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December 10, 2010 11:13 pm
If someone were to design a poverty trap from scratch, it would probably resemble the one that snares the farmers of southern Niger. To their north looms the Sahara, sending its arid winds through the plains where they cultivate crops. Torrential rains often follow, wiping out harvests.
Then there is the equally vicious economic cycle. By the time each harvest comes around, many have exhausted the meagre revenues from the last one. Farmers have no choice but to sell their crops the moment they are ready. The effect is a glut and tumbling prices. What little they can earn from these agricultural fire sales has to tide them over until the next harvest, and the cycle goes on.
Yet the pattern can be broken with a transaction used by farmers as far back as ancient Rome. A warehouse and a loan are all that are required.
“Before, we used to sell all our produce immediately,” Amanu Saidu, 60, says of the 80 households of Zaraso, his village.
At harvest time, a 2.5kg measure of millet fetches about 40 cents. Six months later, the price might reach $1.20 – but that increase goes to the importers and big producers who have stocks left to sell.
Four years ago, a team from Action Against Hunger/ACF International, the charity that the Financial Times is supporting in this year’s seasonal appeal, arrived with a proposition.
Assisted by the charity, the villagers formed a collective, built two grain stores and arranged a $5,000 credit line from a local lender against the value of their harvest. Bound over by the loan, they could afford to stash most of their non-perishable crops, selling once prices rose.
From 19th-century Europe to modern-day Latin America, farmers have used similar financing systems – known as “warrantage” – to sustain themselves through the seasons. Banking is less developed in much of Africa, however, and decent warehouses to store crops are often severely lacking.
In a region where erratic production and volatile prices contribute to outbreaks of hunger such as the one that left some 7m people – half of Niger’s population – at risk of starvation this year, a scheme to push up those prices might appear reckless.
But Julien Jacob, an ACF food security expert, says the effect is to squeeze the margins of middlemen who profit from selling on crops they buy for a pittance at harvest time.
The United Nations Food and Agriculture Organisation, which pioneered warrantage in Niger a decade ago, says that participating farmers’ incomes increase by up to 113 per cent.
ACF has launched similar projects elsewhere in the hunger-prone Sahel region, first in Mali and then in Mauritania.
Many of the hundreds of families assisted each year in Niger have branched out, using their financial flexibility to launch cottage industries. Some mill peanuts into a paste used in cooking while others manufacture soap.
As farmers such as Saidu edge up the agricultural value chain, what were once seasons of desperation are now becoming seasons of opportunity.
More stories at www.ft.com/appeal
The FT’s online charity auction in support of ACF is live now. Details and terms and conditions at: www.charitybuzz.com/auctions/actionagainsthunger
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