Coming Together to Boost Business: Financial Linkages Boost Avocado Processing Company in East Africa

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Olivado Limited, an agribusiness company based in the Export Processing Zone in Murang’a County in central Kenya, processes extra virgin avocado oil and exports fresh avocados.The firm is a subsidiary of a New Zealand based company which commands 78% of the world’s extra virgin cold pressed avocado oil production, with its product sold in more than 35 countries through a network of 5,000 supermarket outlets.

An employ of Olivado assorting avocado fruits at the Sagana processing plan

Olivado started operations in Kenya in 2006 and started processing avocado oil in 2010.The company works with 1,700 smallholder farmers across Embu, Kiambu, Kirinyaga and Meru counties who are organic, fair trade, and global GAP certified, as well as  50 permanent employees and 350 part-time seasonal employees.

While Olivado has the capacity to process 1,000MT of oil annually it has been producing only 200MT due to insufficient working capital.  Olivado provides cash advances to its farmers for organic inputs like organic fertilizer, certified Hass and Fuete avocado seedlings,and farm preparations. However, the amount of capital Olivado had been able to access was inadequate to meet the farmers’ needs.  It also tied up Olivado’s capital which hurt it ability to buy produce.

Olivado reached out to banks for financial support but most banks were unwilling to invest or their products did not meet the company’s needs,which the Olivado attributes to limited understanding of the avocado value chain by the formal financial sector. Olivado was stuck.

Collection point of oil squeezed out of avocado fruit ready for packaging

Then Olivado heard about the Agribusiness Investment for Market Stimulation (AIMS) program, funded by the United States Department of Agriculture (USDA) and implemented by Global Communities. The program seeks to increase the value and volume of trade by small and medium size enterprises buy increasing access to credit, markets and capacity building—critical obstacles to market expansion.

AIMS met with Olivado to understand its challenges.  While the firm had contracts for its products, the timing of the payments was a challenge resulting in working capital shortages.  Recognizing that Olivado needed a facility that could use its contracts as collateral and provide revolving credit, Global Communities linked it to the factoring company Financial Access Commerce and Trade Services (FACTS), an agribusiness based financial company that provides account receivable financing.  Unlike mainstream commercial banks, FACTS does not require physical collateral.  FACTS provided Olivado with a KES 20 million ($194,175) quarterly revolving fund which according to Mr. Benard Chitunga, Chief Operating Officer of Olivado, “enabled the company to provide advances to its farmers which has mitigated side selling and enabled the company to diversify into exporting fresh avocado to new markets in South Africa and Russia.  Without this linkage we were have been stuck.”   In June 2017, Olivado sold its first tranche of fresh avocados (13 containers) with a return of KES 80 million ($776,699) to Russia.  “This critical linkage has motivated farmers to produce more fruits as they are assured of a ready market for their produce and prompt payments for delivered fresh avocados,” said Mr. Chitunga. This motivation has translated in to a growing number of avocado farmers, improved quality standards, increased yields.

Assorted and packaged avocado oil at Sagana plant ready for export

Olivado is now expanding to Kitale, Kakamega and Kisii counties in Western Kenya and Njombe in Tanzania with a projected capacity of 1,500MT in 2019. In Kakamega County, Olivado will support over 1,500 smallholder farmers to diversify into avocado production and away from sole reliance on sugar cane.

AIMS continues to support Olivado by linking them to financial institutions in Tanzania as they start their operations to that country. AIMS is also helping Olivado manage the information systems it is using to manage its1,700 farmers, supporting the provision of timely market information and payments.

Olivado is just one example of how AIMS is creating and strengthening critical linkages that help small and medium agribusinesses grow. These efforts have an impact far beyond the companies like Olivado, they strengthen the entire value-chain, from the farmer to the processor, and help promote sustainable economic growth.



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