Musa Processing Businesses Their Contribution to Rural Development

C. Staver1, R. Junkin2, W. Flores3, I. Gonzales4, S.O.S. Akinyemi5, G. Ngoh6, D. Banda7, M. Byabachwezi8, C.K. Narayana9, N. Masdek10 and A. Arganosa11 1 Bioversity International, Parc Scientifique, 34397, Montpellier, France 2 El Centro para la Competitividad de Eco empresas, Centro Agronmico Tropical de Investigacin y Enseanza, Sede Central 7170, Turrialba, Costa Rica 3 Centro Nacional de Ciencia y Tecnologa Alimentos, Universidad de Costa Rica, Cdigo Postal 2060, San Jose, Costa Rica 4 Universidad Nacional Autnoma de Nicaragua, Apartado Postal 68, Len, Nicaragua 5 The National Horticultural Research Institute, P.M.B 5432, Ibadan, Nigeria 6 Centre Africain de Recherches sur Bananiers et Plantains, B.P. 832, Douala, Cameroun 7 Bvumbwe Agricultural Research Station, P.O. Box 5748, Limbe, Malawi 8 Agricultural Research and Development Institute, P.O. Box 127, Bukoba, Tanzania 9 National Research Center for Banana, Thogamalai Road, Thayanur Post, Tirupachilli 620102, Tamil Nadu, India 10 Malaysian Agricultural Research and Development Institute, P.O. Box 12301, 50774 Kuala Lumpur, Malaysia 11 Philippine Council for Agriculture, Forestry and Natural Resources Research and Development, Los Baos, Laguna, Philippines Keywords: banana, business support services, poverty reduction, plantain Abstract Processing is often proposed to solve the seasonal surplus of bananas and plantains (Musa spp.), to reduce losses from spoilage and undersized fruits and to increase farmer incomes. To examine the contribution of small agro-industries to rural development in banana producing areas, study teams from nine countries in Asia, Africa and Latin America categorized current Musa processing businesses by type of product, size of firm and technology used, determined their strengths and weaknesses, and surveyed diverse categories of business service providers used by the processing businesses. Country teams met in October 2006 in Manila, Philippines, to draw conclusions across regions. In the nine countries less than 5% of dessert bananas, about 24% of plantains and between 3040% of cooking bananas produced were processed. Common products included chips, dried sweet bananas, beer, wine, juice, sauce, baskets and mats from banana fiber, and banana-flavored milk products. Although Musa processing enterprises play an important role in the livelihoods of thousands of poor households, their significance as tools for rural development is limited by a number of factors, including seasonality of production, price competition from the fresh fruit market and quality issues. Limitations can be overcome to some extent by systematic and sustained investment in the business services accessible to rural populations and in the management capacity of microand small businesses. INTRODUCTION Market-oriented growers of banana and plantain (Musa spp.) throughout the tropics frequently face difficulties in selling their production. Especially under rain-fed conditions, seasonal surpluses result in low prices and unsold fruit. Throughout the year undersized fruits cannot be sold and spoil on-farm or are sold with a price penalty. Processing is often proposed as a means to reduce fruit loss and to increase smallholder farmer incomes. Exploring the potential for adding value through processing, however, calls for looking beyond the farm gate to the value chain (Kaplinsky and Morris, 2000). Economically viable processing enterprises, whether under the management of growers or urban operators, depend on the business support environment made up of the numerous
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services for inputs, machinery and equipment, technical assistance, and financing that a business operator uses to produce and market his or her products. The support environment also includes public policies such as licensing and inspection systems, taxation and investment incentives, among others. A full range of accessible business services is the key to assuring the development and competitiveness of production and processing businesses, especially for the benefit of rural communities. To shed light on the potential for processing to resolve production problems such as seasonal production and undersized fruits, a study was undertaken in nine countries with existing Musa processing businesses with the following objectives: (a) characterize Musa processing businesses and their technical support environment; (b) profile major issues faced by Musa processing businesses in terms of supply, services and potential for expansion; and (c) assess the potential for small agro-industry to contribute to rural development among small growers in banana-producing areas. METHODS Musa agronomists from nine countries in Asia, Africa and Latin America (see Table 3 for countries) partnered with food technologists and small-business advisors to carry out a survey of Musa processing businesses and their business services support environment. A common method was developed and applied by the teams in each country. Survey stages included: (a) the development of a preliminary overview of Musa processing in the country, focusing on the principal products, types of enterprises, technical and business services available, ongoing projects and productive potential; (b) a participatory workshop with key actors to deepen the analysis and map the sector, defining key points of interaction, opportunities and barriers to growth and development; (c) case studies of Musa processing businesses; (d) interviews with service providers; and (e) presenting and refining results with key actors in focal groups. All country teams met in October 2006 in Manila, Philippines, to present their study results, compare enterprise types and business support environments across countries and estimate its cover of rural populations. The methods guide and full country reports are available through Bioversity (2007). PROCESSING AND THE BUSINESS SUPPORT ENVIRONMENT Processed Banana and Plantain Products About 5% of the total dessert banana production in the nine countries is processed. Costa Rica and India account for a large share of this total through the processing of reject bananas from high input Cavendish (AAA genome) plantations into banana puree and juice for export. AAA bananas are also processed on a small scale for juice, beer, flour, dried bananas and as an ingredient in different snack foods which are made daily on the street (Table 1). About 24% of plantains are estimated to be processed for sale. India, Cameroon and Nigeria are the three countries in the study producing the most plantains and also account for the largest volume processed. The most common products are plantain chips, sweets and roasted plantain as a street food (Table 1). Between 30 and 40% of the cooking banana production (East African highland bananas, AAA and ABB genomes) is sold processed as beer, alcohol, chips, catsup and snacks. Much of this total is processed in the Philippines, where millions of young students buy a bananacue every day as an after-school snack (Table 1). Typology of Banana and Plantain Processors Five different types of processing businesses were identified (Table 1), similar to the types proposed by Fellows and Axtell (2001). Two types of micro-businesses were found, ranging in number from hundreds to thousands in the countries where they were found. The smallest of these micro-businesses prepare and sell a single product in the street each day and were found in the four countries of Africa and the Philippines. The 226

