malawi innovation challenge fund (micf) - united … 2014...annual report malawi innovation...
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A N N U A L R E P O R T
Malawi Innovation Challenge Fund (MICF)
SUBMITTED TO
The United Nations Development Programme
S U B M I T T E D B Y
Nathan Associates London Ltd. and
Imani Development International Ltd.
www.nathaninc.com
1 4 T H J AN U AR Y 2 0 1 5
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Contents
SECTION 1. Introduction .................................................................................................................. 1
SECTION 2. The Challenge Fund Instrument .................................................................................. 2
2.1 Lessons-learned from past challenge funds ....................................................................... 3
2.2 Incorporating lessons-learned into MICF ............................................................................ 4
SECTION 3. MICF operation ............................................................................................................ 6
3.1 Approach to Issuing Grants ................................................................................................. 6
3.2 Setting first round challenges .............................................................................................. 6
3.3 Pre Launch Marketing Activities .......................................................................................... 6
3.4 MICF Launch ....................................................................................................................... 7
3.5 Engagement With Potential Applicants ............................................................................... 8
3.6 Basic Profile of the Concept Notes Submitted .................................................................... 8
3.7 Geographic Spread of Concept Notes Submitted ............................................................... 9
3.8 Types of Projects Proposed at Concept Note Stage ........................................................ 10
3.9 Short-Listing of the Concept Notes ................................................................................... 12
3.10 Support to Short-Listed Applicants.................................................................................... 14
3.11 Undertaking Due Diligence ............................................................................................... 15
3.12 Proposals That Withdrew From the Process .................................................................... 16
3.13 Selection of Proposals by The Investment Panel ............................................................. 17
SECTION 4. The Process of Contracting ....................................................................................... 19
4.1 Issues Identified at Contracting Phase ............................................................................. 20
SECTION 5. Monitoring and Evaluation ......................................................................................... 22
5.1 Purpose Of The MICF M&E System ................................................................................. 22
5.2 Key Principles Of the MICF M&E System ......................................................................... 22
5.3 The Logframe .................................................................................................................... 23
5.4 Core Definitions and categories ........................................................................................ 23
5.5 Issues To Track Within M&E ............................................................................................. 29
5.6 Data Sources and Instruments .......................................................................................... 31
5.7 Approach to Undertaking Baseline Surveys ..................................................................... 33
SECTION 6. Developing an Irrigation Window .............................................................................. 38
6.1 The Case for an Irrigation Window .................................................................................... 38
6.2 Constraints and Issues Faced ........................................................................................... 39
6.3 What can an Irrigation Window Deliver? ........................................................................... 40
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6.4 The Approach to be Adopted ............................................................................................ 42
SECTION 7. Lesson Learnt to Date ............................................................................................... 43
7.1 Marketing of MICF ............................................................................................................. 43
7.2 Engagement with Companies ........................................................................................... 43
SECTION 8. Workplan ................................................................................................................... 46
SECTION 9. Conclusions ............................................................................................................... 49
Annex 1: ToR for Investment Panel .................................................................................................. 50
Annex 2: Investment Panel Code of Conduct .................................................................................. 53
Annex 3: Due Diligence Report ......................................................................................................... 55
Annex 4: Brief of Projects Selected for Contracting .......................................................................... 63
Annex 5: Risk Assessment For Individual MICF Projects ................................................................. 72
Tables and Figures
Figure 1. MICF Launch ........................................................................................................................... 7
Figure 2: Total Number of Project Concept Notes received by window ................................................. 8
Figure 3: Average project request for MICF grants ................................................................................ 9
Figure 4: Geographic Breakdown of PCNs ........................................................................................... 10
Figure 5. Breakdown of Agricultural PCNs by Sub-Sector ................................................................... 11
Figure 6. Breakdown of Manufacturing PCNs by Sub-Sector ............................................................... 11
Figure 7. Effluent spilling over from the sedimentation tank (6 November 2014) ................................. 20
Figure 8. MICF seven indicator groups ................................................................................................. 29
Figure 9. Timeframes and instruments for data collection .................................................................... 33
Figure 10. MICF Workplan .................................................................................................................... 47
Table 1. Companies and organisations engaged during pre-launch ...................................................... 7
Table 2. Short-Listed Agricultural Concept Notes ................................................................................. 13
Table 3. Short-Listed Manufacturing Concept Notes ............................................................................ 13
Table 4. Companies and organisations engaged during proposal stage ............................................. 14
Table 5. Final list of proposals .............................................................................................................. 18
Table 6. MICF indicators ....................................................................................................................... 29
Table 7. MICF grantee sample sizes .................................................................................................... 35
Table 8. Typical Gross Margin vs. Net Margin Calculation ................................................................... 36
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List of Abbreviations
AfDB African Development Bank
DfID UK Department for International Development
FDCF Financial Deepening Challenge Fund
GDP Gross Domestic Product
GOM Government of Malawi
Ha Hectare
INVC Integrating Nutrition into Value Chains
IP Investment Panel
MCCCI Malawi Confederation of Chambers of Commerce and Industry
MICF Malawi Innovation Challenge Fund
M&E Monitoring and evaluation
MITC Malawi Investment and Trade Centre
MOIT Ministry of Industry and Trade
MOST Malawi Oils Seeds Transformation Project
MSME Small and Medium size Enterprises
MWK Malawian Kwacha
NES National Export Strategy
NGOs Non-governmental organisation
PSDP Private Sector Development Project
SETFI Small Enterprise Training and Finance Institute
SWAp Sector Wide Approach
UNDP United Nations Development Programme
USAID United States Agency for International Development
VfM Value for money
1 MICF Annual Report
Annual Report
SECTION 1. INTRODUCTION
The United Nations Development Programme (UNDP) engaged Nathan Associates and Imani
Development International to provide fund management services for a challenge fund in Malawi, the
Malawi Innovation Challenge Fund (MICF). The initial management contract for the challenge fund
was from 2 January 2014 until 1 January 2015, with the expectation to extend the contract, should the
first year be successfully implemented.
The MICF was designed to be an important operational tool to the Government of Malawi’s Private
Sector Development Project (PSDP), funded by the United Nations Development Programme (UNDP)
and the Department for International Development (DFID), which aims to strengthen the private
sector’s ability to serve as the engine of economic growth. The goal of the project is to accelerate
economic diversification and to increase the opportunities for the poor to benefit from economic
growth through higher incomes and better job creation, and through productive partnerships within the
private sector, particularly between lead firms and poor producers and entrepreneurs, especially
smallholders. The MICF will be the main instrument to stimulate pro-poor market innovations and
competitiveness of value chains in the agricultural and manufacturing sectors.
The purpose of this Annual Report is to provide a comprehensive report on the progress of
implementation of the MICF from its inception and launch through to finalisation of the first round of
challenges which coincided with the contracting of most of the funds available to the MICF. The
structure of the Annual Report is as follows. Section 2 provides a brief introduction of the challenge
fund within the private sector development toolbox and summarise lessons-learned of challenge
funds, while also describing how these lessons were incorporated into MICF implementation. Section
3 highlights the progress made from concept note stage to the final process of contracting of grantees
to the MICF. Section 4 provides information on the contracting process, whilst Section 5 examines the
possibility of introducing an irrigation window. The Annual Report concludes with Section 6, an action
plan for the subsequent year.
