Local Economy Takes Root in Liberia (re-post)

Reblogged from Peace Dividend Trust – published on Sept. 28, 2011

How do corporations secure natural resources (such as rubber) in a sustained way over a long period of time – knowing that most resource-rich countries are also usually prone to instability? The way corporations have traditionally done so is by signing long-term deals with the government of the country (be it a democratically elected one or not) and providing some basic services to the employees it hires (usually as little as their company’s Corporate Responsibility allows) – Firestone style. This old model is attractive because it is financially viable.

But today’s world has changed, and it requires a new way of doing business. In recent years, a few pioneering organizations have started asking themselves: how can you develop natural resources while promoting rural development and empowering smallholders? In the context of Liberia’s rubber industry, FarmBuilders has been working on an answer to this question since 2009.

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Rubber is Liberia’s top contributor to exports; but production is far below potential.
In the 1950s, rubber powered Liberia’s economic growth at 8 percent. Untended and destroyed by passing militias during the war years, hundreds of thousands of acres of trees are now idly unproductive. Replantation halted when rebels forced smallholding farmers from their land. The trees are now old and no longer produce enough rubbers to ensure survival for the farmers who own the small plots of land. Farmers need credit to rebuild their farms; but in a credit-constrained country, their enterprise is too small for commercial banking and too big for microfinance. With the financing and management shortages they face, it is risky business.

Along comes Buchanan Renewable Energies (BRE), which identified in those unproductive farms an unexploited business opportunity. There is a global market for rubber wood, used for furniture production and power generation. So BRE offers to buy the old, non-productive trees and turns them into a carbon-neutral biomass energy source for domestic and international power markets.

Unlike traditional out-grower or contracting arrangements, FarmBuilders forms joint ventures directly with smallholder farmers and sells the old, non-productive, trees from its farms as biomass to BRE. This brings immediate revenues into the farms and lowers the initial cost of clearing the unproductive farm. All that the farmers now need is the investment to replant and maintain their land, and the skills to manage it into a sustainable venture. In a true partnership, FarmBuilders provides them with the long-term financing and agricultural management services they lack.

The power of FarmBuilders’ experiment is that their model is applicable to any cash crop that requires longer than a year to grow. If proven to be a viable socially responsible way of providing natural resources to the market, this model could provide an opportunity to transform the lives of millions of farmers worldwide.

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