14 février 2007

How to finance honey activities?

Cameroon Honey Marketing Forum
Limbe, 15 – 17 November 2006

How to finance honey activities?
presented by Luc Foleu,
Micro enterprise Development Consultant

Introduction:
Honey and its by-products can be used for medicinal or nutritional purpose or for beauty only. Honey associated to other products can serve as drug for example with limes its help to threat cold; it can also be consume directly for pleasure or regain energy. These little illustrations show how much honey and its by-products can be part of our daily life. Honey as a daily consumption good provides a lot of opportunity and for different stake holders; for the consumers it contribute to their feeding, beauty and in maintaining a good health; and for the producers is a nature friendly source of income. The opportunities that offer honey can be turned into real advantage if honey is available, meaning that honey is produced. So far, the existing quantity and quality of honey, in Cameroon and in the Central Africa region, are below the market needs and the international standards. There is therefore need to improve honey supply, in quantity and quality; and to improve the honey supply there is need of funds. Questions now arise: where to get money to finance honey? And how to raise the money? These are questions to which we will try to provide answers in the following lines.

Honey activities and financing needs: what to finance?
Honey activities can be understood like all the activities within the process that lead to production and marketing of honey. They can be regrouped into 3 main steps: farming or beekeeping, processing and marketing. Beekeeping regroups activities like purchasing of beehives, their colonization by the bees, harvesting of honey. Processing start with collection of honey harvested by farmers, continue with others activities such as filtering, heating, packaging; while marketing has to do with promoting honey for sale, distributing to wholesalers or directly to customers, advertising.

The above mentioned activities, found at various levels of the process, are the one who need to be financed. The financing needs for honey activities can be classified into two groups: soft and hard. At production and processing level the hard needs are made of equipment necessary for effective honey production such as factory, beehives, smokers, drums, heater, filter, drums, and bottles bee man clothe,… To use effectively the mentioned equipment in other to produce good honey, the stake holders (bee keepers and staff for processing) needs to have the appropriate knowledge in beekeeping and honey processing. The second category of needs is what we call soft needs; they are essentially made of the technical knowledge.

The knowledge needed to conceive and organise honey activities can be consider as soft needs while the funds necessary to finance promotion campaign and advertisement can be classified under hard needs.

Now that the needs that have to be financed have been identified, the question now is how to fund this needs? Where to get funds to address those needs in the perspective of poverty alleviation (income generation for underprivileged people)? Who is going to provide funds to satisfy these needs?

Financing honey activities: who can finance what?
The act of commercialising honey is a business activity; therefore selling honey is doing business. Normally, in all business we know that the markets, meaning the customers, are the one that finance the business. The customers finance business activities by buying the goods made available to them by factories or producers. Customers generally buy products they can see and they can use. To raise money from customers the products has to be available.

In our own context, honey to be financed by customers has to be available in the market: it should be produced and sent to the markets. There is therefore a need for pre financing honey production. The issue now is who is going to pre finance the activities necessary to make honey available in the markets? And what are the needs that really need pre financing in our Cameroonian context?

From the study report presentation, we learn that the challenges for honey marketing in Cameroon has to do with awareness of the consumers, label or quality of the honey and supply meeting up with demand in some areas. Therefore financing honey activities in Cameroon means helping the sector to overcome these difficulties or to face these challenges which are: improving the quality of honey and increasing honey consumption.

Improving honey quality
To improve on the quality of honey, honey producers should improved the equipments they use (meaning buying more productive equipments) and improve on their production techniques i.e. acquiring new knowledge. This knowledge acquisition can be done through trainings, indoors or on the spot, or through internship. Knowledge development is an indirect production cost, it can not be directly charged to customer or finance by them. Such needs should be addressed by the beneficiaries themselves or through grants or public funds.

Increasing honey consumption
Meeting up with demand requires that more honey should be made available in all the potential consuming areas but also that sensitization of the population on the benefits of honey be raised. To have population more informed about honey, information campaign should be organised and accompanied with flyers, radio program, such campaigns should be promoted by public funds and non-profit organisations. Private organisations can also get involved since they are getting direct benefits for such campaigns and because of corporate social responsibility.

