Bank to Plate: The Risky Business of Fruits and Vegetables in Tanzania

In a world where 3 billion people are malnourished, investments to support the production of healthy food, like fruits and vegetables packed with nutrients, should be scaled up. Not only is global consumption of fruits and vegetables desperately low, but the smallholder farmers who produce these high-value crops are also not getting the support they need from financial lenders. Farming is a risky business, compounded by issues like climate change, but strengthening financial literacy and building trust between farmers and banks is worth the risk. A nation’s health depends on it.
All three forms of malnutrition—underweight, overweight or obese, and micronutrient deficient—threaten the prosperity of Tanzania. The Tanzania National Nutrition Survey 2018 reported that approximately 32 percent of children younger than five are stunted (low height for age), 30 percent of Tanzanian women of reproductive age are anemic, and 32 percent of women of reproduction age are overweight or obese. More fruits and vegetables in daily diets could improve these statistics as well as raise incomes for the smallholder farmers who want to grow the high-value crops over staple commodities with little nutritional value, like maize.
In order to increase access to healthy food, development solutions should include ensuring that smallholder fruit and vegetable farmers have the financial tools they need to increase and improve production. With postharvest losses of fruits and vegetables that range from 30 to 50 percent, Tanzanian smallholder farmers are a high-risk investment, making microfinancing complicated, challenging, and rare. Postharvest losses can be caused by a combination of factors including but not limited to inadequate cooling, physical damage, and insufficient drying and dry storage. In addition, fruit and vegetable farming involves careful attention to plot selection to ensure an ample water supply, quality soil, and market potential and acceptability. Another wrench in this already uncertain business is climate change.
The effects of droughts and rising temperatures heighten investor fears due to the intense water needs for the cultivation of fruits and vegetables. Tanzania temperatures are projected to rise by 1.0 to 2.7°C by the 2060s and by 1.5 to 4.5°C by the 2090s. Unforeseen weather events and disasters can suspend a smallholder farmer’s ability to make loan payments. The insecurity in fruit and vegetable farming contributes to the startling statistic that between 0.8 and 1.9 billion people living in sub-Saharan Africa may lack fruit and vegetable availability in 2050 to meet the five daily portions the World Health Organization recommends.  

Photo Credit: Sala Lewis Photography

Between 0.8 and 1.9 billion people living in sub-Saharan Africa may lack fruit and vegetable availability in 2050 to meet the five daily portions the World Health Organization recommends.

Climate Smart Agriculture as the Foundation for Security
Tanzania is no exception to the new normal of climate change, which gravely affects the more than two-thirds of Tanzanians who are employed in farming and utilize rain-fed agriculture as their primary irrigation mechanism. In the past decade, Tanzania has experienced an aggressive drop in water levels of its major lakes due, in part, to climate change. Mount Kilimanjaro, a water source for agriculture in Arusha, has lost 80 percent of its glacier since 1912 due to rising temperatures. Delayed rains or shifting seasons can alter ecosystem balances and tip the scales in favor of soil microbes or insects that may thrive under new conditions, at the expense of the crops. Increased pests may cause increased pesticide use, which already is a determinant to fruit and vegetable consumption.
The United States has a deep history of strong diplomatic and development ties with Tanzania. As a focus country from 2011 to 2017 under Feed the Future, dozens of projects and millions of U.S. aid dollars have focused on addressing the root causes of hunger, poverty, and malnutrition in Tanzania. The CSIS Global Food Security Project conducted field research in the country in August this year, including looking at the U. S. Agency for International Development (USAID)-funded project Mboga na Matunda (which means vegetables and fruits in English).  
Mboga na Matunda is a four-year, $25 million project that concentrates on scaling up improved technology, bolstering better farming practices, and building capacity via market system models in hopes of making fruits and vegetables more feasible and successful for smallholder farmers. A market systems approach is utilized to deliver technical assistance to 50,000 Tanzanians. The idea is this: if Tanzanian farmers produce more diverse and nutrient-dense fruits and vegetables, the nutritional status of the country will improve and, ultimately, so will the resiliency of the country due to the impact nutrition has on lifelong health, economic growth, and human security. However, without the mandatory application of climate-smart agriculture techniques, or the microfinancing mechanisms to empower farmers to adopt them, progress will not be catalyzed in fruit and vegetable farming.
In Morogoro and Zanzibar, two of the five regions where the project works, project participants corroborated climate change concerns to us. For smallholder farmers in Morogoro, unreliable rains and prolonged droughts requires farmers to dig up dried-up river beds for an irrigation source. According to farmers in both regions, while the rainy seasons were predictable a decade ago, now they vary both in timing and intensity. Rising sea levels are intruding on ground water wells, which already are menaced by prolonged dry spells that only exacerbate resource competition.
While agriculture practices such as drip irrigation, raised beds, plant-based fertilizers, crop rotation, and integrated pest management all increase the resiliency of a farmer in the face of climate change, these strategies still require financial capital. Obtaining the capital without the necessary financial literacy is a major obstacle for smallholder farmers, as banks will not invest in farmers who have little assurance to yield returns. Though not a main tenant of the Mboga na Matunda project, climate-smart agriculture practices are an integral piece to raising farmer incomes and improving their ability to access microfinancing resources outside of the guise of USAID.