micro-businesses based at home or in a small workshop represent a slightly larger scale of operations, producing products including chips, banana beer, banana-based alcohol and banana fiber handicrafts. This type of micro-business is found in the great majority of the countries in the study. The next category represents small- to medium-sized businesses. These produce a single product or a wider range of products, which are identified with a label, contact information and licenses. The businesses are legally registered and appear in national statistics. Chips are their most common product, but they also produce jams, relish, alcohol, wine and dried bananas. This type of business is much less numerous than the micro-enterprises. Per country the number found ranges from a few to 50 businesses. A special category was designated for businesses promoted through donorfinanced projects, which produce specialty products for the local market and occasionally for export in small quantities. They produce products such as banana fiber paper, dried bananas, wine and banana-flavored yogurt. In Costa Rica, growers associations have also been financed to set up processing plants to export pre-processed plantain foods. Large businesses with modern technology for using Musa in their products were found in all countries, although in very small numbers. These businesses produce puree and juice, banana-flavored milk products, wine, chips and pre-prepared frozen products. The country with the highest percentage of processing is Costa Rica that exports a diversity of processed Musa products. Countries such as Tanzania, Malawi and Philippines have significant added value by micro-enterprise processing. In Tanzania, rural households add value by producing banana juice, beer and distilled alcohol. In the Philippines, urban micro businesses add value to cooking bananas as bananacue. Availability of Business Services The quality and availability of services used by the different size enterprises varied (Table 2). Micro-enterprises across countries employ simple, widely available inputs and locally crafted, low cost equipment. As the size of the enterprise increases, the quality of the services and equipment increases. All countries had large companies using banana or plantain in processing with up-to-date equipment and specialized packaging. A ranking of the regions/countries by the availability and quality of services indicates that in Costa Rica equipment, packaging and technical and business assistance are dynamic services that target export and middle income national markets. On the other extreme, the banana juice and its derivatives and other products produced widely in the Kagera District of Tanzania require only village-based equipment. The business support environment in Africa was generally more limited than in Asia or Latin America. All the regions/countries studied have begun to focus programs on promoting added value to primary agricultural products as a component of rural development, but there is substantial difference in the extent of these programs. Costa Rica has numerous initiatives to link production to processing and to generate added value for growers associations. These include training services in agro-industry for workers, young entrepreneurs and farmer associations, and credit for cooperative processing. India and the Philippines also have diverse programs to allow rural communities to generate added value. In Africa, non-governmental organizations (NGOs) are playing a leading role in adding value for poverty reduction and the public sector also has incipient initiatives. The rural population with easy access (close proximity or skills for seeking advice) to public or civil society services to support its efforts to add value through processing indicates the difficulty for marginal families or communities to successfully develop processing enterprises. Only a very small percentage of the population in Africa has access to the limited services available. This situation is better in Asia, but even so the percentage remains low. Costa Rica has achieved a higher degree of accessibility based on good infrastructure and multiple programs dedicated to capacity development. CONTRIBUTION OF MUSA PROCESSING TO RURAL DEVELOPMENT The study showed that processing is not a clear solution to problems of low price 227

