Family economic enterprises: A strategy to fight poverty

Poverty statistics released recently must have shocked even P-Noy against the backdrop and drum beatings of a healthy and robust economy, stock market at all-time highs, and pronouncements of an inclusive growth and not leaving a single Filipino behind.

So what happened? Obviously, it is not just the fault of the current administration but the neglect to develop the rural and agricultural sector for the past 50 years. This period spans the administrations of Macapagal, Marcos, Aquino, Ramos, Estrada and Arroyo. As a result, Philippines Inc. lost its competitiveness against our neighbors who envied us in the early ’60s. Will P-Noy bring us back our pride as a people?

What should we do now?

The way to eradicate poverty is by creating wealth. Not by giving people dole-outs that simply breed mendicancy but by capacitating them to make a decent living.

The experience of countries that are now highly developed show that entrepreneurs and business enterprises are the ones that create wealth, not government. But government can provide the enabling environment to make this happen. Thus, we need to develop thousands of these entrepreneurs and businesses.

Family economic enterprises, or simply family businesses, compose the great majority of businesses in any economy, be it highly developed, developed, emerging or underdeveloped. It is for this reason why “small is beautiful” is often used to champion small, appropriate technologies that are believed to empower more people, in contrast with phrases such as “bigger is better.”

The noted economist E.F. Schumacher popularized this concept in his classic work “Small is Beautiful: A Study of Economics as if People Mattered” (Harper and Row, 1973). As a graduate student in economics at the University of Asia and the Pacific (then Center for Research and Communication), this is one of the few required readings that made a deep impact on me. Many of the world’s large businesses are simply family economic enterprises. Though the scale of their businesses compares many of the large multinational corporations, they are owned and controlled by just a single family. In the Philippines, this type of business organization is mostly the case.

At the heart of the family business is the father or the mother who is the entrepreneur. According to Schumacher, the dynamic force of capitalism is the entrepreneurs. They are the ones who introduce innovations—new inventions and ways of doing business that disrupt the old order, and create new ways for capitalism to prosper. In doing so, they generate profits and spur investment and growth. In short, it is the entrepreneur who creates wealth. This should provide the government the lesson that for poverty alleviation strategy to work, entrepreneurship development must take the center stage for such interventions.

The current administration has pointed out agriculture, tourism, and infrastructure development as keys to solving our poverty problem. And rightly so. But as they say, good plans are as good as the execution. It still remains to be seen how this is translated to nuts and bolts.

In studying how we can improve the lot of farmers in the country, a great majority classified as poor and forms part the large bulk of the statistics of families below the poverty line, it has come to our attention that, maybe it is the family farm that we have to give more focus on.

Government talks about giving out hybrid seeds, irrigation, farm-to-market roads, farm equipment and machinery, land reform, etc. In past decades, we have pinned much of our hope in these, including farmers’ cooperatives and associations as the vehicles to bring them out of poverty. Unfortunately, the record seems to be very dismal in this respect.

Cooperatives and associations have not delivered on their promises for Filipino farmers. True, there are successful agricultural cooperatives but they are a miniscule compared with all the effort and resources poured into it both from public and private funds. So, what seems to be the hope for our farmers? How can they lift themselves out of poverty?

Agripreneurship education and training

In using the concept of a “family economic enterprise” I refer to a scale of a business where a family can earn a decent income to be considered a middle-class family. It is not just the income level to bring them above poverty but the income that can help them live decently as human beings and enjoy the comforts of life. So to achieve this objective, what needs to be done?

Here, I see the strategic importance of education and training as the way to bring our farmers out of the poverty cycle. Here, it is the private sector, not government, that is taking the lead in bringing innovations to this important undertaking. Here are a few of these initiatives.

The issue of giving the proper education and training to people who would like to go into farming as a business was the idea behind the establishment of the first Family Farm School in Dagatan, Lipa City, in 1988. Today, there are 13 such schools in Luzon, Visayas, and Mindanao.

The Management Association of the Philippines (MAP) embarked on its Farm Business Schools project in 2004 as a post-secondary program to teach young people the business of growing crops, livestock, fish, and forest products. The MFI Foundation is the first adopter of the project with the establishment of the MFI Farm Business School in 2009 in Jala-Jala, Rizal. Today, there are four Farm Business Schools in operation and there are other interested parties in the process of replicating the concept.