2 MICF Annual Report
SECTION 2. THE CHALLENGE FUND INSTRUMENT
The Challenge Fund instrument originated in the UK public sector, where it was designed as a tool to
develop new approaches to the delivery of public services and used for inner city regeneration –
enticing private sector, NGO investment and entrepreneurship to deliver social benefits innovatively
and more efficiently. More recently, the tool has been adapted for international development as a way
of engaging with the private sector.
The need to develop and adapt the instrument for this role arose following the limited private sector
response that traditional approaches to supporting private sector development and/or financial
inclusion had yielded. Furthermore, there was concern that many PSD interventions were creating: (i)
market distortion and crowding out private sector activities; (ii) rent seeking and donor dependency on
the part of recipients; (iii) a lack of financial sustainability and insignificant / short term impact; (iv) a
wasteful attempt to “pick winners”; and (v) limited achievement of positive systemic change delivering
substantial sustainable development gains.
A Challenge Fund offers a “challenge” to the private sector and other target fund beneficiaries to
accomplish pre-defined objectives, often involving technological innovations and a defined pro-poor
impact. Although challenge fund objectives and operational modalities are progressively evolving, it is
generally defined as a tried and tested mechanism for donors to engage with the private sector and
attempt to align development and business objectives. The challenge fund instrument allows the
private sector to compete in an economically efficient and transparent manner for co-funding ideas to
ensure that the donor receives good value for money and the partners’ objectives are concurrently
accomplished.
Challenge funds are best defined as a competitive mechanism to allocate financial support to
innovative projects to improve market outcomes with social returns that are higher/more assured than
private benefits but with the potential for commercial viability. Although there has been some
adaptation of the instrument, its general characteristics can be summarised as follows. Challenge
Funds:
Are mechanisms to align development and business objectives. They aim to enable new
approaches to be tested by tipping investment decisions from ‘no go’ to ‘go’, overcoming the
purely commercial risk hurdle in return for potential development benefits.
Harness the strengths and abilities of the private sector – namely, to generate and test new
ideas, rapidly abandon them if they do not work and scale up those that do.
Trigger innovation, and have proved to be effective in helping to speed up the implementation
of new business models and technologies which combine potential commercial viability with
high social impacts, but where these commercial returns were uncertain, and therefore
investment is high risk.
Do not attempt to pick winners, (as many matching grant schemes have done in the past), but
instead support the ideas of others, through a transparent process of bidding rounds judged
by an independent appraisal panel.
Are not aimed at developing the capacity of project implementers, and so can therefore be
‘light touch’ instruments.
Require grantees to at least match the financing provided by the fund, as an indication of their
commitment to the commercial viability of the project, and to share the perceived risk.
Are allocated through an open competitive process with public solicitation of applications. To
remove the potential conflict of interest arising from a fund manager who also has to engage
with potential applicants and successful bidders, awards are made by independent selection
panels.
Help prove the viability of new business models and enhance the ability of such projects to be
replicated and/or scaled up on a purely commercial basis.
Require that the grantee has the capacity to implement. Challenge Funds are not capacity
building instruments.
3 MICF Annual Report
Experience has shown that challenge funds can be very effective in leveraging investment from the
private sector. In the final evaluation of the Financial Deepening Challenge Fund (FDCF), the fund
was found to have leveraged on average (across 25 projects), £2.35 of private sector funding for each
£1 of public sector input.
2.1 LESSONS-LEARNED FROM PAST CHALLENGE FUNDS
The Challenge Fund instrument has now been used for several years, with a variety of challenges
tried in a number of sectors and contexts. Several reviews have been undertaken and a number of
strategic and operational lessons learned have emerged. These lessons are summarised in the
following section and have been incorporated into the strategic and operational direction of the Malawi
Innovation Challenge Fund.
Strategic Issues Related to the Use of the Challenge Fund Instrument
Because challenge funds support the ambitions of others and do not attempt to ‘pick winners’,
innovations emerge that would not have been conceived of through other instruments. The
breadth of ideas that may emerge is affected by the nature of the challenge issued. This
can be both a strength and a weakness, throwing up unexpected successes, but potentially
producing a ‘scatter gun’ effect, which means that the collective impact of the fund is not
necessarily greater than the individual impacts of projects supported.
The instrument in itself is not designed to achieve systemic change through its
interventions. This has been described as its main ‘Achilles heel’. The best proposals may
come from a wide range of different types of innovation, and there is no a priori reason to
expect even very successful projects to necessarily trigger systemic change beyond the
projects own domain. A challenge fund may have successfully given a kick start to a
commercial initiative that would not otherwise have gone ahead in that way, at that time. After
challenge fund support ends, the business may grow and develop, may provide incomes
earning opportunities to numbers of the poor, and may even be replicated. But “so what?”,
unless the initiative alters the fundamentals of how markets operate, or leads to systemic
change, it can stand accused of failing to extend the benefits of support well beyond the
partners who received the initial challenge fund grant.
Understanding the incentives that current market conditions are providing to
companies within the agricultural and manufacturing sectors. It is important to
understand market conditions and the types of incentives they create. It is only when the
incentive offered by the market place are reinforced by incentives provided by the MICF in
terms of risk sharing grants that will enable these firms to respond to the MICF’s challenge
and the particular private sector will be willing to change their internal investment decision
from a “no go” to a “go” decision. This requires an informed pro-active fund manager, which
the MICF team undertook during the inception phase to sensitise and challenge key private
sector to consider varying degrees of innovation in both products and services across the
agricultural and manufacturing space.
Operational Issues
To attract the best possible range of proposals, marketing must be targeted, in
addition to mass advertising. In the use of challenge funds to trigger innovation by the
private sector, mass advertising is not likely to prove valuable if what the fund wants is
specific innovation – specifically aimed at supporting export and import substitution in the
manufacturing and agricultural sectors (as opposed to any type of innovation). In fact, mass
advertising may prove counterproductive. For instance, if the fund receives masses of Project
Concept Notes but reject most (in the case of the MICF first round 14% of applications were
invited to submit full proposals), the private sector may doubt the fund’s relevance if not its
impartiality. It is far more effective to engage pro-actively with groups of companies that have
4 MICF Annual Report
the potential to deliver the type of innovation the fund is seeking, as was done for the MICF,
whilst leaving it open to others to apply and provide other innovative projects for the fund to
consider. With an engaged fund manager this can be achieved as the final decision on
whether a project is approved falls to an independent investment committee.
Careful and regular monitoring of individual projects is critical: The Monitoring and
Evaluation (M&E) system has a role that includes the measurement of progress against the
clear targets set out in the logframe at the output, outcome and impact levels, but goes
beyond it to serve as an instrument for project delivery. Constant monitoring of projects is
essential to ensure that those projects that are getting into difficulty can be identified and
where issues are relatively straight forward in nature to be addressed supported quickly.
While it might be tempting to intervene to correct aspects of projects, the challenge fund
instrument must permit projects to fail. Otherwise, there is a risk of distorting the assessment
of whether the project should be closed down or can continue to meet a successful outcome.
A whole series of Challenge Fund reviews found that recipients of grants which had not
previously been involved in donor support were likely to produce projects with a
greater chance of success. In a small country such as Malawi with a relatively small and
capable private sector this is not always possible, but the key is to entice companies to
consider alternative approaches and products to engage with the poor.
Successful challenge funds that have delivered significant impact have been able to develop
a portfolio of successful projects driven by a real competition for funds. By introducing
a hard constraint in terms of financing available for the first round after the investment panel
have undertaken their deliberations, we introduced genuine competition for funds that will
permit the investment panel to use their considerable experience and knowledge to identify
the best proposals to be financed.