To increase the availability of honey to consumers, there is need to invest in the production capacity and building marketing channels and strategy. Those Investments should improve the productivity and make the products more accessible to consumers. These investments should preferably be financed by private funds.


We identified above the different ways that contribute to finance honey activities; we should discover where and how to access them.

Financing opportunities:
Based on the analysis made above we can say that financing honey activities needs a combination of development grants and private funds.

Role of funds
The private funds will contribute to make honey, a more marketable product available in quantities everywhere needed with a quality that opens all potential markets. These commercial funds will contribute in improving and increasing the processing capacities of honey, to increase the purchasing capacity of raw honey by processing units, as well as their ability to advertise their products and to explore new markets.

The development grants should contribute more in improving and increasing bee farming at rural and local levels. The development grants will increase the production capacity, in quality and quantity, at the base (beekeeping level). That could be done by direct financing of beekeepers training courses, by providing guarantee funds to increase access to loans for bee farmers at local level.

How to access these funds?
The access to development grants or funds is done through a presentation a project that can show the impact on the community at various level population, nature, economy, etc… these types of funds generally can only be source by non profit making organisations. For investment funds, the access depends on the presentation of a viable business plan that demonstrates how the given project can generate income over the years and reimburse the funds. All type of organisations can present a business plan to financial institutions; but because of security purpose private institutions (profit making) attract more funds than others

Financing the needs
To improve the production at primary level, beekeepers can use their personal funds or take loans from MFIs acting in their areas such Credit Unions affiliated to CamCCUL or at ACEP which is a Micro Finance Institutions who supports directly micro entrepreneurs. Such loans can be guaranteed by a guarantee fund provided by public administration. This concerns mainly the acquisition of equipment or materials. For knowledge development, the bee keepers should rely on their network or the association they belong to; if does not exist or function it should be created.

At processing level the same financing institutions can be targeted but the issues here is how to address them and who should do it; because at this level the exigency of profitability is more crucial. According to us, it will be more appropriate to a profit making company to lead in honey processing and marketing besides and in partnership with other institutions, civil society organisations, who will be in charge of capacity building (the federation or beekeepers associations?).

Grants as well as investment funds can be a source of funding at international level or national level.


A successful experience: Honey Care Africa
Established in March 2000, Honey Care Africa (HCA) is a socially responsible Kenyan enterprise, promoting small-scale beekeeping as an income generating opportunity for low-income rural households.

Honey Care works with small-scale farmers to provide:
§ training primarily for women and youth in commercial beekeeping
§ easy access to start-up financing to acquire equipment, like bee hives, for commercial beekeeping
§ improved beehive technology and harvesting techniques that increase productivity and protect the environment

How does this work practically: the triple model
This triple model involves HCA as the private sector organisation, beekeepers and development NGOs.

Honey Care Africa is a sales and marketing channel for the beekeepers. Once the honey is ready for sale, the organization purchases it at a fixed and competitive farm gate price. HCA then processes and packages the honey according to internationally accepted standards of operations, before selling it on the domestic and foreign markets. The enterprise provides a comprehensive package of services and linkages to other service providers. These range from training to start-up financing, technologies, and market access.

HCA works with beekeepers to whom they provide equipment and training. These operations are not free of charge. Development NGOs finance the trainings when the farmers can not afford it and they sometimes also provide the start up loans to farmers to buy equipment. The NGOs also provide capacity building to beekeepers.

Results so far
§ Honey Care provides extension services to 2,240 beekeepers, 50 percent of whom are women and youth with few economic opportunities in rural Kenya.
§ More than 1,500 beekeepers currently sell honey to Honey Care. Some double their annual income by selling their merchandise through other retailers.
§ Collaboration between Africa Now and K-Rep Development Agency (KDA), two Non–Governmental Organizations (NGOs), has increased the number of beekeepers by 25 percent in the last two years. In partnership with HCA, KDA offers a micro-leasing product that allows farmers to finance their honey production start-up costs and acquire productive assets (beehives) out of their future revenue streams.
§ In 2002, HCA and Africa Now won a Development Marketplace Award.
§ HCA is replicating the experience in Tanzania with the support of Grassroots Business Initiative (GBI) and Swisscontact.

A model for Cameroon context

Before proposing a model, we would like to present the actual situation.

