Improving Agricultural Market Performance:
Creation and Development of Market Institutions
50
Numerous initiatives by donors, which included IFC and USAID, as well as several NGOs,
sought to address this problem, with some success. USAID, for example, claimed to have
trained 100,000 smallholders on Sulawesi in integrated pest management between 2000 and
2005. The Government, through the Ministry of Agriculture, in 2009 launched its first
significant support program to the cocoa sector, the National Cocoa Rehabilitation Program
(GERNAS), intended to improve productivity and revitalize the cocoa sector. The program,
which operated until 2014 at a cost of about US$100 million per year, aimed to improving
450,000 ha of smallholder cocoa through replanting, rehabilitation (side grafting) and
intensified use of fertilizer. However, poor-quality planting material and the absence of well-
trained technical support limited its success.
The limited success of these programs in revitalizing the cocoa sector called for a new
institutional approach. Previous programs had blamed their lack of success on farmers’
“unwillingness” to adopt the new practices and technology and on their lack of awareness of
the assistance available to them. A new program, based on a more participatory and business-
oriented approach, has proved a more successful collaboration between the Australian Centre
for International Agricultural Research (ACIAR) and Mars, Inc., with subsequent involvement
of other multinationals, set up a system of Cocoa Development Centres (CDCs), which are
knowledge hubs linked to Cocoa Village Clinics (CVCs), in a business-oriented farm extension
outreach system that motivates growers to adopt sustainable practices that will increase
productivity.
CDCs are established as outreach centres for training, experimentation and demonstration of
latest technologies, for developing regionally appropriate techniques, and to test the local
suitability of improved planting material. In Sulawesi, CDCs are supported and linked together
by a Mars-funded Cocoa Academy, a sort of clearinghouse for technologies and good practices.
“CDCs, which cost approximately US$35,000 to set up, are operated by large cocoa buyers and
employ farmer facilitators, who are usually local villagers with advanced agricultural
education or training. “Unlike previous donor-funded initiatives in Sulawesi, and indeed
various ‘project-oriented’ Government interventions, the companies tend to have a longer-
term interest in sustainable supply, and consequently appear committed to longer-term
investments. CDCs are responsible for identifying potential ‘cocoa doctors’
[knowledge/extension agents] living within cocoa communities to establish CVCs as business-
oriented spokes. Unlike some other extension approaches, such as FFS, CDCs provide the cocoa
doctors with ongoing access to cocoa expertise and ensure continued engagement with
farmers. Critically, CDC facilitators are demand-responsive to the specific needs of the cocoa
doctors. CVCs themselves are designed to be economically self-sustaining rural enterprises,
with continuous technical support from CDCs. Initial costs for establishing a CVC are
approximately US$11,000, which is commonly provided in partnership with microfinance
institutions, although risk-minimizing mechanisms implemented by CDCs ensure that effective
risk exposure is less than US$3,000. CVCs are managed and owned by a cocoa doctor, who is
trained by a CDC in both technical and business skills, and who demonstrates the financial
benefits of applying an improved productivity package on their own farms.”100
100 Neilson, J. & McKenzie, F. (2016), “Business-oriented outreach programs for sustainable cocoa production in Indonesia:
an institutional innovation,” in FAO/INRA (eds.), Innovative markets for sustainable agriculture – How innovations in market
institutions encourage sustainable agriculture in developing countries, pp. 17-32, Rome: Food and Agriculture Organization of
the United Nations and Institut National de la Recherche Agronomique.