality of processed rice is not very good here, and although the women know of some techniques to improve processing (e.g. raking, using drums etc) they ignore those techniques.

• Mubi Market: Mubi is again located in the border of Cameroon. It is a town that lies next to another town in bordering Cameroon. Thus Mubi actors have access to two town markets and a major market exists in Mubi that has a prominent rice section. Mubi is paddy growing, rice processing, and trading hub. It has a steady supply of paddy brought over from all surrounding areas (within Adamawa and from Cameroon) also there are low lying areas in Mubi where paddy is grown. The market in Mubi is most organized, and there is a separate section where paddy and rice trading is done, an association exists of Grain Dealers and Retailers of which all rice dealers and retailers are a member of. There is also a parboiler association. Both these associations are very active and it is not possible to operate in the market without being a member of the association. The quality of processed rice in Mubi market is very high and they attract buyers from mostly the Northern states, particularly Borno, Kano, and also from parts of Cameroon. It is also where the prices of paddy and processed rice are highest; e.g. the price of paddy in Mubi ranges from N5000 – N7200 and the price of parboiled rice ranges from N270 – N350 per mudu. The quality of processed rice is however the best seen in Adamawa.

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Mapping of Adamawa State Rice Value Chain

Highlights of Adamawa Rice VC Highlights of different markets in Adamawa can be presented as following – Yola Gurin Mubi Area Specialty Consists Consists of Very vibrant of Yola Gurin and and south, Fufore. On prominent Gerio, by an average Paddy and pass, quality of processed Jimeta, processed rice market, Bachure, rice is bordering Dan'du poor. with and Buyers Cameroon. Lokko. come here High quality Situated to buy paddy around paddy, produced Yola town. processed as well as Paddy rice hardly imported comes in goes from from outside Cameroon. different this area. Very strong parts of Strong market the state. social association Prominent barriers for s. Low for women. social processed barriers for rice women. trading. Medium or low social barriers for women. Market days Number of One One market market market day day (also with open every several day for market transaction) days. Measurement units Bag size 100 KGs 100 KGs 100 KGs 125 KGs Mudu / bag 40 60 40 50 Actors present All All except All agents, wholesaler s Paddy Production Yield / hectare 40 bags 25 bags 20 bags

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Mapping of Adamawa State Rice Value Chain

Inputs and machines used Seed, Seed, Seed, fertilizer, herbicide, herbicide, pesticide, pesticide, pesticide herbicide, tractor tractor Threshing cost per hectare (N) 8,000 - 6,000 9,000 10,000 Cost of production (N per bag) 1,800 1,800 2,200 Storage time 3 - 7 1 year up to 2 months years Sales price (per bag) 3,000 - 4,000 - 4,000 - 5,000 5,500 6,800 Profit (N per bag) 1,200 - 2,200 - 1,800 - 2,000 3,000 4,000 Parboiling Cost of the drum (N) 2,500 (oil 2,000 (oil 2,500 - drums) drums) 3,000 (oil 20,000 1,500 (few drums) (fabricate use large d drums) bowls) Capacity of the drum 1.5 bags 1 bags 1 bag (oil drums) 5 - 7 bags (fabricate d drums) Durability of the drum < 2 years < 2 years < 2 years (oil drums) 4 years (fabricate d drums) Average parboiling capacity of the women per 10 - 15 4-5 bags 7 - 10 bags batch bags Contract parboiling charge per bag (N) 700 250 400 – 500 (including (excluding (excluding water and water and water and firewood firewood firewood cost) cost) cost) Processing time 2.5 days 2 days 2 days Cost of Paddy 4,500 - 4,000 - 5,000 - 6,000 5,500 7,000 Milling cost (N) 200 150 250 (Electricity (electricity) (electricity) ) 200 350 (Diesel) 250 (diesel) (Diesel) Other costs (transport + fire wood + water + etc) 500 500 500 - 550 Sales price (N per bag) 5,500 - 5,000 6,500 - 6,500 (rainy 9,000 season)

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Mapping of Adamawa State Rice Value Chain

Profit (per bag) 750 - 500 350 - 800 1500

Constraints and Opportunities in the Value Chain

Based on the functions of the actors discussed so far, market analysis and discussions, we have come out with few constraints in the value chain which do not relate to all the actors. There are few actors in the VC who are not facing any significant constraints and those are processors, agents, wholesalers, retailers and processor cum trader cum retailers. However, that does not undermine the roles they play in the value chain. In actual fact it is found that whatever constraints they face are originated from the constraints from some other actors such as in case of processors, if they could have got more paddies especially in rainy season then they could have done more business and it is more related with supply of paddy in market i.e. with farmers and paddy traders. Also few processors could have done better if they had destoning and polishing machine, but that is an opportunity and is not really causing any limitation in the value chain right now.

Moreover, constraints are picked considering whether that can be worked out under M4P approach and what opportunities we have in the market that can offer a solution for that.