The present picture
The honey sector is organised in 3 poles of activities: beekeeping, processing and marketing, capacity building. The present system has been picture in the scheme below (P1).

At primary level, the production level, beekeepers are made of two categories of people: individual beekeepers and Civil Society Organisations (CSO). The individual beekeepers who makes the bulk of the production are not organised in groups everywhere and when beekeepers associations exist they are not very effective. Beekeepers produce honey and sell it directly and individually to buyers (most often wholesalers who are the previous mentioned CSO or foreigners)

At the next stage, where processing and marketing activities are found, the leading actors are the CSO who buy in bulk to individual farmers. These CSO are sometimes not lead by active farmers. They process the honey bought at primary level, package it and sell it to customers directly or indirectly through supermarkets, shops, etc...

These CSO also provide others services to individual beekeepers like trainings. They are assisted technically and financially by international NGOs or development programs active in Cameroon.

A critical look at the present functioning, particularly processing and marketing shows that the resources at that level are not enough or appropriate, specially money, equipment and expertise. This can explain why honey production, in quantity and quality, so far does not tied with market demands and standards. This is his happening while a huge potential market exists. So there is room for investment. Then a question arises: why is it that, with this existing gap, the sector is not attracting more funds? Our observations and little contacts with the stakeholders inspire us two explanations.

The first explanation is the status of the actors. In fact, commercial funds are hardly attracted by business opportunities promoted by non profit making organisations. Secondly, we can mention the approach used; so far these actors, mainly civil society organisations, seems to be willing to develop commercial activities with development funds. But such gaps are better addressed with effective business approach.

A tentative new set up
Considering the above analysis we would like to suggest another set up through which we think the honey sector will attract more funds. This suggestion is summarised in the diagram below (P2). This proposed set up is presented in the following lines.

The production activities
For production, we would have individual beekeepers that will continue producing. Each of them owning a minimum quantity of beehives that will enable him to earn a substantial annual income. The access to beehives and other beekeeping equipments will be easier with loans provided by Micro Finance Institutions.

Individual beekeepers should be organised into groups that will form a federation. The federation should contribute in fostering beekeepers knowledge, will lobby for the beekeepers vis-à-vis public administration and should be involve in raising customers awareness.

The Processing and marketing activities
These activities should be lead by private companies who have obligation to make profit and that will buy honey at a fair price to beekeepers through their federation. These companies will make the necessary investment to equip themselves with human resources and materials that will enable them to produce honey in accordance with market needs and standards.

Due to their knowledge of the field and experience, we think that honey should be collected by CSO from beekeepers and then sold to private companies. This activity should be taken over after some time by the beekeepers associations. They could be supported by organisations like SNV to set up such a system.

The financing activities
These private companies will raise funds from directly from financial institutions such as Credit Unions, Union Bank of Cameroon, ACEP. These funds could be combined with funds from international programs that support private sector initiatives that can improve under privileged people income. Institutions like ICCO, IFC/GBI or Swisscontact are open to this type of initiatives.

Capacity building activities
Here we have to distinguish two levels. The first level concerns the beekeepers; they should benefit from training and technical assistance (including in management) provided by Civil Society Organisations or by their apex organisations. These CSO could also provide to them the material and equipment they needs to produce honey. These services should be provided to them on an increasing commercial basis; by this we mean that the price charged to beekeepers could be subsidised. The subsidies should decrease till the beekeepers are able to pay the real commercial price. This period should not exceed 3 years.

At the second level, the CSO becomes the beneficiaries. They will benefit from technical (and financial) support from others national and international, organisations. These services and other partnerships should enable to become effective service providers.


Abbreviations:
CamCCUL Cameroon Cooperative Credit Unions League
CSO Civil Societies Organisations
GBI Grassroots Business Initiatives
ICCO Interchurch Organisation for Development Cooperation
HCA Honey Care Africa
IFC International Finance Corporation
SNV Netherlands Development Organisation




References:
Ø Honey Care Africa factsheet, March 2006
Ø Honey and bee products market study report, May 2006
Ø www.ifc.org/gbi
Ø www.honeycareafrica.com
Ø www.africanow.org
Ø www.masterbeekeeper.org

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