Vanilla of Madagascar, a journey at the end of the world with a new partner

Before it enhances our ice creams, cannelés and custards sublime, did you know that vanilla had to travel a road full of pitfalls? For SIDI, Gabrielle Orliange travelled the vanilla trail to meet the cooperatives, from Madagascar’s capital, Tananarive, to the jungle around Mananara. We invite you to follow her, particularly on the day she reaches a particularly isolated area, and discover a new facet of the job of partnership manager at SIDI.

I live in Madagascar where I work part-time as a partnership officer for SIDI. Having identified a possible new partner in the agricultural sector, I needed to meet them in the field. MVE (Madagascar Vanilla Export) is a family-run SME that processes vanilla for export. It buys vanilla from two cooperatives of male and female producers, and also helps them to structure themselves.

After four months of e-mail exchanges, I organized a seven-day mission to meet them and present a detailed report to SIDI’s Financing Committee with a view to obtaining a loan.

MVE is based in Tamatave, about 400 kilometers from Tananarive, the capital of Madagascar where I live. Covering this distance took me a full day in a bush cab. Then I continued by 4X4 for two more days on bumpy roads, meeting producers in coastal areas.

Meeting in the highlands

On this fourth day, I have to reach a village near Mananara, located on the “high plateaus“1, in a very dense forest. It’s here, in this particularly remote area, that the best quality vanilla grows.

The track is too narrow for a 4X4, and we start with a two-hour ride through the mud. By the time I reach the village, some fifteen growers from the Label Vavasaha cooperative, which numbers around 500, are gathered in the village hall. I can tell they’re eager to show me their plantations. To do so, we have to go deeper into the jungle. We start by taking a pirogue, before finally clearing a path with a machete.

Once we arrived, they were very proud to show me their plots, where Madagascar’s finest vanilla is grown!

I can see big green beans hanging from the vines wrapped around the trees. Vanilla is a very demanding crop, requiring constant care. Native to Mexico, it has to be cut and the flowers fertilized by hand to produce vanilla.

At the end of the world

I’m struck by the isolation of these producers. It’s like being at the end of the world. Madagascar is already a lonely island. The vastness of its territory and the area’s lack of accessibility add to this feeling.

In a way, this isolation, which protects them from theft, suits the growers. But arriving after four days of acrobatic transport, I understand the logistical cost of growing vanilla. I have even more respect for MVE, forced to deal with this reality and its share of unforeseen events: broken-down cars, fuel supply problems. It’s not easy to get vanilla from so far away.

The second thing that stands out for me is how the value of vanilla has helped generate wealth. Even though these areas are very isolated, I see motorcycles everywhere, satellite dishes and 4X4s. Goods that are very rare on the agricultural plateaus near Tananarive, a less landlocked but poorer region that mainly produces rice.

Here, everyone grows vanilla, from a few beans to several kilos. This windfall benefits everyone, even if some benefit more than others.

For male and female growers, the difference lies in the way they sell their produce. Those who work alone find it harder to sell their produce at a good price. But those who manage to form cooperatives are able to negotiate and sell their produce at a better price. MVE is keen to buy vanilla from cooperative producers at a higher price than the market price.

Tour of the processing site

On the way home, I stop off at the final processing site in Tamatave. The MVE warehouse is located in a discreet, safe and secure area, with guards.

Here, vanilla is sun-dried for several weeks. The beans are then sorted before being cured in caissons to develop their aroma. After several months, they are checked and graded by quality before being packed for export.

In the final stage, the vanilla is sent to Tananarive before being shipped to Europe. The fragile beans travel by air. The more resistant powder can be shipped by boat. It takes no less than 90 days on average to reach France from Tananarive.

An extraordinary mission

This mission was a real discovery for me, even though I live in Madagascar. I’ve never been so far into the country. The other partners we work with on the island in the microfinance sector are much more accessible. This allows us to strike a balance. Although the partnership with MVE is financially more risky for SIDI, it fulfils our vocation of supporting the agricultural sector and strengthening this type of business.

As it is a structure that has never benefited from investments, SIDI’s loan represents real added value for it. This is what we call a “impact partner”, and I was able to measure its social and environmental commitment on the spot.

The loan was disbursed in the summer of 2024. Thanks to it, the vanilla could be purchased from the producers. As it does every year at this time, MVE is awaiting approval to export to European buyers. The sale of vanilla will allow MVE to repay the Sidi loan. If they manage to repay and meet the deadline, the loan can be renewed in 2025, enabling them to buy vanilla this summer.