The constraints identified are –

Farmers have no access to threshers Farmers in Adamawa are not familiar with mechanical threshers. Current practice is letting the paddy get dried on the field and then thresh them manually by beating with stick or against drums. The disadvantage of this process is that the paddies usually fall and spread on the ground and causes the following – I. During collection lots of dust, stones and other materials got mixed in the paddy II. Possibility of losing grains III. Due to beating lots of grains got broken IV. Incurs huge labor costs and sometimes scarcity of labors makes it very challenging Moreover, in some other places farmers tend use reaper for threshing, which destroys the land.

Limited financial capacity of paddy traders Generally market experience a scarcity of paddy supply during rainy season as it is the cultivation period of rice and abundance of supply in dry season as it is the harvesting period. This also affects the entire value chain. In rainy season market could not satisfy the total demand, prices go up by N2000 or more and business becomes very challenging whereas in dry season all the markets have abundance of supply and prices are also very favorable. Therefore when the paddy traders require more money to keep their business

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Mapping of Adamawa State Rice Value Chain running in rainy season, their limited capacity to invest or inject more money in the business makes them very vulnerable.

Limited financial capacity of the parboilers during dry season As mentioned in case of paddy traders, parboilers also find it very difficult to source sufficient amount of paddy to parboil in the rainy season due to seasonality effect. This scarcity force them to buy paddy at a higher price and incur more cost to parboil (fuel prices go up), but compared to these increased costs the price for parboiled rice does not increase that much and that makes their business less profitable and more challenging. On the other hand, in dry season they observe a huge supply of paddy in the market at a reasonably low price (compared to scarcity period) but they could not buy more mainly for two reasons – i) limited financial capacity and ii) limited daily parboiling capacity.

Millers and processors have outdated and low capacity milling machines Millers and processors are using milling machines that are more than 15 years old and milling capacity is decreasing day by day. Moreover, those machines do not have the facility to run by both electricity and diesel, so when there is a power failure they have to move the half-done paddy from electricity-run machine to diesel-run machine and these cause extra hassle and loss of some grains. These age old machines also sometimes cannot do the husking uniformly and cause breakage of grains which incurs a loss for the farmers or parboilers whoever is buying the service. Furthermore, few processors have opined that if they had any machinery which can do both milling and destoning then they could have done more business. All these are making their business very difficult but they could not buy new machinery as they do not have enough money to invest in this. Also they are not very aware about where they can find these machines.

Availability and usage of better parboiling equipment Parboilers in Adamawa generally use used oil drums for parboiling. These drums last for less than two years. These drums cause uneven heating during parboiling which affect the quality of the processed rice and they are also not very easy to handle. However, according to the fabricators they have never showed any interest for more efficient and better drums. Despite the fact that better parboiling equipments can increase efficiency hence the income, parboilers have not found it a big problem to change the drums in every two years time. On the other hand, the fabricators are found unaware of possibility of small changes or modifications in the existing drums that can also increase the efficiency to some level without increasing the cost very much. Furthermore, the current parboiling practices are not flawless and improvement in their practice would result in reduced processing time and increased production for the parboilers. These lacks of sources of technology and skill development are limiting the parboilers’ level of efficiency and potential increased income.

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Mapping of Adamawa State Rice Value Chain

Possible Interventions and Next Steps Based on the constraints and opportunities identified above the following intervention ideas are suggested –

Intervention 1: Introduction and promotion of threshers PrOpCom already has an intervention on promoting threshers. Since the farmers of Adamawa have expressed an interest in owning or using threshers, it has been decided to include Adamawa as one of the location for the promotion. This introduction of threshers will reduce the cost of threshing for the farmers, reduce waste of grains and save time for threshing.

The CIM in charge of Threshers Intervention has been notified and introduced to Standard Microfinance bank (SMFB). SMFB will provide the platform to promote threshers in their working areas and offer a customized financing to the interested buyers for purchasing threshers.

Intervention 2: Access to improved milling technology To address the constraint of millers and processors, PrOpCom can facilitate the linkage between the interested millers and processors and suppliers of such improved machineries. Once again SMFB can provide a platform to reach these interested millers and processors and can also develop and provide the solution for financial needs. Better milling equipments will increase the processing capacity of the millers. It will also improve the quality of processed rice through destoning and polishing. Therefore, this intervention will increase the income of millers; increase the volume of quality processed rice being produced and reduce the loss incurred by other actors from poor quality milling due to old machines.

Here also, PrOpCom has worked with this constraint in Kano and hence the CIM in charge will be introduced to SMFB to discuss next steps.

Intervention 3: Access to modern parboiling equipments The fabricators can develop improved parboiling drums either by modifying the current one or developing a new design. These drums will help the parboilers to increase their efficiency and also quality of the rice parboiled. This will require further information on the following – I. What modifications are feasible and can increase the efficiency? II. What are the benefits of these modifications for both parboilers and fabricators? III. What training is required for the fabricators to make those modifications? IV. What training is required for the parboilers to use those equipments? V. Willingness of parboilers and fabricators to respond to these changes?