Projects are more likely to succeed when there is genuine risk-sharing by the private
partners involved in a particular project. By incorporating a combination of cash and in-
kind contribution, the MICF was able to obtain greater buy-into by the company and their
partners to the proposed projects.
Projects which were proposed with significant consultation with top management,
developing their active participation, were likely to be significantly more successful.
2.2 INCORPORATING LESSONS-LEARNED INTO MICF
Based on the experience of the lesson learnt from both first and second generation challenge funds,
the implementation of the MICF incorporated all the lessons highlighted above. In addition to this the
MICF further incorporated a number of other issues and lessons learnt:
Supporting innovation is central to the MICF. An application request made to the fund
should be based on a specific, new and innovative business idea that will either develop new
or enhance existing export markets or that can be a substitute for imported products in the
Malawian market. The MICF views innovation in its broadest sense including: i) a new
approach, idea, product or service that has not been tested anywhere; ii) an approach, idea,
product or service that is new to Malawi; iii) an approach, idea or service that has not been
applied to the sector in question in which the proposed project is being implemented; or iv)
service or business model being introduced to a target group where it has not been tried
before.
Focussing MICF challenges over time. It is expected, based on the types of projects that
have been selected in the first round of the fund, the second round of the MICF is likely to
consider narrowing the challenges to ensure that areas where there is interest and potential
for significant change are targeted. In this respect the proposed IFAD irrigation window
5 MICF Annual Report
provides an opportunity to narrow challenges around an important theme to support
agricultural transformation in Malawi.
Supporting systemic change. As the MICF projects are contracted and progress through
implementation, the MICF team will work closely with the NES implementation team and other
donor financed policy initiatives to identify potential policy and regulatory issues that are
hampering the growth of particular sectors, such as work carried out by the MOST and BIF
programmes. By harnessing communications in a strategic manner to highlight potential
policy constraints, and working with other initiatives to identify and support potential
champions of change, the MICF will be able to deliver a more systemic type change in the
markets where it operates.
Supporting the development of partnerships. Projects succeed when useful partnerships
which the potential grantee would not normally engage in are forged. The MICF team is
working with partners both within Malawi and where appropriate discussing with those outside
of the country to ensure that grantees are made aware of new and potentially interesting
partnerships for their ideas that they may not have been initially been aware of.
Undertaking careful due diligence on potential applicants to the fund. Due diligence of
grantees, particularly during the proposal preparation phase, is critical to ensure that the
investment committee has the necessary information to make an informed decision. The
MICF team, as part of the proposal stage, visited the lead partner’s offices to undertake basic
due diligence – to a level which has not been attempted in a single country challenge fund.
This was followed by the submission of a report highlighting the findings of the due diligence
to the investment panel.
6 MICF Annual Report
SECTION 3. MICF OPERATION
The following sections briefly highlight how the fund manager operationalised the MICF and the
activities that undertaken from the launch of the fund to the contracting stage. More detailed
descriptions are provided in the MICF inception report dated April 2014 and the subsequent quarterly
reports of the MICF.
3.1 APPROACH TO ISSUING GRANTS
The process of issuing grants involved the stages of application, appraisal and selection; followed by
contracting. As is common with all challenge funds a two-stage application process was utilised: this
method allows for a large intake of initial concepts, without imposing a burden on the initial application
of interested private sector enterprises. It is also an efficient way to identify a small number of relevant
concepts to go to the full proposal stage, which: i) minimises transaction costs for all parties; and ii)
provides an opportunity for structured feedback as the application develops.
The Fund Manager launched the MICF on 23rd April 2014 with a targeted event in Blantyre for both
rounds for the first challenges (in manufacturing and agriculture).
3.2 SETTING FIRST ROUND CHALLENGES
Setting the challenges for the MICF especially during the first round was demanding. There was need
to achieve a balance between having a sufficiently broad set of challenges to generate interest and
solicit a number of high quality proposals for an instrument which remains relatively new to Malawi,
whilst ensuring that projects are of a scale to potentially have a systemic impact on markets that
matter to the poor.
It is within this context that the following challenges were developed. They were broad whilst placing
emphasis on innovation, exports / import substitution, incomes of the poor and the potential to
increase employment for Malawi’s poor:
Window 1: Introduce new initiatives that deliver new products, services and business models
that increase the supply of processed and semi-processed agricultural commodities produced
by poor producers in Malawi that either develop new or enhance existing export markets or
that can be a substitute for imported products in the Malawian market.
Window 2: Introduce new initiatives that deliver new products, services and business models
that increase the supply of manufactured goods produced in Malawi for the export market or
where companies can backward integrate their processes to incorporate locally produced
products and services and reduce reliance on imported goods. These initiatives must be able
to deliver significant and tangible benefits in terms of increased incomes and employment to
the poor in Malawi.
3.3 PRE LAUNCH MARKETING ACTIVITIES
Prior to the launch of the MICF, the team performed an intensive period of sensitising leading
agricultural and manufacturing companies within Malawi, as well as financial institutions and donor
organisations, to ensure as many companies and organisations were aware of the MICF before the
launch of the fund. The sensitisation process with the private sector included meetings with senior
management (board or director levels) of many of the leading companies within Malawi.
The list of companies and organisation that the team engaged with during this period is highlighted in
the table below:
7 MICF Annual Report
Table 1. Companies and organisations engaged during pre-launch
AgDevCo Crown Group of Companies
Malawi Mangoes Universal Industries
AgriCane Dairibord (Malawi) Ltd Moringa Miracles Valid Nutrition
Agriculture Resources Ltd. Exagris Africa NASFAM Wonder Fresh Limited
AgriFeeds Farmers Organization Ltd
Nyama World GTZ
Arkay Plastics FES OXFAM MOST Project
Bakhresa Global tea & Commodities
Rab Processors BIF
Business Consult Africa GR Farming & Engineering
Rice Milling Co. Business Linkage Challenge Fund
Candlex Limited Heifer International Sable Farming Co. Carbon Dioxide & Allied Products
SABMiller- Chibuku Products
HMS Food & Grains Satemwa Tea Estates Malawi Investment and Trade Center
Carlsberg Illovo Self Help Africa Malawi Confederation of Chambers of Commerce and Industry (MCCCI)
Capital Oil Refining Industries Ltd.
Kwithu Kitchen Stuart M Grant PipeIt
Citrofine Lilongwe Dairy Transglobe ChemPlus
3.4 MICF LAUNCH
The launch of the Malawi Innovation Challenge Fund and the opening for the call for the first round of
proposals followed the end of the Inception Phase. The Launch event was held at Ryalls Hotel in
Blantyre during the morning of 23th April 2014.
The event was deliberately held as a two hour breakfast event to ensure the maximum number of
Chief Executive Officers, Directors and Finance Directors from leading businesses operating in
Malawi’s agricultural and manufacturing sectors would attend. The launch event was also attended by
the UNDP Resident Representative, Mia Seppo and by Sarah Sanyahumbi, DFID Country Head.
The agenda for the launch event comprised of: i) Welcoming remarks and introductory speech by Mia
Seppo, Resident Representative, United Nations Development Programme; ii) Opening remarks by
Sarah Sanyahumbi, Head of Office, UK Department for International Development; iii) “Challenge
funds: what are they and how do they work?” presented by Buddhika Samarasinghe, MICF Project
Director; iv) “How do firms apply to the Malawi Innovation Challenge Fund?” presented by Navin
Kumar, MICF Fund Manager; and v) A question and answer session. The launch event was facilitated
by John McGrath from the MICF fund management
team.