 

Interview by Anne-Isabelle Barthélémy

 

1. These are high plateaus, but they have nothing to do with the Malagasy high plateau region, which rises to 1,500 m.

SIDI trip to Tunisia, local solutions to global challenges

At the beginning of November, a group of SIDI savers and solidarity shareholders travelled to Tunisia to discover how their investments come to life in the field. The trip enabled them to meet SIDI’s local partners and discover the projects supported, thus embodying the chain of financial solidarity that unites savers here and micro-entrepreneurs or small producers there.

Tunisia is facing multiple crises: democratic transition at a standstill, deteriorating public services, galloping inflation, very high unemployment, particularly among young people, large-scale emigration to Europe and Canada, illegal immigration from sub-Saharan Africa, etc. These political, economic and social challenges are compounded by environmental issues, in particular the water crisis exacerbated by recurrent droughts. Added to these political, economic and social challenges is the environmental issue, and in particular the water crisis exacerbated by recurrent droughts. In this context, SIDI’s partners, whether in sustainable agricultural sectors such as Beni Ghreb and South Organic, or in the microfinance sector such as Enda Tamweel, play a crucial role in supporting vulnerable communities in their economic development and improving their living conditions.

Enda Tamweel: microfinance for emancipation

Enda Tamweel has become the country’s leading Microfinance Institution (MFI): 472,000 customers for a country of 11 million inhabitants. SIDI has been a partner since its creation in 2015, when it acquired a stake in the MFI. Enda Tamweel offers small loans designed to support micro-entrepreneurs and small farmers in their economic activities. It primarily targets the informal sector (59% of its customers live below the poverty line), women and young people, and the rural sector with strategic support for agriculture. Today, the MFI is the leading financier of small-scale agriculture in Tunisia.

During our visits, we were able to talk to beneficiaries whose inspiring stories illustrate the impact of this organization. In a working-class district of Tunis, we met Amina, a shopkeeper and Enda customer for many years. Amina is on her 12th loan cycle with Enda, which has enabled her to expand her business, build up sufficient stock, send her children to school and secure her future. In another district, a sewing workshop supported by Enda for over 20 years now employs seven women, demonstrating that microfinance can be a lever for long-term sustainable development. In Kairouan, in the center of the country, another beneficiary impressed us with his small dairy cow farm. This project, which began with the purchase of a single cow thanks to a microcredit, has gradually grown to include seven cows and a fully-equipped barn. With the ongoing support of his specialist advisor, he now meets the strict standards of the local dairy, which collects his milk.

From the farmer who started out with one cow to the craftswoman who makes evening dresses and now employs seven seamstresses, these initiatives bear witness to the lasting impact of microfinance. This support goes far beyond the financial. Enda offers all its customers free training and local support, guaranteeing a strong relationship of trust between loan officer and beneficiary, as well as the sustainability of projects and genuine social inclusion. These initiatives transform not only individual lives, but entire communities.

South Organic and Beni Ghreb: innovation in the face of the water crisis

In southern Tunisia, water management is a daily challenge for farmers, especially date growers. We headed for the Hazoua oasis, on the Algerian border, where a family of producers has set up and runs a small business marketing and exporting Beni Ghreb dates. The company is backed by the Groupement pour le Développement de l’Agriculture en Biodynamie, which groups together around a hundred producers from the oasis. The dates produced are of the excellent Deglet Nour variety. Attending the date harvest on one of the producers’ plots is a magical moment. We were able to see the sprinkler irrigation system in place, which saves 70% of water consumption, and allows other crops to grow between the date palms, notably fruit bushes. We then visited the packaging unit, which employs around a hundred young women from the village. Beni Ghreb is struggling to maintain its autonomy in a very fragile economic context. The emotion was palpable when the founder recalled that, thanks to the financial support of SIDI, and therefore of its shareholders, the community had overcome major crises such as drought, insect infestations, and above all the Covid crisis which had halted exports. “This project is life for Hazoua,” he insisted.

South Organic, another of SIDI’s partner date-packing and export SMEs, located in Kebili, some 100 km to the east, is also tackling the water issue with innovative solutions. South Organic works with 200 certified organic producers and employs just over 500 people, most of them women. Accompanied by the director and quality control manager, we visited their Al Wahaat pilot orchard, where the hydraulic engineer in charge of the project explained the irrigation system in place. This system drastically reduces water wastage by targeting the exact needs of crops, storing water, and alternating irrigation techniques according to the time of year. With this optimal water management, the crop stages under the date palms (legumes, arboriculture etc.) are re-established and can provide growers with additional income while promoting local biodiversity. The pilot orchard is open to all farmers in the region; they are invited to visit the plot and adopt these new techniques, thus amplifying its impact on a local scale.

