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May 26, 2010

Nestlé Prize in Creating Shared Value – the Nestlé Prize Laureate 2010

Who is the Nestlé Prize Laureate for 2010?
The first Nestlé Prize in Creating Shared Value was awarded to International Development Enterprises (IDE) Cambodia, a non-profit organization working primarily in rural areas and carrying out projects in agriculture and water & sanitation. Past and current projects include market-based promotion of farm business advisory services, drip irrigation, treadle pumps, improved fertiliser technology, ceramic water filters, and sanitary latrines. IDE has been working in Cambodia since 1994.

IDE Cambodia is part of IDE, an international non-profit organization dedicated to using market oriented approaches to increase the income of the rural poor by improving market access, increasing agricultural production, and creating sustainable local businesses. IDE currently operates country programmes in Cambodia, Vietnam, Nepal, Bangladesh, India, Myanmar, Zambia, Zimbabwe, Ethiopia, Mozambique, and Nicaragua. For more information:

What is the focus of the winning entry?
IDE Cambodia was awarded the Nestlé Prize in Creating Shared Value for a Rural Development project entitled “Farm Business Advisors: Scaling-up private-sector delivery of agricultural support services”.

Through this project, IDE Cambodia has developed a micro-franchise model for delivering high-quality agricultural inputs and technical advice to poor farmers through private Farm Business Advisors (FBAs).

These Farm Business Advisors are independent micro-entrepreneurs trained by IDE to encourage and equip farmers to grow market-oriented crops. FBAs analyze individual farm enterprises to identify constraints or missed opportunities, which are then matched with products and services in the FBA toolkit. The toolkit includes a range of products and advice to reduce risks, improve productivity, and increase income: seeds, fertiliser, irrigation equipment, pest control, and market information, among others. FBAs sell products at a profit, often on credit with payment due at harvest, and provide technical advice as an embedded service during return visits throughout the growing season.

FBAs are recruited by IDE Cambodia, which acts as a central Franchisor enterprise. It does not pay salaries to FBAs but provides services such as training, bulk input purchases, credit access, market information, new product development, and promotion to the FBAs as franchisees. IDE also ensures that specific standards for product and service quality are maintained by FBAs. It is expected that the franchise enterprise will become profitable when the number of FBAs reaches about 500. The franchise operations will then be spun off into a private enterprise with explicit social and financial goals.

What have been the achievements of the project to date?
The project was piloted in 2005 with three entrepreneurs receiving training and marketing support. Over a three-year period, these three FBAs built a client base of 509 small farm households. On average, farmers assisted by a Farm Business Advisor increased their net income by 27 percent from USD 382 to USD 480 per year. The FBAs earned an average net income of USD 43 per month by serving an average of 170 clients per year. It is expected that after 4 to 5 years FBAs can earn more than USD 200 per month by serving about 150 farmers each.

Today, 61 FBAs have already been trained and reach more than 4,500 farmers. FBAs services are now generating an annual net additional income of USD 150 per small farm household.

Why was this project preferred over other ones?
Among the 549 applications received by the Nestlé Prize Secretariat, many showed very high potential.

  • However, the Nestlé Creating Shared Value Advisory Board unanimously selected IDE Cambodia as the winner of the Nestlé Prize in Creating Shared Value. This is because the project met all the selection criteria of the Nestlé Prize:
  • By providing agricultural extension services through private-sector entrepreneurs and by organizing and supporting them through a franchise enterprise, this project provides an innovative approach to the problem of delivering effective agricultural extension services to small farmers.
  • The project has demonstrated tangible and measurable results in improving the lives of farmers and rural communities on a small-scale basis.
  • It is built on a sustainable business model and is based on an entrepreneurial mindset. Once the FBA franchise is spun off as a private enterprise, it will become a sustainable, self-financed entity which will not require relying on continued donor support.
  • The FBA model developed in this project is replicable in other countries where access to good-quality agricultural inputs and extension information is lacking.

How does this project illustrate the concept of Creating Shared Value? Through IDE Cambodia’s market-based approach, Farm Business Advisors create significant value for small farmers and their families by providing them with high-quality inputs and technical advice. In addition to increasing their cash income, the products and services sold by the FBAs help small farm households improve management of water through the use of drip irrigation, and improve their nutrition through increased diversity of food. At the same time, FBAs capture a portion of the value that they contribute to create.

This approach has been designed to create opportunities for large numbers of poor households while remaining financially viable in the long term. Farmers are treated as customers as opposed to beneficiaries of charity.

For instance, Kim Sokha, a Prey Veng farmer used to spend several months per year working construction jobs in the capital city. Thanks to the products and services sold by a Farm Business Advisor, Sokha is now able to earn enough income from vegetable production that he no longer needs to travel away from home to find work. He and his wife recently expanded their plot from 300 to 500 square metres.

For Ou Oun, a Farm Business Advisor, IDE’s training has led to a big increase in his own vegetable income. This has allowed him to hire two people to work his plot so that he could spend more time helping his clients be more successful as well.