The total number of attendees greatly exceeded
expectations; approximately 100 people attended
(excluding the MICF team), comprising of captains of
industry, representatives of leading manufacturing
and agribusiness firms in Malawi, leading local and
international NGOs active in Malawi, a number of
commercial banks and financial sector providers,
representatives of the Ministry of Trade and Industry,
Malawi Investment Trade Centre, key donor
financed programmes supporting private sector
development in Malawi, as well as local media
(television and print media).
As no travel, accommodation or per diem allowances were provided to attendees (with the exception
of one official from the Government), this wide spectrum of private sector participants from across
Malawi was particularly encouraging to see, and reflected the genuine interest in the project.
Figure 1. MICF Launch
8 MICF Annual Report
The Question and Answer session was lively and contributed to further discussion, and a better
understanding of the application process and what it was that the MICF was looking for. The vast
majority of participants were keen to understand more of the project and how their businesses could
engage in the first round of the competition.
This high profile event, targeted at key stakeholders, was deemed a success, and was consolidated
further by the project’s national media coverage, website and on-going marketing activities to ensure
maximum coverage and awareness of the project.
A number of articles about the launch were placed through both the traditional print media and
electronic formats. In addition to these, the launch was also covered on Malawi TV and on radio news
channels. These were uploaded on to the website to give potential applicants further information
about what the MICF is looking for in terms of inclusive, innovative business models.
Immediately after the launch the MICF office had meetings with potential applicants with more
detailed questions on the application process and the eligibility criteria.
3.5 ENGAGEMENT WITH POTENTIAL APPLICANTS
As highlighted in the inception report, to attract the best possible range of proposals, marketing must
be targeted, in addition to mass advertising. Based on the team’s experience of running challenge
funds in other countries and locations, it was deemed necessary to engage pro-actively with groups of
companies that have the potential to deliver the type of innovation that MICF is seeking, whilst leaving
it open to others to apply and provide other innovative projects for the fund to consider. This did not
compromise the instrument as the final decision on whether a project is approved fell to an
independent Investment Panel.
Thus during the subsequent five weeks from the launch of the first round of challenge windows the
consultancy team held meetings with around 90 businesses and business associations in the
Southern and Central Regions to ensure that: i) eligible applicants were aware of the MICF; and ii)
there was an opportunity for businesses and their partners to discuss their concepts with the MICF
project team.
3.6 BASIC PROFILE OF THE CONCEPT NOTES SUBMITTED
With a concerted media and private sector engagement campaign over a five week period, an
impressive number of concept notes were received. Around 202 concept notes were submitted to the
MICF team, which was much greater than expected, given the size of the country’s private sector and
the fact that this instrument was new to Malawi.
Figure 2: Total Number of Project Concept Notes received by window
Although a predominantly agricultural economy, it was pleasing to note that around 46% of concept
notes (93 in total) were focused on some form of manufacturing activity, whilst slightly over half the
concept notes were focused on the agricultural sector. The higher number of agricultural concept
9 MICF Annual Report
notes was to be expected, given the fact that: i) Malawi is primarily an agricultural based economy;
and ii) it is often easier to conceptualise inclusive business projects, as the majority engage with
poorer smallholder producers, then process it, and often export the product. Most of the projects were
focused in sectors that are relatively well known to businesses.
The aggregate value of projects seeking MICF funding was US$ 293.1 million, and the cumulative
funding requested from MICF in this first ‘call’ window was US$ 87.1 million; over ten times the total
amount of US$ 8 million grant funding available to MICF at present.
The average estimated cost of projects was slightly over US$ 1,451,000, ranging from less than fifty
thousand dollars to over US$ 24 million. The average MICF contribution being requested varied
between challenge fund windows. Surprisingly the average grant requested by applicants bidding for
the manufacturing window was lower than the agricultural window at just over US$ 418,000, ranging
from less than US$ 105,000 to US$780,000. This is partly due to the fact that a vast majority of
projects in the manufacturing sector focused on agro-processing, building on facilities that companies
often had and working with production systems, on the whole, where they already part or the majority
of the infrastructure in place.
Figure 3: Average project request for MICF grants
The average grant requested by applicants bidding for the agricultural window was just over US$
441,000, ranging from around US$ 15,000 to US$ 2,000,000. This significant range is not surprising
given the broad diversity of agricultural enterprises that applied to the fund, from small scale farmers
groups to large international agricultural operators.
Leverage rates (the amount businesses were willing to provide in relation to the MICF grant
contribution) remained extremely encouraging given the constraints that companies within Malawi
often report in terms of access to financial resources. The average leverage per project i.e. company
contribution as a proportion of MICF funding can be highlighted as follows:
Within the manufacturing window for every one US$ 1 contributed by MICF, applicant
companies have indicated during this concept note phase that they on average are willing to
contribute US$ 2.10. This is a significant number, although consistent with the more capital
intensive nature of projects within the sector.
Within the agriculture window for every one US$ 1 contributed by MICF, applicant companies
have indicated that they on average are willing to contribute US$ 4.43. This is on average a
very large number for challenge funds, particularly from single country challenge funds. These
figures may be skewed by a few extremely large projects (around 3 in total) that account for
over 75% of total company contribution of projects within the agricultural sector.
3.7 GEOGRAPHIC SPREAD OF CONCEPT NOTES SUBMITTED
In regard to the geographical locations of where project activities were to be undertaken, there was a
relatively good national spread (see figure 3 below). Around 11% of all concept notes proposed to
implement projects in the Northern Region of Malawi, whilst 39% of projects aimed to implement
10 MICF Annual Report
Northern Region
13 PCNs
Southern Region
50 PCNs
Central Region
46 PCNs
Breakdown of Agricultural Window PCNs by Region
Total 109 Agricultural
PCNs
Northern Region9 PCNs
Central Region
33 PCNs
Southern Region
51 PCNs
Breakdown of Manufacturing Window PCNs by Region
Total 93 Manufacturing
PCNs
activities in the Central region. Unsurprising, given its dominance of economic activity, 50% of all
concept notes planned to implement their activities in the Southern Region of the country.
Figure 4: Geographic Breakdown of PCNs
There were however, divergences to these averages when comparing where proposed activities will
take place between the agricultural and manufacturing windows. Those PCNs focused on the
agricultural window saw a relatively more equitable spread of projects with 12% being implemented in
the Northern Region, whilst 42% are being proposed to be implemented in the Central region, and the
remaining 46% in the Southern region.
Unsurprising given the dominance of manufacturing activities in the South of the country, the majority
of PCNs (55%) were proposing to be undertake their manufacturing projects in the Southern region
whilst only 35% of applicants were focusing on manufacturing activities in the Central Region.
3.8 TYPES OF PROJECTS PROPOSED AT CONCEPT NOTE STAGE
The types of projects proposed were commendably diverse. In the agricultural sector this spanned
more than 30 classifications of agriculture-related activities. However, the most common submissions
were for: fruits and vegetable (27% of agricultural window PCNs); staple crops (15%); and livestock
(10%). The pie-chart below provides a more detailed breakdown of PCNs in the agricultural sector.