A universal message

Each stage of this journey illustrated the strength of concrete and effective international solidarity. The projects encountered, whether in microfinance or sustainable agriculture, embodied the values that SIDI stands for: perseverance, solidarity and respect for people. For the participants, the trip not only enabled them to see the impact of their investments, but also to nurture their commitment to fairer, more sustainable development.

How to remove barriers to financing agrifood organizations in developing countries

By Johan Thuard, West Africa Investment officer

In developing countries, financing agricultural activities represents a major challenge that is often underestimated. According to ISF Advisors, only 34% of the $160 billion needed each year to support the 220,000 small and medium-sized agricultural enterprises in Southeast Asia and sub-Saharan Africa is covered by formal financing[1]. This lack of financing creates an annual deficit of $106 billion, with serious consequences for the sector’s dynamism. In particular, its ability to meet the challenges of food security, job creation and reduced vulnerability for the 1.3 billion people who depend on agriculture in these regions [2].

This deficit is colossal; to better understand its scale, it is almost equivalent to the $113 billion allocated to fossil fuels by the main banks of the European Union in 2023 [3]. This critical situation cannot be resolved by the market alone.

But what explains such a deficit? At SIDI, through our experience as a solidarity investor active for over 40 years, we seek to shed light on this question. In this context, SIDI finances cooperatives and agri-food SMEs in developing countries. These organizations work with small-scale producers in support of family farming, both upstream – by facilitating their production and their transition to sustainable agriculture – and downstream – by developing outlets through the processing and marketing of agricultural produce.

We identify three major barriers to the mobilization of financing by agricultural organizations: problems of identification, preparation, and an imbalance between risk and return on transactions. These barriers particularly affect smaller, less mature organizations. These organizations find themselves in the “missing middle”, while also being ill-suited to the requirements of formal financiers (commercial banks, international financiers, donors, etc.).

This article looks at these three barriers, focusing specifically on debt financing, and proposes solutions to overcome them.

Better identification between agri-food organizations and funders

For agri-food organizations, particularly those with little experience of fund-raising, it can be difficult to determine which funders to approach, given the fragmented nature of the ecosystem. Each funder has its own strategic priorities, investment criteria and areas of operation, which can be highly specific and difficult to understand externally.

Similarly, for internationals, identifying new opportunities not yet financed by other players can be complex, especially for organizations that are not members of entrepreneurship networks or that operate in remote areas.

Finding new financing opportunities requires in-depth knowledge of the local economic fabric. This represents a challenge for investment officers, as the areas to be covered are vast. At SIDI, for example, each investment officer is responsible for three to four countries, so building up in-depth knowledge of local players is a gradual, long-term process.

To enrich our understanding of the field, we regularly collaborate with allied organizations, both local and otherwise. For example, SIDI invests in local I&P funds, such as SINERGI in Burkina Faso, which focus mainly on agricultural value chains. We have also established a partnership with the Ethiquable cooperative to finance and support some of their supplier cooperatives, and maintain close links with organizations specializing in agricultural value chains, such as Nitidæ. At the same time, we are strengthening our local presence with the opening of two offices in Lomé and Kampala, from which we conduct much of our business in sub-Saharan Africa.

The challenge of preparing to raise funds

Fund-raising is a complex process, requiring specific resources and skills. Sometimes, there is a gap between the prerequisites that funders may have to validate a transaction and the capacity of local organizations to meet them. This gap becomes particularly problematic when it involves the fundamentals – operations, social and environmental impact (particularly for impact funders), finance, team, market, or data reliability.

Developing cooperatives and SMEs are often not equipped to meet these expectations. This is particularly true of organizations that are growing organically and lack a strong management team. These organizations may also find it difficult to identify their own areas for improvement, or to overcome them on their own.

To overcome these shortcomings, it is important for organizations to have access to specific support to prepare them for financing. This is where SIDI’s offer, which combines financing and support, comes into its own. Based on a diagnosis by an investment officer, SIDI can offer not only financing, but also support tailored to the organization’s needs. SIDI works with several facilities, including the ACTES Foundation, the SSNUP program and the AT facility of the FEFISOL II fund, to meet the support needs of prospective and existing partner organizations.

