CONCEPT NOTE: 4P’S MODEL ON POULTRY VALUE CHAIN PRODUCTION –

GIC, AIMS, PRODUCER & HEIFER

1. Summary

The project goal is to enhance prosperity of Cambodian smallholder farmers through increasingly profitable

links to agri-businesses and markets. Its objective is to achieve greater financial returns of smallholders,

including poorer farmers, via pledging themselves to innovative private investments.

This project has rolled out since 2017. From recent Supervision and Implementation Support Mission in

October 2018, one such points of concern is that project has to rapidly scale-up its delivery. Referring to

10th paragraph in Aide-Memoire report, three potential value chains, such as 1) poultry, 2) vegetable, and

3) rice, are most immediate potential for accelerated impacts and scaling-up. More specifically, IFAD team

introduced Green Innovet Cam (GIC) Company and Heifer organisation to project team. It might be worth

to note GIC is recognised by IFAD team as the best-in-class intensified rural chicken production model.

Therefore, under this 4Ps’ arrangement from a single source bidding procurement process, indicative Value

Chain Innovative Fund (VCIF) level is required USD 600,000 within 1-year timeframe under the base-case

projection.

Outputs

a. 4,000 households (-10% tolerance), located in project designed areas, have implemented

of new innovative rural chicken production system that responds well to market

demand, embedding trainings, and on-going monitoring.

b. The economic return of early adopters, validated by the income level, shall be greater

than 30% (- 5% tolerance) within 4 financial years.

Outcomes

• Improve farmers’ income and incentivize for increased private investment in poultry

value chain.

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 • Build confidence for farmers and private financial institution into the new poultry

production systems widespread nationwide.

• Foster a vertical-integrated agricultural and food model in a poultry value chain.

2. Background

Defining the problems

Worryingly, agricultural growth has projected just 1.8% in 2018 and 2019. As a result, there is a pressing

need to establish new engines for growth on new foundations through intensification, diversification,

processing and commercialization. If poverty reduction and broad based inclusive economic growth is to

continue, several relevant bottlenecks in poultry value chain are chiefly identified as below.

a. Supply • Traditional practice of poultry production which fails to meet demand

in changing market environment.

• Insufficient qualified products in the supply market.

• Lack of know-how knowledge to secure better sanitary and

phytosanitary safeguards.

• Limited in chicken health monitoring and responsive system.

• Lack of financial access

b. Demand • Trouble in buyer-supplier relationship due to 1) lack of linkage and 2)

limited organised supply groups.

• Lack of financial access

About GIC

GIC is a newly established business whose team members deciding to formulate this business after

their successful experiment in Tonle Sap Poverty Reduction and Smallholder Development project

(TSSD) funded by IFAD and ADB. GIC works to build up the education of two local small entrepreneur

groups: 1) chick hatching and supply, and 2) chicken fattening in the village. Their services are (a)

technical training on rural backyard chicken productions (refer Appendix 1), (b) training in product

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knowledge, use and safety from other input supplies such as feed, vaccines and such (refer Appendix

2), (c) quality agriculture output via encompassing monitoring activities that provide to farmers

throughout the production period and (d) other consultation services to yield capacity production and

find solution to problem effectively. More specifically, GIC is also recognised by IFAD as the best-in-

class intensified rural chicken production model.

Alignment with AIMS

In the value chain mapping, it is started in continuous sequential steps from inputs, production,

collection, wholesale, processing, retail and finally cascades to consumers, as illustrated in below

sample diagrams.

The diagrams signify mainly an existing practice and a potential intervention proposing into the current

practice to enhance a poultry value chain in the market. Without a vertical-integrated model, three main

actors are operating independently in a discrete commercial activity which this brings about

ineffectiveness in cost and final outputs to the end users.

Heifer (Heifer is a non-profit, humanitarian International NGO dedicated to working with communities

to end hunger and poverty and care for the earth by providing livestock, education and other resources

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 to help poor families become self-reliant. It might be worth to note Heifer is also a strategic partner in

AIMS project.) who acts in the poultry market as a demand buyer will outsource its supply from various

producer sources and from place to place. Needless to say, there might be a supply disruption involved

as well as buyer-supplier relationship is not guaranteed. Smallholder producer groups encounters either

a metaphor of trying to sell what they have produced rather than producing what they can sell or a

consequence in absence of buyers to their products. Finally, farmers are not able to access another

critical input such as technical knowledge from GIC to produce quality products that responds well to

the market needs.

Hence, this 4P models of public-private-producer partnerships in the vertical-integrated model will be

relevant to support the contract farming arrangements between farmers and Heifer and business-to-

service (B2S) between farmers and GIC. Meanwhile, AIMS serves as a brokering and facilitator role

via MSP approach and also assists deal makers access to best financing option in a priority from their

own resources or financial market per se.