What is the value of the Nestlé Prize received by the Laureate?
Nestlé committed an investment of CHF 500,000 to IDE Cambodia. This will be disbursed over a three-year period and will assist in the scaling-up of the project.

How will the Prize monies be used by the Laureate? The Prize monies will be used by IDE Cambodia to recruit and train more Farm Business Advisors; provide them with access to agricultural inputs, market information, microfinance, and marketing materials and activities; and for the development and strengthening of the franchise system.

What is the potential impact of the Nestlé Prize? The investment committed by Nestlé will result in the training of 36 additional Farm Business Advisors. The project will have a direct and tangible impact on the lives of nearly 20,000 people in about 4,000 rural households and aims to generate a total value of approximately USD 1.9 million*. The products and services offered by the FBAs will help these small farm households to increase their cash income, manage their water better through the use of drip irrigation, and improve their nutrition through increased food diversity.

The publicity generated by the Nestlé Prize will be leveraged by IDE Cambodia to attract additional donors and investors to reach the goal of at least 500 FBAs in an accelerated time frame.

Because the investment made by Nestlé will go towards creating a sustainable FBA franchise, the benefits of this investment will extend far beyond the three-year project period. FBAs will continue to serve increasing numbers of small farm households each year.

Finally, this model could be replicated in other countries where access to high quality agricultural inputs and services is lacking.

Background information on the Nestlé Prize in Creating Shared Value

What is the Nestlé Prize in Creating Shared Value?
The Nestlé Prize is awarded bi-annually to an individual, an NGO or a small enterprise to encourage and reward an outstanding innovation in improving access to or the management of water, improving the lives of farmers and rural communities, or bringing improved nutrition to populations suffering from nutritional problems.
Specific fields of achievement include, but are not limited to: agriculture including plant and animal husbandry; food science and technology; fortification; education and healthy lifestyles programs; access and management of water. The Nestlé Prize was awarded for the first time in May 2010.

Why did you launch a CSV Prize?
We launched the CSV Prize because we want to encourage others from the Private and Not for Profit sector to join us in realising the potential of Creating Shared Value. We know that there are many examples of Creating Shared Value in practice or in planning in both sectors, and Nestlé does not have a monopoly on good examples.
That is why we wanted to incentivise development of the best examples of Creating Shared Value worldwide. Judging by the fact we received over 500 applications, we believe that the idea has significant resonance.

How does the Nestlé Prize distinguish itself from other prizes and awards?
Worldwide, there are numerous awards, prizes and recognition for worthwhile causes and efforts. Most recognize past achievements but do little to assist worthwhile efforts in their quest to improve and become more available to others. The Nestlé Prize recognises successful, innovative endeavours in the areas of water, nutrition and rural development but also lends crucial financial assistance to ensure that the work can endure and become available to others. This is the living legacy that only an investment can create.

What is the value of the Prize?
Nestlé commits to the Prize Laureate an investment of up to CHF 500,000 for a specified period of time to assist in the development of the innovation to bring it to scale. The winner of the Nestlé Prize will benefit in the following ways:

It will benefit primarily from the worldwide recognition of its innovative contribution which will assist in its growth and replication elsewhere, bringing its benefits to people and communities that might not be reachable without the assistance of the Nestlé investment in the innovative approach taken by the Prize Laureate;

The substantial investment by Nestlé to the Prize Laureate will occur over a multi year period as the effort grows and matures and will allow advancement of the innovation as well as its adoption in other communities and markets.

How many applications were received for this first edition of the Nestlé Prize?
549 applications from 79 countries and all continents were received for this first Nestlé Prize in Creating Shared Value.

How was the Nestlé Prize Laureate determined?
The Nestlé Prize Screening Committee served as the initial point of entry for all nominations. After reviewing the nominations, it selected a short-list of five finalists.

The Screening Committee was divided into 3 Subcommittees (one for Water, one for Rural Development and one for Nutrition) and was comprised of two Nestlé staff experts and three fair-minded and knowledgeable external individuals in the three areas of focus of the Prize.

The Nestlé Creating Shared Value Advisory Board – an international, independent body comprised of distinguished individuals from academia, civil society and industry – determined the winner of the Prize upon the recommendations of the Screening Committee. More information about the Advisory Board is available here.

What are the criteria against which entries were judged?
The winning entry needed to meet the following requirements:

  • Proven worth on a pilot or small-scale basis.
  • Judged to be feasible on a broad-scale basis.
  • High promise of improving access to nutrition, improving rural development, or having a significant impact on water management or access to clean water.
  • Built on a sound and sustainable business model.
  • Have the ability to incorporate and leverage an investment by Nestlé.

For more information, visit the Nestlé Prize in Creating Shared Value’s webpage.

* This figure is reached by assuming that each client generates an additional annual net income of USD 150 and that they continue to receiving FBA services for at least three years (= 4,140 clients x USD 150 additional income x 3 years = USD 1.86 million).

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