and seasonal gluts or market access, even though it has a potential to contribute to rural development. This is due to several key factors. Currently, processing capacity is limited and therefore not set up to absorb large seasonal pikes in production. Short term increases in the amount of production that is processed are not likely. Many of the products based on banana and plantain are perishable and cannot easily be stored for later use. From the point of view of the processors, the more limiting problem is the lack of raw material and high prices in certain seasons of the year. In addition, processing businesses pay the market price or lower. When plantain or banana prices increase, processors suspend their production lines rather than pass short-term price fluctuations on to the consumers of their products. Many of the processed foods, primarily consumed by local mass markets, are low cost and readily available. This market does not appear to have much potential for expansion. The growing middle class market with increasing disposable income for preprocessed foods and innovative snack foods is still limited in most of the nine countries. Export opportunities exist in most countries but the volumes and the quality requested were usually beyond the production capacity for raw materials and beyond the managerial capacity and the service capacity of the majority of enterprises in the countries studied. At the same time that the limitations listed above exist, Musa processing is extremely important for thousands of micro-enterprises from marginal households as an essential part of their livelihood strategy. Similar to other subsistence-level enterprises, however, very few of these businesses grow from micro to small businesses. These microbusinesses are quite skilled in operating with minimal resources and they know their markets quite well, but they do not have the skills and access to service providers to develop new products or markets. At the same time, as taxation and health regulations in developing countries become more stringent, some enterprises prefer to stay small and informal, thus avoiding the inspection and supervision required of legally registered businesses, a situation mentioned in Nicaragua and India. In countries such as Costa Rica, regulation has already led to the elimination of the informal street food businesses. Finally, the study teams felt that business owners and operators needed additional skills and resources to access services and information to resolve problems in their processing and marketing and to identify and take advantage of opportunities for new products or markets. This problem is aggravated by the limited services available and the inaccessibility of most service providers to poor, marginal or rural households. Only a very few of the businesses profiled in the nine countries were owned by banana and plantain producers, which means that the value that is added does not often translate into higher income for producer groups. Some exceptions to this include Costa Rica that has been able to develop farmer associations that operate processing factories, Malaysia where one of the analyzed chip factories also had plantain plantations and the Kagera District in Tanzania where thousands of household businesses produce banana juice, beer and alcohol using rudimentary equipment. However, increasing sanitary regulations, competition from beer and rum and the lack of support services to upgrade household-based processing may threaten Kageras informal banana juice businesses. The findings of this study agree with the results of the Asian Development Bank (2000), which concluded that to be successful, initiatives for rural poverty reduction through agro-industry depend on economically viable businesses with market-driven linkages to small growers as a source of raw materials. Production systems must be designed, farmers trained and inputs supplied to produce raw material meeting quality standards and available in dependable and predictable supplies. The processing facilities themselves require reliable infrastructure clean water, power and efficient transport. Micro-processing businesses were not considered useful for rural poverty reduction. CONCLUSIONS Musa processing enterprises play an important role in the livelihoods of thousands of poor households. However, their significance as tools for rural development is limited by a number of factors, including seasonality of production, price competition from the fresh fruit market and quality issues. Benefits from processing are often captured by 228