When the Foundations for People Development (FPD) embarked on its program to address the need to develop the agricultural and rural sectors, it identified family farms as the organizational unit it will help nurture and develop. Looking at the profile of a typical Filipino farmer today (he or she is 57 years old and with only five years of elementary education), people at FPD realized there is nothing much one can do about this farmer. In business, we call these nonperforming assets and we simply write them off from our books. But FPD committed itself to devote time and resources to taking care of the farmers’ children, or at least some, who may be developed as agricultural entrepreneurs. These are the future generation of Filipino farmers and we refer to them as “agripreneurs.”

Thus was born the public-private partnership among the MFI Foundation, Agricultural Training Institute (ATI) and FPD in 2009. The intervention calls for a ladderized training program for out-of-school youth who are high school graduates and will be trained as agripreneurs using the dual training system.

The first batch of students from Benguet and Negros Oriental started the program in July 2010 and graduated last October with a Diploma in Agriculture Entrepreneurship. The second batch from Palawan started in August 2011 for a Diploma in Eco Farm Tourism Entrepreneurship. Last September, a batch from Negros Occidental started their program leading to a Diploma in Entrepreneurship with specialization in Organic Agriculture. The hope is for these graduates to start their own family economic enterprises when they finish the program and to be catalysts for the development of their communities in the near future.

Integrated family farm systems

The average Filipino farm today is just a little over a hectare.  Given that small size, such a farm will not produce enough income for the farm household to get out of poverty if they are only engaged in mono crop farming be it rice, corn, sugarcane, coconut, bananas, etc. Their hope lies in integrated family farm system where in the same land crops, livestock, vegetables, and other high-value products are grown side by side.

The concept of integrated family farm systems was popularized by Andrew Halliday who worked on the Manu Biosphere Reserve project in Peru. It illustrated how the generic model based on the concept of a social-ecological system (SES) can be applied to different situations and used as a management tool. Under SES, four functional subsystems are identified: Natural (N), worldview (W), control /management (C) and technology (T). At the farm setting, these can be understood in terms of soils, topography, climate (N); traditional and modern values, sustainability (W); local knowledge, extension workers, management style (C); and traditional and modern technologies (T).

In the country, the integrated family farm systems can be illustrated in the practice of intercropping, multi-story, or condominium farming that we see in Batangas and Cavite. Under the coconut trees, a farmer may plant coffee, bananas, vegetables or even raise some livestock like cows and pigs. With this system of farming, it is no wonder why farmers in these provinces are more progressive than their counterparts in other parts of the country who are still doing mono cropping systems.

The adoption of integrated family farm systems has wide ranging implications on Philippine agriculture and the way government programs are designed as a whole. These include the following:

1.) Small farm holdings can be made more productive if these were managed as integrated family farm systems. This is the strategy that should be followed for lifting farmers out of poverty.

2.) If such were the case, then current thinking at the Department of Agriculture (DA) that programs and projects have to be managed per commodity has to be revamped. Thus, for example, rice, corn, and coconut programs should now be treated in a way how a rice, corn, and coconut farmer can maximize his income by teaching him how to incorporate other agricultural enterprises in his farm.

3.) Effectiveness of agricultural programs should cease to be measured in terms of how many tons of rice, corn, coconut, etc., we produce but how much income rice, corn and coconut farmers earn out of his family farm.

4.) Performance of DA regional offices and programs must cease to use production targets but how many farm families have been taken out of the list of those who are poor. This is easy to monitor since government regularly makes surveys related to family incomes. This is the same data that DSWD uses to identify beneficiaries for its 4Ps program.

5.) Local government executives (governors and mayors) can now be given a simple scorecard to judge their performance. That is, how many of their constituents are still in the statistics classified as poor and how many of those who have moved out of that list during their incumbency. I suggest P-Noy use this simple scorecard to recognize governors and mayors who have done an excellent job. Enough of these awards that in the end mean nothing to their constituents. It’s about time government uses the poverty statistics as a measure of good governance at the barangay, town, city, and provincial level.

It’s also about time that government makes its business making Filipino farmers rich not just alleviating their poverty. As P-Noy promised his bosses “walang maiwan” in his all-inclusive growth strategy for the Philippines during his watch. You still have three years, Mr. President, to deliver on your promise. We shall surely watch your poverty scorecard at the end of your term.

(The author is a member of the MAP Agribusiness and Countryside Development Committee, the Project Manager for the MAP Farm Business Schools and the Dean of the MFI Farm Business School. Feedback at [email protected] and [email protected]. For previous articles, visit www.map.org.ph.)