Stanford Graduate School of Business — Announced in June 2009, the Shea Value Chain Reinforcement Initiative uses microfinance, education, and technology to improve the incomes and living conditions of women who pick shea nuts and women who process nuts into shea butter. A case study written for the Stanford Global Supply Chain Management Forum explores the collaboration in Ghana between German-based software giant SAP and Paris-based microfinance development organization PlaNet Finance.
The Ghanan women in the program are enrolled through two local microfinance organizations, Maata-N-Tudu (MTA) and Grameen Ghana (GG). The shea nut is the seed of the tropical African shea tree, which grows wild and has fatty nuts that yield shea butter. Some call this the poverty-coping tree, since anyone can go to the bush and harvest fruits. Shea butter is mostly used in food and cosmetics. Although producing shea nuts and butter is one of the most accessible income-generating activities for rural women in Ghana, their incomes are unstable due to a lack of market information, inadequate business knowledge, and low negotiating power.
A case study of the program, prepared for the Stanford Global Supply Chain Management Forum, is designed to monitor the initiative’s achievements over 18 months, discuss key challenges, and consider how to position the initiative for future success. Research for the study involved reviewing industry reports, conducting phone interviews with key program partners, and field interviews in Ghana with stakeholders such as program partners, shea women and buyers.
For the past four years, the Dow Jones Sustainability Index has named software giant SAP as the leader in the software sector for upholding ethical, environmental, social, and governance values in products and services. In 2008, SAP’s Executive Board defined the company’s social sustainability priority as connecting global value chains to the base of the economic pyramid. The board decision represented a long-term strategic commitment to alleviate poverty by accelerating economic development in previously excluded markets. To support this priority, SAP is investing technology, expertise, and cash to connect underserved markets to the global value chain.
Key achievements of the Shea Value Chain:
Women have been organized into an association called the Star Shea Network (SSN), which gives them more negotiating power, and gives buyers access to larger quantities of products.
Women have been trained on how to process better quality nuts and butter. As a result, in November 2010, SSN women sold over 93 metric tons of nuts at premium prices to a major buyer, Olam International. They earned .40 Ghana cedi per kilogram for premium nuts, and .35 cedi per kilogram for standard nuts, a significant increase over the price they would have obtained had the nuts been sold in the summer. Women typically sell nuts in the summer due to lack of cash flow. Olam benefits because it secures high quality nuts (which command a higher price from their ultimate buyers) at economic quantities.
SAP has contributed its core expertise to support the shea program: Rural Market Connection (RMC), an order management and fulfillment software package, provides the buyer with transparency on historical product quality data and product traceability. Women get access to information through price updates via SMS text messages to mobile phones. The Star Shea
The network website markets SSN products to the global market. Finally, Microloan Management (MLM) is a tool for microfinance organization credit officers at MTA and GG to track their loan portfolios more efficiently.
Key Challenges: There are several risks that can affect the success of this initiative.
1. Stakeholders report that the market demand for butter is currently weak.
2. There is a risk that the shea prices could become regulated in the future, potentially limiting women’s opportunity to achieve higher prices for producing better quality products.
3. The initiative targets the most remote women for the very reason that they have a lack of access to market opportunities. In doing this, however, buyers incur a higher cost to pick up products.
4. The Maata-N-Tudu), and Grameen Ghana have had difficulty raising additional credit portfolio funding.
5. Women often sell nuts early in the season when prices are low, due to lack of cash flow and a lack of pre-financing opportunities. As a result, they miss the opportunity to sell at a higher price later in the season when the nuts have fully dried and the quality is better.
Positioning the Initiative for Greater Success:
Using a value chain development framework, the Stanford Supply Chain Forum study find that the shea program addresses many weaknesses in the structure and dynamics of the shea value chain. Preliminary outcomes indicate that women are poised to earn more from the sale of quality nuts through this initiative. The market values high quality nuts because they deliver higher yields when processing butter. If some of the key challenges can be managed, the initiative will improve the potential to change women’s lives.
It will take time to understand the impact of this initiative on shea women. However, the fact that women have sold nuts at a premium price and that certain key program risks can be managed bode well for program success. If the initiative can grow in scale, it should become more attractive to large buyers. SAP is working with the Grameen Creative Lab to determine whether the initiative can be converted into a social business that can earn its own revenues through transaction charges. If this can be realized, the program’s impact will extend far beyond the period of SAP and PlaNet Finance’s involvement.
The initiative’s ultimate sustainability, whether through a social business or more grant funding or some combination, will be the key to ensuring long-lasting improvements in the lives of the shea women of Northern Ghana. As one shea woman interviewed said, “We are very hopeful that our life is about to transform.”
By Sonali Rammohan
Stanford Global Supply Chain Management Forum
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