urban populations, or rural populations not directly related to the production process. At the same time, the cases of Costa Rica, Malaysia and Tanzania show that processing has the potential to contribute to rural development through providing additional income to small-scale producers and eventually to allow for a scale-up of rural-based enterprises. Rural community enterprises among small-scale producers and other households are crucial to bring growers together to overcome barriers of scale (Stoian et al., 2008). Each country must find its own approaches, but the case of Costa Rica indicates that systematic and sustained investment in the business services environment increases opportunities for small rural processing businesses. Literature Cited Asian Development Bank. 2000. A Study on Ways to Support Poverty Reduction Projects. Final Report. ADB/TA, Manila. Bioversity. 2007. www.platforms.inibap.org/processing Fellows, P. and Axtell, B. 2001. Setting up and Running a Small Food Business. CTA, Wageningen. Kaplinsky, R. and Morris, M. 2000. A Handbook for Value Chain Research. IDRC, Ottawa. Stoian, D., Donovan, J. and Poole, N. 2008. A Global Review of Rural Community Enterprises. Technical Bulletin No 29. CATIE, Turrialba.

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Tables

Table 1. Musa products produced by five types of processing businesses and their strengths and weaknesses. Type of business Microenterprises: single product prepared and sold on the street Microenterprises: single product prepared at home for sale on street or from home Small to medium enterprises: foods or snacks with company label and license Micro and small enterprises promoted by nongovernmental organizations (NGOs) Medium to large businesses with modern processing technology Products/countries Philippines bananacue; Cameroon banana fritters, roast plantain; Nigeria dodo ikere, roast plantain, chips; Tanzania balagala, roast plantain; Malawi pancakes, snacks, muffins India chips, sweets, handicrafts, fibres; Nigeria chips, beer; Nicaragua chips, sweets, baked plantain, vinegar, choco banana; Tanzania beer, brandy; Malawi snacks, pancakes, muffins; Costa Rica, Cameroon chips Chips Nigeria, Malaysia, Philippines, Costa Rica, Nicaragua, Cameroon, India; Banana relish, juice, jam, figs, sweets India; Flour Nigeria, Cameroon; Banana catsup Philippines; Alcohol Cameroon Strengths Simple, low cost technology, labor intensive, quality control by consumer, daily cost accounting, low sale price Simple, low cost technology, labor intensive, daily price accounting, low sale price Weaknesses Difficult hygiene on street, precarious finances, minimal shelf life, not licensed or regulated, raw material supply Labor efficiency, minimal shelf-life, not licensed or regulated, raw material price and supply