11 MICF Annual Report
Inputs, 8
Sugar, 6
Legumes, 7
Fisheries, 7
Fruit and Vegetables, 27
Livestock, 10Tea and Coffeee, 5
Staple Crops, 15
Others, 24
Other15%
Livestock Processing7%
Processing of Crops27%
Bio-Fuel9%
Consumer Goods15%
Agric Input Processing7%
Industrial Products11%
Construction9%
Figure 5. Breakdown of Agricultural PCNs by Sub-Sector
Classifying the manufacturing sector applications proved to be a difficult exercise given the wide
range of sub-sectors in which companies focused their PCNs. The following pie chart provides a basic
breakdown of the main manufacturing sub-sectors.
The largest number of concept notes were derived from agro-processing of crops (around 27% of all
concept notes). This subsector included everything from developing tomato paste through the
development of soya-milk in cartons for domestic and international markets.
There were a significant number of firms (15%) that submitted concept notes in the consumer goods
sector aimed at the domestic and in some instances the international retail market, varying from new
types of margarine and fortified cereals, through to hair dyes and beauty products.
Industrial products, the next largest classified grouping comprising of 11% of all PCNs, had a
narrower range of products primarily focused on developing industrial uses for starch and starch by-
products. The “other” category included a wide range of products including plastics, pharmaceutical
and recycled products.
Figure 6. Breakdown of Manufacturing PCNs by Sub-Sector
More
12 MICF Annual Report
details of the profile and analysis of these 202 submissions was provided in the “MICF Report on The First Round of Project Concept Notes” submitted to UNDP in early June 2014
3.9 SHORT-LISTING OF THE CONCEPT NOTES
The first meeting of the MICF Investment Panel (IP) was held on 24th June 2014, at Ufulu Gardens
Hotel in Lilongwe – the terms of reference for the IP and the Code of Conduct each member had to
sign is attached in Annex 1 and 2 respectively. The IP comprised:
George Partridge, CEO National Bank Malawi (Chairperson)
Zwide Jere, Managing Director, Total LandCare (Member)
Charity Lumpa, Managing Director, Airtel Networks Zambia PLC (Member)
Shakil Satar, Head of Investment Banking, Standard Bank Malawi (Member)
Sarah Holmes, Programme Director, TechnoServe Inc (Member)
In addition, to the MICF consultancy team, Nick Amin and Sharon Matenje, from DFID Malawi, and
Cinzia Tecce, from UNDP Malawi, sat as observers to the first investment panel meeting. With five out
of the seven investment panel members in attendance, quorum was achieved.
In preparation for the appraisal process by the Investment Panel (IP), the MICF management team
conducted an initial review and grading of the 202 concept notes, using a ‘traffic light’ grading
system1. Submissions that either fail to respond to any of the challenges set, do not meet the key
criteria or have major faults inherent in the proposal were graded red. Submissions that respond to
one of the challenges and broadly meet the criteria, but are perhaps not the strongest proposals, were
graded yellow. Submissions that respond to one of the challenges, broadly meet the criteria and
appear to have particular merit, were graded green.
The quality of concept notes proved to be of a very high standard, which resulted in a very high
quality short list being developed. Given the quality of the first round and the time and considerable
effort that many businesses provided, it was agreed by the funding donors (UNDP and DIFD) to
release the entire funding available for the challenge fund minus a contingency of US$ 500,000. Thus
it was agreed that for the first round, US$ 7.5 million will be available for both windows.
With this indicative figure in mind, 29 submissions were invited to submit full project proposals. All the
29 successful PCNs were identified on their fundamental merits (as cited in the concept note), with no
‘top down’ consideration of ensuring an equitable spread across locations, business sectors, kind of
applicant, etc. 28 of the 29 short-listed submissions selected by the IP were taken from the 54 ‘green’
applications, with one short-listed submission from the ‘yellow’ category.
Based on the ranking presented by the Investment Panel, 14 agricultural PCNs were short-listed for
the next stage of the competition – the proposal phase. The 14 PCNs represented slightly over 12%
of all the agricultural concept notes submitted. The total amount of financing available for the window
is $ 3,637,123, which is slightly less than 50% of the total grant request made by the short-listed firms.
This should ensure significant competition for funds at the proposal stage, whilst also ensuring that
firms have a realistic chance given the level of effort they will need to put in to develop their full
proposals.
1 It is important to point out that the final decision on which submissions should be invited to proceed to the next stage of the
appraisal process rests wholly with the Investment Panel of the MICF.
13 MICF Annual Report
Table 2. Short-Listed Agricultural Concept Notes
For the manufacturing sector challenge fund window, 15 projects were selected based on the ranking
presented by the Investment Panel. The 15 proposals represented slightly over 16% of all the
manufacturing concept notes submitted. The total amount of financing available for the window is
$3,637,123, which is slightly more than 47% of the total grant request made by the short-listed firms.
Again this should ensure significant competition for funds at the proposal stage.
All 14 agricultural window submissions selected by the Investment Panel were taken from the ‘green’
applications identified by the consultancy team. The 14 short-listed submissions are, at this stage at
least, cumulatively seeking around US$ 7.37 million in MICF funding, which is around 8.5% of the
total US$ 87.1 million that all 202 submissions were seeking. The average size of funding requested
by the 14 short-listed projects in the agricultural sector is US$ 526,230, ranging from a maximum of
US$ 800,000 to a minimum of US$ 207,000.
Table 3. Short-Listed Manufacturing Concept Notes
Fourteen of the 15 short-listed submissions selected by the Investment Panel were taken from the
‘green’ applications, with one short-listed submission from the ‘yellow’ category (Nandau
Investments). The 15 short-listed submissions in the manufacturing sector are, at this stage,
cumulatively seeking around US$ 7.69 million in MICF funding, which is around 9.4% of the total US$
87.1 million that all 202 submissions were seeking. The average size of funding requested by the 15
short-listed projects in the manufacturing sector is US$ 512,588, ranging from a maximum of US$
750,000 to a minimum of US$ 206,476.
14 MICF Annual Report
More detailed information on the short-listed companies is available in the second quarter progress report dated July 2013.
3.10 SUPPORT TO SHORT-LISTED APPLICANTS
From 23rd July to 26th August 2014, MICF team carried out due diligence visits to companies
shortlisted by the Investment Panel for proposal stage. Of the 27 companies invited to submit
proposals, all the companies except COMARG were visited, as the Directors of the company were not
available and then subsequently withdrew their application to the MICF.
The MICF Team engaged with each of the applicants multiple times, not including the official site visit
to conduct the due diligence process. These engagements were to clarify any queries that the
applicants had with regard to the preparation of the proposal. The Team also provided clarification to
the applications on how they could provide details on the innovation; the implementation of the project
including work plans and activities; demonstrating that they have an understanding of who the poor
are and ultimately linking the project to the social impact.
The last date for submission of proposals was the 29th of August, 2014. The Investment Panel had
invited 27 companies to submit 29 proposals (one company was invited to submit two proposals) after
review of Project Concept Notes in July 2014.
