Madagascar - Farmer Ownership Model (FOM) Project

Report No. PID7976 Project Name Madagascar-Farmer Ownership Model (FOM) Sector Agriculture Project ID MGPE65928 Borrower Republic of Madagascar Implementing Agency Ministry of Agriculture Date this PID prepared July 20, 1999 Projected Board Date January 10, 2000 1. Background: Madagascar has thousands of poor, small, subsistence farmers who are barely producing enough food for family consumption. These farmers have no means of increasing their yields and outputs or to gain access to competitive output markets. Subsistence farmers live in abject poverty which is a never ending cycle and to this date, no real solutions have been developed to empower them to earn a reasonable livelihood from agriculture. 2. The Farmer Ownership Model (FOM) is a new approach by the World Bank to eliminating rural poverty and subsistence agriculture. The FOM is discussed in detail in the attached document. 3. Project Scope and Objectives: The proposed FOM project will be located in the southern part of the country and will include approximately 750 farmers and 1200 hectares of irrigated rice. The project was part of the World Bank's Irrigation Project. These farmers own and farm 1 ha or less each and most of the farmers have no access to working capital finance or credit. During field work with these farmers, it was determined that a high percentage of them do not produce sufficient rice for family food requirements. 4. Eight farmer associations will be part of this project. The associations will form a new limited company and the World Bank will make a loan to the farmers for the purchase of 100t of the company's shares. This not only creates farmer ownership of the business based on their crops, it also injects required working capital and capital investment into the project. Loan periods are 12-15 years with 5-7 year grace period. 5. In addition to production of rice on this irrigated land, the farmers will also begin production of a second crop of vegetables or other crops. The FOM will include financing for this second crop and the management of the company will oversee the second crop. This should significantly increase farmer incomes. 6. Environmental Aspects: The FOM forbids slash and burn practices, burning of refuse on the land, and indiscriminate use of agricultural chemicals. The production manager of FOM will enforce this rule and any farmer who disregards this aspect of the FOM will be dismissed without recourse. In addition, the production manager will work with farmers to prevent soil erosion and use environment friendly farming techniques. 7. Benefits: The major benefit will be a radical increase in farmer incomes plus a reliable supply of rice for family consumption. Further, the FOM is a model which has replication capability and can be readily replicated across several subsectors. 8. Risks: The risks faced by the FOM are typical commercial risks that any commercial venture faces. These may include resistance from the middlemen who now purchase the crop at very low prices, failure of farmers to adjust and adapt to the FOMM requirements, weather and market conditions.  Contact Point: Lynn Engstrand The World Bank Email: Lengstrand@worldbank.org Phone: 202 473 2498; Fax 202 477 1822 InfoShop The World Bank 1818 H Street, NW Washington, DC 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Processed by the InfoShop week ending July 23, 1999. Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. - 2-