We will find out those above information in collaboration with SMFB and will come up with an intervention plan based on the information collected.

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Mapping of Adamawa State Rice Value Chain

Intervention 4: Development of loan model for Paddy traders and parboilers Paddy traders and parboilers require additional capital to stock up paddy during the dry season which will enable them to earn more consistent higher profit all year round. Moreover, this access to finance will help reducing the demand supply gap during the rainy season and will stabilize the prices of paddy. SMFB will need to design an appropriate loan model that can serve both of the target groups to invest in their business when they can buy paddy to stock up for lean season and repay the loan within that stipulated time.

Intervention 5: Access to safety information and tools the actors involved It has generally been observed that parboilers quite often suffer from burns and also they have to work very close to the fire without any protection very long time and this is very exhausting. There are also some hazards that millers have to face. Therefore, SMFB has requested that PrOpCom explores how safety information can be disseminated to the actors who are engaged in hazardous activities like parboilers, millers etc. It will be difficult as well as time consuming to design a standalone intervention and look for different partners with the proper incentive to carry out this dissemination. Therefore, PrOpCom has promised to look into how to embed this information and its dissemination in all interventions mentioned above in a manner that the partners/actors perform the task as part of their service delivery.

Intervention 6: Linkage among all the Rice VC actors under SMFB client portfolio It is assumed that SMFB will design different financial products to serve the needs of various actors in the rice VC and by doing so they can reach a number of different actors in the same geographical location and include them in their client portfolio. Once they become SMFB’s client, SMFB will become a common contact point for all of them and they will all come in contact with the bank at least once in a week. Based on this assumption, it is suggested that SMFB can transform this to an opportunity for itself where they will link all the actors and facilitate exchange of market information and business transaction among them. SMFB will take this holistic approach to improve the flow of information between actors, hence increase their competitiveness. This will also help reduce the risk of non-repayment for SMFB.

STRATEGY SESSION On the basis of the value chain mapping of the rice sector in Adamawa, the following were the basic constraints facing the key actors:

Constraints • Farmers have no access to threshers • Limited financial capacity of paddy traders

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Mapping of Adamawa State Rice Value Chain

• Limited financial capacity of the parboilers during dry season • Millers and processors have outdated and low capacity milling machines • Availability and usage of better parboiling equipment As a result the bank is refocusing its strategy and sees the constraints as business opportunity. SMFB is seeking collaboration with other partners in order to address the constraints profitably. The bank is working with PCom to address financial limitations of the parboilers and paddy traders through group lending. With linkage from PrOpCom, It is collaborating with Nova Technologies to provide access to threshers. The objective of the strategy session was to align the bank’s activities and plans for these new opportunities into a vision that will guide its operations and people. The session took into consideration the harmony between the bank’s strategy and PCom’s goals. These were summed up in the collaboration vision.

Bank’s vision • Increase the number of women client portfolio from 30% to 80% • Increase the agric loans from 2% to 16% of the total loan portfolio • To increase the client outreach base from 3000 to 35000 by 2010 (of which 16% will be in agriculture)

Collaboration vision (SMFB / PCom) • Creating access to finance for more women parboilers and improving their competitiveness leading to increase in income and well being

Strategy • Expanding operations to new areas through the provision of loans during the peak season and by creating access to better services, equipments and techniques. This will be supported by access to market linkages and the provision of embedded services to increase the competitiveness of the target group.

Intervention Plan The plan outlined four areas of intervention and the activities to be employed in accomplishing them. The interventions are linked to the various strategies that the bank wants to use in accomplishing its vision. Roles were also shared between the bank and Pcom. Because of the inherent risks associated with the intervention, the session came up with a risk sharing arrangement between Pcom and the bank. Timelines and responsibilities for accomplishing the immediate activities of the intervention were outlined.

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Mapping of Adamawa State Rice Value Chain

Intervention Activities Responsible 1. Creating access 1. Identify new areas that produce and 1. SMFB and developing a process rice in Adamawa state. customized loan 2. Feasibility test of the location in 2. SMFB / PCOM model for Paddy terms of no of potential borrowers, traders and business activity and so on.

Parboilers (to 3. Developing promotion materials for 3. SMFB / PCOM address strategies loan advocacy in new areas. 1, 2, 3, and 5) 4. Promotion and advocacy for access 4. SMFB to finance. 5. SMFB 5. Establishment of contact point and

HR arrangements.

6. Developing customized loan 6. SMFB / PCOM products based on the potentiality and capacity of the borrowers. 7. Processing and disbursement of the 7. SMFB loan 8. Providing embedded services to the 8. SMFB / PCOM target audience – a. Support in group dynamics a. SMFB and conflict resolution b. Business management and b. SMFB / development service PCOM c. Accounting and record c. SMFB keeping support d. Loan administration support d. SMFB e. Loan management support e. SMFB 9. Creating market linkages (if and as 9. PCOM / SMFB necessary) 2. Access to safety Embedded in 1. information and tools for the actors involved (to address strategy 4)

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