The table below provides information on the companies visited during the period of proposal
submission:
Table 4. Companies and organisations engaged during proposal stage
AGRICULTURE WINDOW
No Code Company Name
Contact Person
Location Email Phone Date Visited
1 01-01-74 Rab (Groundnuts)
Afzel Thassim
BT [email protected] 0888-825-017
12/08/2014
2 01-01-75 Exagris Jim Goodman
LLW [email protected] 0-999-966-528
04/08/2014
3 01-01-71 iOTA Ltd Chris Schaeke
BT [email protected] 0999-747-070
18/08/2014
4 01-01-02 Fumwe MacDonald Thawale
BT [email protected] 26/08/2014
5 01-01-64 Peak Apiraries
MacLeod Nyirongo
LLW [email protected] 0-991-282-869
25/07/2014
6 01-01-85 Afrisphere Hussein Jakhura
LLW [email protected] 0999821140
06/08/2014
7 01-01-05 Satemwa Wouter Verelst
BT [email protected] 0993-727-091
29/07/2014
8 01-01-38 Kwithu Kitchen
Frank Kondowe
LLW [email protected] 0997-406-925
06/08/2014
9 01-01-62 IFSA Cullen Kamanga
BT [email protected] 0999-617-929
18/08/2014
10 01-01-67 Agronomy Tech
Neill Stewart
LLW [email protected] 0-884-013-425
23/07/2014
11 01-01-57 Wonder Fresh
Amanda Mitumbili
LLW [email protected] 0-991-187-929
05/08/2014
12 01-01-92 Agrotech Ltd
Dhiren Thakrar
LLW [email protected] 0-882-201-970
12/08/2014
13 01-01-68 ESOKO Tione Kaonga
0-888-369-173
01/08/2014
14 01-01-37 Balvi Kondwani Chiwina
LLW [email protected] +491-772-741103
14/08/2014
MANUFACTURING WINDOW
15 MICF Annual Report
No Code Company Name
Contact Person
Location Email Phone Date Visited
1 01-02-49
Ranet Edson Kaonga
LLW [email protected] 0996 151 080
05/08/2014
2 01-02-42
RecycOil Eveline Sibindi Van Dam
LLW [email protected] 23/07/2014
3 01-02-60
Universal Farm
Alan Chipasula
BT [email protected] 0999-783-595
30/07/2014
4 01-02-35
Moringa Miracles
Ian Lockington
0999-830-704
12/08/2014
5 01-02-02
Dairiboard Theodora Nyamandi
BT 13/08/2014
6 01-02-76
Nandau Investments
Antoinette Kalinde
LLW [email protected] 0993419788
15/08/2014
7 01-02-33
Preco Vijay Kumar (Menon)
BT [email protected] 0888-823-665
31/07/2014
8 01-02-55
Green Com Daniel Kloser
LLW [email protected] 0-999-926-230
15/08/2014
9 01-02-05
Sunseed Oil
Manoj Kumar Vats
LLW [email protected] 0-884-821-061
15/08/2014
10 01-02-26
COMARG Ishmail Ali LLW [email protected] 0-888-138-118
Not Visited
11 01-02-40
Unpack David Taylor
LLW [email protected] 0-995-319-109
24/07/2014
12 01-02-46
Universal CSM
Kaushik Pillalamarri
BT [email protected] 01 878 172 30/07/2014
13 01-02-82
Charles Stewart
Maya Stewart
BT [email protected] 0-999-383-458
12/08/2014
14 01-02-86
Lilongwe Dairy
Jitendra Agrawal
LLW [email protected] 0-881-310-670
24/07/2014
15 01-02-80
Arkay Lalit Malhortra
BT [email protected] 0882-091-525
30/07/2014
3.11 UNDERTAKING DUE DILIGENCE
The due diligence process commenced immediately after the two proposal workshops were
conducted for those companies who were invited by the Investment Panel to submit full proposals. At
the proposal workshop each company was expected to submit a list of documents that covered all
aspects of a business including among others, financial records, governance of the company, details
of management structures and statutory and regulatory prerequisites. The MICF Team followed this
up with onsite visits to each of the companies to better understand the project, the site for
implementation and to conduct an on-site verification.
During the site visit the MICF Team undertook the following activities:
Visited the site where the project would be set-up, which could be a part of an existing
building, a new building which the company has procured or a rented unit.
Geo-tagged the project site for future reference.
Took pictures of the project site and any other subject of relevance to the project.
If the company has put forward any in-kind contribution, visually assessed and identified the
equipment, machinery or building that the company has identified and then assessed if this in-
kind contribution has any relevance to the proposed project.
16 MICF Annual Report
Where partnerships were proposed, visited the site(s) of these partner(s) and clarified their
involvement and commitment to the project that was proposed by the lead firm.
Monitored and gauged the involvement of the partners in the discussions and assessed their
understanding and knowledge of the role in the project.
Met the management team of the company and the operational team who will be
implementing the project.
Discussed the project in detail, the key activities that would be undertaken during
implementation, clarified the sequential work plan with timelines to support the key activities,
and also discussed the risks in the project.
Verified any plans that the company had to mitigate the risk of adverse environmental impact
from their project and if there was any physical evidence of any such measure in place.
Highlighted elements of the project that were unclear and made suggestions for possible
improvements.
It was also made very clear to the company that the MICF Fund Managers were able to
engage with the company on their project in detail only because the decision on which project
is selected to move to the next stage was in the hands of an independent Investment Panel.
Subsequent to the due diligence visits, the Fund Management team drafted due diligence reports to support the proposal of each shortlisted company. The reports included sections on the operational/managerial capacity of the company and its financial strength to implement the project. Each report had detailed sections on the innovation in the project and included criteria on environmental impact as well as UNDP exclusionary criteria. Annex 3 provides a summary of a due diligence report.
The Fund Management team also developed new templates for assessing the financial strength of
start-up companies that do not have the necessary audited data as more established companies. A
number of formats were tested in the field until one was agreed by the team in Malawi and London.
3.12 PROPOSALS THAT WITHDREW FROM THE PROCESS
Twenty nine project concept notes were selected to submit full proposals. Out of these projects, eight
were unfortunately unable to submit a full proposal at the close of the round, equally split between the
manufacturing window the agricultural window. Around US$ 3.9 million of potential MICF funding was
withdrawn from the competition through the non-submission of the proposals.
The withdrawals were based on a number of reasons. Around 50% of those companies that did not
submit were due to difficulties in securing adequate matching finance for their respective projects.
Around 20% of these non-submissions were due to the realisation that more work needed to move
their concept from innovative idea to actual implementation on the ground. All companies that
withdrew for these reasons indicated that they would reapply for subsequent rounds of MICF once
they were able to undertake more research and development. Other remaining non submissions were
due to a need, identified by the company itself, to undertake more market information. Finally one
company had anticipated that the cost of the equipment, the major component of the project will be
paid up-front. Once it was clarified that MICF pays only in arrears and against milestones they
withdrew their proposal.
The following provides a brief overview of the projects which withdrew and the reasons for their
withdrawal:
RecycOil (Project No. 01-02-42): The directors of the company had been unable to secure the
supporting finance for this project.
Green Com (Project No. 01-02-55): The directors of the company needed more time to
ensure that they have secured their market for the product and hence withdrew their proposal.
17 MICF Annual Report
COMARG (Project No. 01-02-26): The directors of the company were unable to secure the
supporting finance for this project.
Nandau Investments (Project No. 01-02- 76): The directors of the company had internal
issues with regard to securing the rights to the land meant for the factory and were also
unable to secure supporting finance for the project.
Rab Processors (Project No. 01-01-74): The company had anticipated that the cost of the
equipment, the major component of the project, would be paid up-front by the MICF. Once it
was clarified that MICF pays only in arrears and against milestones they withdrew their
proposal.
Fumwe Farm Ltd (Project No. 01-01-02): Sadly due to unexpected family reasons the director
of the company and lead implementer of the project had to withdraw its application.
Peak Apiaries (Project No. 01-01-64): The directors of the company had determined that
more work needs to be done on training of farmers to get them ready for a project of this
scale and felt that they need another year to be ready.
