Local para-vets in Cajamarca, Peru
Trust and win-win relations transforming dairy markets
In Cajamarca (Northern Peru), Practical Action has been facilitating a transformation in the local dairy market. The protagonists of this story are the Livestock Promoters Association and a local agri-vet distributor. The drive of the Association to solve their problem of access to credit drove them to build a win-win relationship and a sustainable business model that is bringing tangible benefits to 1,500 marginalised milk producers.
It all started in 2003, a meeting of the Association where their twelve members realized that they were loosing efficiency by purchasing inputs independently. They decide to buy in bulk to get better prices.
Promoters use to sell inputs to milk producers and generally complement them with some sort of technical advice. But they were not reaching as many clients as they could because many of them cannot pay on the spot; they needed credit (15-30 days) because they normally get paid by buyers every 15 days. At the beginning the promoters were not legally registered and therefore did not have the conditions to apply for a formal credit in a bank.
This situation led the Association in 2004 to look for a solution in another actor of the market system: a local agri-vet distributor. After reaching an agreement on the rules and signing a contract, the Association deposited a guarantee fund in the distributor’s bank account.
The key points of this contract were:
• The promoters have 30 days to pay back to the distributor; this in turn allows the former to sell to farmers on credit. If the promoters default, the distributor takes the money out of the fund
• The distributor facilitates the access of promoters to training and updates according to their needs. If there are new inputs or skills that promoters want to know about or acquire, the distributor organizes and pays for visits by experts from the corresponding laboratories. This contributes to customer satisfaction and gives the promoters an opportunity to build direct relationships with the labs .
• The distributor channels promotional material (e.g. pens, hats, posters, T-shirts, etc) through the promoters. This contributes to customer loyalty and satisfaction
• The distributor covers the costs of radio spots to publicise the services provided by the promoter in their areas of influence. This broadens the client base.
The Association began with 12 promoters and it stabilized in eight members. The other four still provide services on their own but are not part of this agreement. Members with relatively lower levels of leadership and commitment have left the group and some other had to migrate to other areas due to personal reasons. Practical Action used this experience to improve the training curricula for promoters by adding subjects on leadership, relationships with clients and business negotiations.
The fund operated for three years; enough time for the promoters to build a track record of good payment and for both sides to build trust. The fund then returned to the Association who then invested it in technology and skills to keep on improving the quality of their service. Since then, relationships between the Association and the distributor occur autonomously without any kind of support from Practical Action.
Recently the Association decided to invest more than 1,300 USD or their own funds to buy more inputs and establish an animal health station in the Alto Llaucano to provide technical assistance, training and information services to nearby clients.
Click here if you want to listen to an interview (in Spanish) with Maria Sol Blanco, the person who has been facilitating this process.