3. Activity Purpose and Description

The purpose of this is to put GIC, Heifer, and AIMS producer groups into a new formation known as a

vertical-integrated model. It will be a test case to fast-track internal learning and experience of an ideal

inclusive market development process within AIMS poultry value chain.

To ensure the performance service delivery, below KPIs are outlined.

Output Targets Unit Qty

Key indicators

1 Number of Province Number 10

2 Number of Cluster Household 100

3 Average Number of Cluster Members Number 40

4 Number of Beneficiary HH (- 10% tolerance) Number 4,000

5 Investor income level increasing by (- 5% tolerance) Percentage 20

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 Input Activities Unit Qty Cost/ Investment Cost

Unit Private

Beneficiary MFIs VCIF

Resource

Average Input Service Cost SME 100 $2,853 $2,282,351 5 PFIs $570,590

Sub-Total $2,852,939

5 Partnered Financial Institutions (PFIs) are including:

1. Rural Development Bank

2. Idemitsu Saison Microfinance (Cambodia) Plc

3. Lolc Cambodia Plc

4. AMK Microfinance Institution Plc

5. Amret Microfinance Institution

4. Economic Return

From agro-economist point of view, it is concerning that agriculture income are not able to keep pace with

growing on non-farm wages. Now, minimum wage is standing at $170 per month and will increase to $182

at incremental rate of 11% in 2019. Notwithstanding that, by practicing this new 4P’s mechanism of public-

private-producer partnerships in the vertical-integrated model of poultry value chain well, it is estimated

agricultural return, $160 million, is better-off 165% or equivalent to $86 million than labour return, $63 million

(refer Appendix 3 for details of calculation).

5. Design and Implementation

According to the Supervision and Implementation Support Mission, October 2018 Aide-Memoire, it is

confident that this work can be given to a potential contractor (Green Innovet Cam), as a single source

bidding procurement process, to coordinate delivery to all outputs in conjunctions with Component 1 and

Heifer. Component 2 would be responsible for general project oversight and financial options.

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Appendix 1: GIC’s Rotational Backyard Chicken Production Model (100 Chicken)

Appendix 2: GIC Core Business Activities

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Appendix 3: Economic Return Calculation

Several assumptions are underpinned in the projection for agricultural income table below. First, it is

predicted that the investor groups accounted for 4,000 households will fully reinvest its profit into the

business in order to scale-up its production capacity leading to various income growth in the following year

as detailed in the table 1 below.

Type of Investment Year 1 Year 2 Year 3 Year 4

1. 500 Chick Production Enterprise NA 53% 53% 53%
2. 100 Chick Production Enterprise NA 28% 28% 28%
3. 100 Chick Production Enterprise (Solar) NA 11% 11% 11%
4. Broiler NA 50% 50% 50%

Second, it also assumes the price will be increasing in line with the minimum wage at the constant rate of

11% per annum. As a result, net total income from 4 years culminative investment is approximately $160

million which can be found in the table 2 below.

Year 1 Year 2 Year 3 Year 4

Type of Investment Chick/Cycle Cycle/Annum $/Chick # of Investor Income/Annum Income/Annum Income/Annum Income/Annum
1. 500 Chick Production Enterprise 350 12 $ 1.50 200 $ 1,134,000 $ 1,733,285 $ 2,649,274 $ 4,049,336
2. 100 Chick Production Enterprise 70 12 $ 1.50 320 $ 362,880 $ 464,022 $ 593,354 $ 758,734
3. 100 Chick Production Enterprise (Solar) 70 12 $ 1.50 240 $ 272,160 $ 301,796 $ 334,658 $ 371,099
4. Broiler 120 4 $ 5.00 3,240 $ 7,776,000 $ 11,652,336 $ 19,401,139 $ 29,072,607
Sub-Total $ 9,545,040 $ 14,151,438 $ 22,978,426 $ 34,251,776
Accumulated Total $ 9,545,040 $ 23,696,478 $ 46,674,904 $ 80,926,680
Net Total $ 160,843,103

Finally, it is calculated an annual increase of 11% in minimum wage throughout 4 years as appeared in the

below table 3.

Year 1 Year 2 (+11%) Year 3 (+11%) Year 4 (+11%)

Type of Investment # of HHs Income/Month Income/Annum Income/Annum Income/Annum Income/Annum
Labor work in Manufacturing 4,000 $ 182.00 $ 8,736,000 $ 9,696,960 $ 10,763,626 $ 11,947,624
Sub-Total $ 8,736,000 $ 9,696,960 $ 10,763,626 $ 11,947,624
Accumulated Total $ 8,736,000 $ 18,432,960 $ 29,196,586 $ 41,144,210
Net Total $ 97,509,756

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