There are also investment preparation programs that reinforce the fundamentals while supporting organizations in the preparation of their funding applications – market analysis, creation of business plans or other documents intended for investors. Some of these programs also include prospecting and matchmaking. There are many such programs, often financed by donors and implemented by consulting firms. Examples include Activ’Invest in Senegal, Invest Salone in Sierra Leone, and CrossBoundary, which helps agri-food companies raise funds in several sub-Saharan African countries.

The imbalance between risk and profitability in agricultural financing

A study carried out by Dalberg on 3,500 loans granted to agri-food SMEs by international financiers reveals that half of loans between €250,000 and €500,000 are not profitable.

One of the main reasons for this imbalance is the cost of risk, which is high and rising all the time. In particular, agricultural production is under increasing pressure due to its growing exposure to climatic disturbances. Furthermore, agri-food organizations often operate in markets where product supply and demand are not systematically correlated. As a result, some sectors experience cyclical crises, putting operators under pressure and increasing the risk of default.

This risk puts a strain on the market, which then concentrates on certain well-defined segments:

  • Organizations with a lower risk profile, generally larger, more mature organizations with a solid financing history and/or able to offer guarantees.
  • Short-term financing, often in the form of working capital, instead of medium-term loans to finance equipment or investments
  • High financing rates to cover transaction costs

As a result, the market remains relatively static, with a limited number of organizations already known to the sector and funded, and little openness to new partnerships.

For a financier like SIDI, whose mission is to be additional, in particular by acting as the leading international investor for certain partners, managing this risk is an essential challenge. This is achieved through several approaches: on the one hand, portfolio diversification across different sectors (such as microfinance and agriculture) as well as more or less mature organizations; on the other hand, SIDI’s business model enables it to take greater risks, thanks to its philanthropic shareholding and access to certain guarantee tools.

These elements are essential if we are to ” intervene where others do not go “, and thus support high-risk organizations, sectors and regions. This also gives us the opportunity to finance particularly risky organizations and/or not be profitable on certain transactions when this is justified by high additionality and a significant social or environmental impact. From this experience, we see the need to have access to guarantee mechanisms or subsidies so that financiers can be more additional, have more impact and thus make the sector more dynamic.

Effective solutions already exist, starting with the Aceli program in East Africa. This program, dedicated to financing the agricultural sector, offers financiers subsidies to reduce transaction costs, and guarantees to reduce the cost of risk. The value of this program also lies in its ability to minimize market distortions, while encouraging financiers to support the least well-served companies: grants cover only part of the costs, and are higher for companies that have never raised institutional funds, or that have a higher social or environmental impact. This is the kind of example that deserves to be better studied and replicated in other regions, given its proven effectiveness.

In a context where the vulnerability of producers and the challenges of food security are increasingly pressing, it is crucial to work towards reducing the barriers to financing agri-food organizations in developing countries. In addition to offering some food for thought, this article is an invitation to all those who wish to collaborate and develop concrete solutions for a more dynamic, socially just and ecologically sustainable sector.

Johan Thuard, West Africa Investment officer

[1] ISF Advisors, The state of the agri-SME sector – Bridging the finance gap, 2022

[2] ISF Advisors estimates that this concerns 260 million households – ~1.3 billion people – who consider family farming to be an integral part of their livelihoods in Southeast Asia and sub-Saharan Africa.

[3] Banking on Climate Finance Chaos, Fossil Fuel Finance Report, 2024

A strong commitment for Forest Fruits in Zambia

[chapeau] Despite the health situation and the temporary suspension of field trips, SIDI is continuing its activities and, at the end of the year, opened a new partnership in Zambia with a company that processes and markets honey products. For SIDI, this is both an opening to a new country of intervention, and a major first in terms of support for the beekeeping sector.[/chapeau]

Since 1998, Forest Fruits has been collecting, processing and marketing beekeeping products for local and international markets. It buys raw honey produced by certified organic (Ecocert) Zambian beekeepers at a remunerative price, and processes it at its Mwinilunga factory. The social enterprise then transports the production to its packaging plant in Lusaka, where the finished product is exported to the sub-region (Zambia, Botswana and South Africa) and abroad. In addition to marketing forest honey for direct consumption, Forest Fruits is developing several types of processed honey-based products (beeswax flakes, candles, honey mustard, etc.). In recent years, thanks to technical support from FEFISOL[1], the company has developed the production of honey vinegar by fermenting lower-quality honey.