IFSA (Project No. 01-01-62): The directors of the company are currently engaged in another
enterprise, which is also capital intensive and hence had to prioritize their resources.
3.13 SELECTION OF PROPOSALS BY THE INVESTMENT PANEL
The second Investment Panel Meeting of the Malawi Innovation Challenge Fund (MICF) was held on
17th September 2014 held at Ufulu Garden Hotel and Conference Centre in Lilongwe, Malawi. At this
meeting the Investment Panel selected projects to be funded by the MICF, based on the evaluation of
submitted proposals. UNDP Resident Representative, Mia Seppo, opened the Investment Panel (IP)
meeting and reiterated that the MICF is an instrument that supports inclusive growth, specifically
designed to spur innovation and help transform the Malawian economy. She thanked the IP members
for participating in the process and stressed the importance of the session which would decide which
Proposals would move forward to the Contracting and Negotiating stage.
The IP members agreed the format for evaluating the projects and resolved that the Fund
Management Team (FMT) was to present the summary of each project based on their Due Diligence
visit and subsequent report, focusing on the innovation, impact on poor households, capacity of lead
firms to implement their project and any other fundamental issues specific to each project.
It was also agreed that in case of any clarification the IP would refer back to the Fund Management
Team, who would then respond to the queries to the best of their ability based on their understanding
of each Project which was acquired during the multiple interactions during the Proposal stage and the
Due Diligence visit. The IP would then discuss the projects and make a decision to either give a
straight approval, of approve with conditions or give a conditional approval (namely that the applicant
would need to resubmit their proposal addressing all the concerns highlighted by the IP, for a final
decision by the IP). More detailed information about these discussions can be accessed through the
MICF third quarterly report dated October 2014.
After these deliberations the final list of proposals as decided by the Investment Panel to move to the
Contracting and Negotiating stage is given below.
18 MICF Annual Report
Table 5. Final list of proposals
PCN Number Company Remarks
01-02-60 Universal Farm (Cassava) Approved with conditions
01-02-35 Moringa Miracles Approved with conditions
01-02-02 Dairibord Approved
01-02-05 Sunseed Oil Approved
01-02-82 Charles Stewart Approved with conditions
01-02-80 Arkay Approved
01-01-75 Exagris Approved
01-01-71 iOTA Ltd Conditional Approval
01-01-85 Afrisphere Approved with conditions
01-01-05 Satemwa Approved with conditions
01-01-38 Kwithu Kitchen Approved
01-01-67 Agronomy Tech Ltd Approved with conditions
01-01-37 Balvi Conditional Approval
Each Company that submitted a proposal was sent a letter by the Fund Manager indicating the status of the project based on the classification done by the Investment Panel.
19 MICF Annual Report
SECTION 4. THE PROCESS OF CONTRACTING
The Contracting Process was divided into four stages:
Finalising the grantee logic model
The drawing up of and finalising each grantee logic model was the first step as companies moved
towards final contracting with UNDP.
The MICF Team prepared the grantee logic model for each company based on their understanding of
the proposal that was submitted and the various interactions during the proposal stage. This grantee
logic model provided a logical sequence of outcomes and outputs starting from the key activities that
the company would initiate to ultimately lead to an impact in terms of improving livelihoods and
creating jobs.
During the first meeting with the company, the grantee logic model was introduced and discussed in
detail. The MICF Team requested the company to go through the model and highlight if any activity
had been omitted or if any activity that the company did not intend to do has been included. The
company was also asked to verify and clarify every single target that was mentioned in the proposal in
terms of social impact, production targets, increase in productivity, commercial returns, export earning
or any other target relevant to the project.
Finalising the logframe
Once the grantee logic model was finalised with each company, it was converted to the logframe,
which will be used for monitoring throughout the duration of the project. All the grantee logic models
and the subsequent logframes for each of the projects were completed by the end of October 2014.
Finalising the milestones and the payment attached to each
The third step in the process involved setting up the milestones for the project. The company was
encouraged to disaggregate their budgets and to prepare themselves for the discussions on the
milestones setting while doing the grantee logic model.
As expected this process was more time consuming and required greater levels of negotiation. The
principle in setting the milestone, given the detailed knowledge the fund managers had gained
through the period of engagement with the firm was to ensure that the business model proposed by
the firm would be tested fully. This would include the whether the project would be able to deliver on
its impact on the poor. Thus the final milestone, which entailed testing this impact indicator required a
significant portion of the MICF funds to be attached to it – usually around 20 percent of the overall
grant contribution.
The incremental approach that was taken by the MICF team allowed companies to understand in
some detail the practical issues that would be involved in implementing their projects. The logic model
phase was a particularly revealing, highlighting the areas of a number of company’s proposals which
were either weak or missing. Thus a further refinement of most company’s projects occurred at this
stage, with the lead company and its partners in most cases inserting additional activities and
increasing their contributions to each of their respective projects.
The negotiations also tested with some rigour the basis of impact figures that were presented in the
proposals and the relationship between inputs, production assumptions (in the case of agricultural
projects) and overall outputs – particularly the potential in penetrate chosen export / high value added
markets that most of the projects were attempting. In almost all cases there were revisions to the
initial impact figures based on the discussions and what was technically possible. In one project,
these impact numbers required significant adjustment and required re-evaluation of the proposal;
however, in most instances, the changes represented a more realistic impact figures which could be
achieved during the remaining two year life span of the MICF.
20 MICF Annual Report
The setting of milestones required a balance to ensure that there was sufficient financial incentive to
ensure that individual projects pursued their impact objectives, whilst making sure that they were not
overly cashflow constrained to make the project non-viable from a company perspective, given the
current financial climate. This was done with most companies through several iterations and
discussions. In most challenge funds this is the most difficult part of the negotiations, with it not being
uncommon for one or more companies to withdraw from the contracting process at this stage. It is
pleasing to report that all companies were able to navigate this process.
Final contracting with UNDP
With the exception of one company, Agronomy Technology Limited, by early December virtually all
the company’s documents were submitted to the regional procurement office of UNDP in Ethiopia for
final approval. The case of Agronomy Technology’s delay in submission of documents was due to
disputes between the two principle partners on the approach they would take to Intellectual Property
Rights that each party brings to the project. It is hoped through discussions with both partners and the
MICF team during the contract negotiation phase a compromise solution could be found. If this is not
reached then the documents will not be submitted to UNDP’s procurement committee in Ethiopia.
In late December 2014, negotiations also commenced with Balvi, whose proposal was re-evaluated
by the investment panel in December after resubmission. Given the holiday period, discussions were
not able to progress as rapidly as hoped and were rescheduled to commence in early January when
senior members of staff from the company would recommence their operations.
In terms of the UNDP contract, most companies understood and studied the contract in some detail
often with their legal team which permitted them to understand the implications for them as a business
entity and for their projects. What was less clear and often required considerable discussion and
negotiation was the clause in the current contract about Intellectual Property Rights. For subsequent
rounds there may be need to re-examine this and discuss with UNDP Malawi and UNDP
headquarters to see if there is a potential of changing this section of the contract.
4.1 ISSUES IDENTIFIED AT CONTRACTING PHASE
During the process of negotiation with companies the MICF learnt that on 3rd and 4th of November,
2014 there was going to be a front page article in one of leading daily newspapers in Malawi, “The
Nation” about the adverse environmental impact of effluent discharged by Sunseed Oil Ltd and its
sister concern, CP Feeds, both based in the same physical location to the surrounding villages.