Photo Credit: Sala Lewis Photography

The Overlooked Importance of Microfinancing for Fruits and Vegetables
Because many smallholder farmers lack access to capital and personal savings, Mboga na Matunda devised a cost-sharing mechanism for cluster demonstration plots. These farming clusters act like a small business with each cluster member taking a specific role. The progressive financing component, the initial cost-sharing protocol combined with subsequent microfinance trainings, is the heart of the project’s long-term sustainability after USAID support ends. Whereas cost sharing is beneficial for initial investments, having sustained access to capital and a strong relationship with a financial institution are required for continued economic growth.
Through financial literacy trainings hosted by local banking institutions in collaboration with Mboga na Matunda, farmers are able to develop these critical relationships. The trainings emphasize entrepreneurship and money management skills to compliment the trainings farmers receive in the field. Increasing farmer income does little good if additional funds are not available to a farmer in times of crisis or climatic shocks. These trainings—that often include basic accounting, opening and maintaining a savings account, and market forecasting—are vital components to economic development and farmer-led growth.
The trainings provide much more than a technical understanding of business development, but also provide the credibility smallholder farmers need to earn trust from the lenders. After having created their own savings account as a part of the trainings, farmers have the option to form a collective savings account with other farmers in their cluster. With the guidance of Mboga na Matunda and the local lender, the farmers devise a business plan covering market analysis, cost-benefit analysis, and accounting practices. To compliment the finance and accounting details, farmers also create a marketing plan to outline the demand potential and local competition for specific fruits and vegetables in the area, where opportunities exist. Banks are more willing to provide loans to farmers with these microfinancing skills because elevated financial literacy, enhanced technical knowhow, and updated infrastructure to adapt to climate-smart practices reduces risk.
Photo Credit: Sala Lewis Photography  

An Integrated Approach to Microfinancing, Climate Change, and Nutrition
If transformation is to take place on the plates and in the fields for improved nutrition, the dedicated funding needs to match to level of effort required for such a shift. Currently, only a mere 7 percent ($1.25 million) of the total $25 million allocated to Mboga na Matunda is dedicated to nutrition-sensitive activities—such as cooking demonstrations and technical assistance to grow more nutritious fruits and vegetables. Increasing farmers’ incomes, diversifying the fruits and vegetables available at market, and disseminating knowledge on how consumption of produce can improve health, requires application of an integrated multisectoral approach. By enhancing nutrition-sensitive investments throughout the project, such as microfinancing trainings and climate-smart agriculture, a more holistic approach to increase access to nutritious fruits and vegetables is achievable.
Access to finance, while a significant factor for smallholder farmers transitioning to fruit and vegetable production, depends largely on behavior. Farmers in the Mboga na Matunda cluster groups shared that prior to USAID support, they did not hold savings accounts nor written business plans. A common belief in the development world is if incomes rise, improved nutrition will surely follow. However, as evidenced by growing malnutrition in high-income countries, increased incomes do not always correlate to better nutrition. If farmers and communities aren’t aware of why greater fruit and vegetable intake contributes to optimal nutrition and overall health, they may prioritize other purchases not related to household nutrition or food security. By pairing financial literacy with health and nutrition education, farmers will better understand the connections between income and nutrient-dense foods.
Part of an integrated approach is inclusion of the many stakeholders involved, including the private sector. Mboga na Matunda’s engagement with the private sector is limited, despite sustained support from local lenders and banking institutions that play a key role in the salability of smallholders in the fruit and vegetable market. Currently, only a few banks partner with the project to develop and host the financial literacy trainings that support the smallholder farmer clusters.
At the 2019 Borlaug Dialogue this month, Administrator Mark Green announced that USAID’s partnership with Mastercard will extend to the agriculture sector in sub-Saharan Africa to connect smallholders to markets and financial services. While this level of private sector engagement is important, significant barriers still exist. In Tanzania, banks are not accessible with less than one-half of branches per thousand square kilometers. And, not surprisingly, 47 percent of Tanzanians without a bank account cited distance to the bank as a primary reason for not being an accountholder. Even with private institution participation, distance between bank branches and communities is an obstacle to utilizing financial resources. Fortifying rural infrastructure is required for this partnership to be beneficial for smallholder farmers.

By pairing financial literacy with health and nutrition education, farmers will better understand the connections between income and nutrient-dense foods.

Throughout Morogoro and Zanzibar, Mboga na Matunda farmers utilize their mobile phones to stay connected and document farm demonstration plot issues via photos. The increasing use of mobile technologies on farms is an opportunity for USAID. For example, M-Pesa is a mobile money service that allows users to store and exchange money via their phones and is used widely throughout rural and urban Tanzania. Having 24/7 access to financial services and personal bank accounts at their fingertips makes a significant difference for smallholder farmers who may have to travel long distances only to deposit funds into a bank account. Removing barriers and creating the path of least resistance for a behavioral shift in financial literacy will bolster financial resilience and long-term household food security.
Fruit and vegetable smallholder farmers confront considerable livelihood threats from climate change, which impedes their household nutrition and food security, as well as economic productivity. USAID can continue to contribute to the success of Tanzania’s journey to self-reliance by facilitating partnerships and among lenders and other institutions in scaling up financial literacy and continuing to foster country- and industry-led ownership in nutrition and agriculture initiatives. Through an integrated multisectoral approach that connects climate-smart agriculture, microfinancing, and nutrition technical assistance, smallholder farmers are better equipped to overcome the local challenges of the Tanzania of today and tomorrow.

To learn more about the Global Food Security Project’s recent nutrition research in Tanzania, visit the report launch webpage: The Curious Case of Fruits and Vegetables to Improve Nutrition.

Eilish Zembilci is program coordinator and research assistant for the Global Food Security Project at the Center for Strategic and International Studies in Washington, D.C. Amy R. Beaudreault is a research fellow with the CSIS Global Food Security Project and the Global Health Policy Center.

This report is made possible by the generous support of the Bill & Melinda Gates Foundation.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

© 2019 by the Center for Strategic and International Studies. All rights reserved
Eilish Zembilci
Adjunct Fellow (Non-resident), Global Food and Water Security Program

Amy R. Beaudreault