Dried Musa Cameroon, Tanzania, Nicaragua, Costa Access to training Uncertain financial Rica; on management, sustainability, Wine Malawi, Tanzania; access to technical services not always Paper products and training, available locally, handicrafts Tanzania, access to financing, market potential Nicaragua, Malawi, India; new products for uncertain, Frozen foods Costa Rica; new markets small volume Yogurt Nicaragua; Frozen foods Costa Rica; Dairy products Cameroon, Business strategy Costa Rica, Nicaragua, India, and management; Raw material price Malaysia, Malawi; volume production and supply; Puree Costa Rica, India, for cost reduction; high cost product Philippines; access to not accessible to Chips Costa Rica, Nicaragua, international low income classes India; technology and Flour Nigeria; Wine packaging Tanzania

specialized Traditional products Need services and for popular taste, external financing diverse product mix, to expand, licensed/regulated to dependent on permit expansion, public services, technology/packing vulnerable to cheap can be upgraded, imported strategic business substitutes or management changing tastes

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Table 2. Services employed by five categories of processing business.

Type of processing business Micro/small: nonMicro: homeSmall: snacks governmental based labels license organizations (NGOs) Public food Public food scientist, input scientist, outside and equipment expert New paper, New packaging: plastic bags, polypropylene, Like small recycled bottles, plastic container, business bring your own bottle vessel Paper labels or printed bags, Like micro and laminated or small business aluminum bags Bulk purchase, Local markets grower or trader Local markets contract Sourced by Spices, flavors, business preservatives advisors Higher quality Like micro and Utensils for and larger than small business larger batches micro Dryers, stoves, Stoves, large large pans, Like micro and pans, storage worker safety small business containers equipment Stoves, scales Plastic bags, sterilizers, sealers dryers, sealers Accounts, Training courses finance plans University food University food science science On job or from On-job, Training on new similar business, occasional public products family courses Government Grants credit, friends Worker safety, permits and inspections

Type of service provider Technical assistance on processing Simple packaging

Micro: street

Large: modern In-house or international contract Sealed with minimal handling, product brand Bulk purchase, grower contract or network Imported directly Specialized for efficiency and food safety Imported directly, worker safety equipment Specialized product lines, custom design Specialized in house University food technology In house Bank credit or parent company Worker safety, in house labs, permits and inspections

Used paper, plastic bags, sticks Local market Simple tools

Advanced packaging Raw materials/ basic inputs Specialized ingredients Hand equipment Small scale equipment Industrial equipment importers Business services Courses in processing Practical training in processing Credit Standards for food safety, labor and environment

On job, family

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Table 3. Quality and accessibility of business support environment for the promotion and expansion of processing businesses among rural communities in nine countries. Country (region covered in study) Nigeria (Lagos/ Ibadan) Cameroon (YaoundeDouala) Malawi (southern region) Tanzania (Kagera District) India (Tamil Nadu state) Malaysia Philippines (Southern Tagalog Region) Nicaragua (Pacific) Costa Rica (whole country) Technical and business service availability (1=low; 9=high) 4 Services that facilitate establishment or upgrade of micro and small businesses/programs for rural enterprise development Small/medium enterprise agency; Women in food processing (nongovernmental organizations (NGOs)), National Horticultural Research Institute, Universities (Abeokuta, Ibadan, Ile-Ife) Few NGOs, Centre Africain de Recherches sur Bananiers et Plantains, Small scale dryer workshops Development Malawian Enterprises Trust, Malawi Industrial Research and Technology Development Centre Few NGOs in food processing, Agricultural Research Development Institute District Rural Industries Project, State government rural agro-industry plan, Banana Product Cluster Project, Ministry of Food Processing, National Banana Research and Development Centre Malaysian Agricultural Research and Development Institute Provincial Science and Technology Office; Department of Science and Technology Provincial Centre, Technical Education/Training Authority; National Research Centers in Food, Nutrition, Industry and Packaging, Universities (Cavite, Los Baos), Credit services Small/medium business institute, Few NGOs in food processing, University (Leon) National Training Institute, Technical school food technology training, Agricultural Reconversion Program, National Council on Production, University Center for Food Technology, Input sales people are food technologists % rural population with easy access to services <5

3 2 1

<5 <5 <5

515

515

515

<5

1530

232