Most of the company’s business and its supplier beekeepers are located around the Mwinilunga district. In this isolated region with little economic dynamism, beekeeping is traditionally practiced and represents a considerable source of income for families. Thanks to Forest Fruits, producers benefit from higher remuneration and training to improve the quality of their honey and diversify their agricultural production (trials underway for tea tree production, for example). To develop the region, the company, which currently employs 63 people, also favors local recruitment, and training to enable its employees to upgrade their skills.

Forest Fruits’ business is directly linked to the bees’ honey production periods. Harvesting is spread over two periods of the year, depending on the flowering cycle of the Zambian forests in which the honey is harvested. In such periods, the company needs working capital to enable it to pay producers in cash. FEFISOL has been funding Forest Fruits campaigns since 2014, but this year the fund, which is in transition, was unable to commit to funding for 2021. SIDI has therefore decided to step in and support the next honey campaign by granting a line of credit of $750,000 over 12 months. This loan, backed by several regional and international buyers, will enable the company to purchase 600 tonnes of raw honey at a remunerative price for beekeepers as soon as the harvest is complete.

Despite the current context, SIDI continues to innovate by opening this partnership with Forest Fruits, to contribute to the economic, social and environmental development of a remote region of Zambia.

To find out more about the Forest Fruits social enterprise: https: //www.zambezigold.com/

[1 ] European Solidarity Fund for Africa, managed by SIDI.

News from UCLS in Madagascar

A long-term partnership

The Union des Coopératives Lanzan’ny Sambirano (UCLS) is a Producers’ Organization (PO) for cocoa beans located in Madagascar around the Sambirano valley near Ambanja. It was created in 2010 by an association, ADAPS[i], whose aim was to structure agricultural value chains. The UCLS was therefore originally institutionalized by a local development association. SIDI’s partnership manager in Madagascar, with her knowledge of the country and its stakeholders (NGOs from the North, in particular AFDI, the French NGO for the Development of the Industrial Sector), was responsible for the project.[ii]), came into contact with UCLS at a time when SIDI was seeking to strengthen its commitment to agriculture. UCLS and Ethiquable[iii] also wanted to commit to a long-term business relationship.

Ups and downs, but a continuing partnership

SIDI’s first financing operation took place in 2011, with the aim of pre-financing UCLS member cooperatives to enable them to acquire certified organic cocoa beans for export (12.5 tonnes, equivalent to 1/2 “standard” container). Today, SIDI financing enables UCLS to export almost 250 tonnes of certified organic cocoa beans a year. This partnership has not been linear, as UCLS has suffered slowdowns in its activity and misappropriations, which led to the suspension of SIDI funding in 2016. However, SIDI, along with other players, continued to support the Union by providing assistance, in particular in strengthening the organization’s accounting function.

Results today

Beyond the quantitative results, with volumes rising from 12.5 tonnes of cocoa exported in 2011 to almost 250 tonnes today, UCLS has made progress in its organization, reach and member loyalty. It has grown from 6 cooperatives at the start of its activity to almost 20 today, with between 300 and 400 producers depending on the year, who supply it with increasing quantities of cocoa. The relationship is established and the trust present so that growers regularly supply their cooperatives (instead of selling to others).

Despite the difficulties mentioned above, the organization has adapted to the needs of its members. It has succeeded in structuring 20 small cooperatives and supported them in the process of certification by Union agricultural agents. Despite the state of the infrastructure, UCLS manages to send containers of cocoa on a regular basis to meet its annual contracts with Ethiquable and Valrhona.[iv]. Today, the UCLS is looking forward to the collection campaigns with a little more serenity. Its campaign financing resources are more diversified (self-financing, SIDI financing, buyer’s advance, supplier’s credit) and larger.

And challenges

Despite the situation linked to the COVID-19 pandemic, SIDI and UCLS intend to continue working together. SIDI’s long-term approach makes it possible to tackle certain challenges, such as strengthening the structure’s administration without overburdening its processes and costs, increasing income for producers, integrating the smallest producers into cooperatives, and encouraging young people to take up cocoa farming.

Jean-Marie CAVARROC,

SIDI Partnership Officer

[i] Association for the Development of Agriculture and Farming in Sambirano (ADAPS)
[II] Agriculteurs français et développement international (Afdi), an international solidarity association that builds partnerships between French farmers and those in developing countries.
[III] Ethiquable is a French cooperative specializing in the sale of organic fair trade products.
[IV] Valrhona is a French food company specializing in cocoa processing.