Subsequently the Environment Affairs Department (EAD) of the Ministry of Natural Resources,
Energy and Mining issued a notice to the company to immediately address all concerns. In the interim
the operations of Sunseed Oil Ltd. was to be
suspended.
Based on this turn of events, the MICF Fund Manager
visited the company in Lilongwe on 6th November 2014
to verify the allegations, to discuss with the senior
management of the company the issues surrounding the
news headlines, and to assess in person the corrective
action being taken.
During the inspection of site, it was clearly noticeable
that effluent was spilling over from the sedimentation
tank. Furthermore, the management of the company did
agree that there was some spillage and this was
seeping into the perimeter fence.
Based on discussions and a rapid assessment of the
site, it seems feasible that part of the discharge was due
to fact that Sunseed Oil Ltd. was in the process of
designing and constructing an up-graded effluent plant
to meet their future needs. As an interim measure the
Figure 7. Effluent spilling over from the sedimentation tank (6 November 2014)
21 MICF Annual Report
current levels of discharge of effluent were being diverted from their original system to a temporary
structure. However, what was clear was that the company did not develop adequate temporary
measures to contain the effluent. Based on a series of activities and interventions proposed by the
MICF team and implemented by the company to meet environmental standards required by the
company, the situation was rapidly addressed and environmental discharge was abated.
The company is in the process of implementing both ISO 14001 on environmental impact and HACCP
on food safety. Both these have been added as further milestones for the MICF project and included
in the means of verification. The company also took immediate corrective action to prevent any
seepage of any kind while the civil work was in progress. More details of the issue and the specific
recommendations proposed can be found in the MICF report entitled “Assessment of Environmental
Issues, Raised by Ministry of Natural Resources, Energy and Mining”, dated 6th November 2014.
22 MICF Annual Report
SECTION 5. MONITORING AND EVALUATION
5.1 PURPOSE OF THE MICF M&E SYSTEM
This sector provides an overview of the MICF M&E system and outlines the details of its practical
application over the course of the programme. It explains what would be measured in order to monitor
firstly, programme delivery and whether the MICF is on track in achieving its intended results, and
secondly, the impact of the MICF and the sustainability of its projects.
The M&E system was developed taking into consideration the initial logical framework developed by
the UNDP and a detailed assessment of the assumptions that it was based on. Subsequently there
was a considerable amount of discussion and negotiation to ensure that the logframe met the needs
of both donors as well as being practically implementable.
The MICF M&E System has been designed to provide a simple, yet logical and comprehensive
framework for capturing and reporting results for the MICF programme as a whole as well as its
individual projects. M&E for the MICF has several salient purposes, these are to:
Inform programme management and decision-making;
Transparently monitor individual MICF projects, track risk and manage grant disbursement against milestones;
Play an accountability function in providing the information required to demonstrate the impact of the MICF investments and provide accountability on how donor money has been used;
Learn and share lessons regarding the function and success of the MICF.
5.2 KEY PRINCIPLES OF THE MICF M&E SYSTEM
The MICF M&E system must be comprehensive and yet should remain as ‘light touch’ as possible,
due to its participatory nature with business partners. Data will need to be gathered systematically
and consistently across the MICF projects and yet have a flexibility that allows it to capture nuances in
the individual business models. One of the critical elements of the MICF programme management is
keeping track of risk. This can only be achieved if companies and investment officers are bought in to
the M&E process. To allow the M&E system to act in the manner desired, it was be guided by the
following key principles:
Balanced: The MICF M&E will find and constantly review the tensions between seeking to reduce the
burden on companies, so as to not compromise their competitiveness, while ensuring transparent
reporting for management and funders on results.
Embedded: The essence of our approach M&E is to fully embed it into the MICF operations.
Consistent: The M&E system and its universal indicators are standardised across the MICF portfolio
to enable consistency and aggregation.
Company level buy-in: Company participation in the MICF M&E process will be a key principle of
each project. From the outset companies will be engaged in the logic and usefulness of the M&E
system as pertains particularly to their MICF project.
Tailored: Whilst the overall M&E system has been standardised, it has been designed so that
detailed results measurement approaches can be tailored to individual projects and their milestones.
Contribution: MICF projects will operate as part of a wider system where they may interact in some
way with other public and private activities to achieve their intended results. The MICF M&E system
23 MICF Annual Report
will capture where a clear contribution has been made by MICF, even where specific calculations of
attribution are not feasible.
Risk management: The M&E system will have a distinct component to track and assess individual
project risk, and how it changes over time, in order to ensure the MICF investments are appropriate
and circumspect.
Appropriate: The cost and time involved in M&E activities should not exceed their usefulness, and
should be in proportion to the resources invested in implementation.
Use of results: The M&E system will focus on making good use of data that is available, from
multiple sources and for multiple audiences, rather than an ever-expanding data set.
5.3 THE LOGFRAME
The MICF logframe works hand in hand with the Theory of Change in that it summarises the basic
causal steps that lead from outputs to the achievement of the MICF impacts. The logframe is a high-
level summary of the results framework for the programme and contains a series of indicators against
which the results of the MICF intervention can be projected. The grantee logframes are based on
compatible indicators and feed into the overall and MICF level logframe. Indicators in the logframe are
categorised by the three levels of the Theory of Change:
Impact: The Impact level captures the effect that the MICF projects will have on what number of poor
people as smallholders, consumers, low income entrepreneurs and employees. Income indicators
capture improvements in income for a fraction of the target beneficiaries and are applied to
smallholders and employees.
Outcome: The Outcome level focuses on the success of the individual MICF projects and whether
they have proven to be inclusive, innovative and commercially viable business models that can be
taken to scale and show demonstrable success. Indicators focus on tracking commercial viability,
innovativeness and attribution to MICF.
Outputs: The Output level focuses on the delivery of the MICF grant through the ‘implementation via
milestones’ approach.
5.3.1 MICF LOGFRAME REVISION
The MICF logframe not only contains the key indicators to be measured to track programme success
but it also contains projections of what the MICF will achieve in its lifetime. During the inception phase
the MICF fund managers reviewed the validity and underlying assumptions that led to the initial target
indicators. Although within the UNDP project documents, the MICF is expected to have a three year
implementation cycle, in reality MICF’s business projects will have at a maximum two and a half years
of implementation. Given this and quantitative assessments of jobs creation and potential impacts on
the poor in terms of incomes and livelihood improvements, the original logframe was recast and a
series of new indicators also included to capture more fully the MICF across a range of parameters.
There were over six iterations of the logframe until a final version could be agreed with the donors and
the fund management team by the middle of November 2014. The final version of the logframe is
attached in the following section of the report.
5.4 CORE DEFINITIONS AND CATEGORIES
The MICF M&E process will involve many actors, including, the recipient companies, the core MICF
team and the MICF grantees. These actors come from different backgrounds and therefore it is
essential that core definitions are agreed and referred to throughout the M+E process. Some core
definitions are as follows:
24 MICF Annual Report
Innovation does not necessarily mean the invention of a new product but doing something new in the
Malawi context. Innovation could be anywhere in the business model, value chain or product. One
MICF project could have several aspects of innovation.
Maturity of the MICF Project is classified as Blueprint and Design, Early Operation and Validation,
Implementation (breakeven and beyond), Scaling up (volume, reach and return).
‘Poor Beneficiaries’ are broken down and defined into four groups:
The poverty line includes those living on around $1 per day at current market rates, which is the
$2.50 international poverty line at 2005 Purchasing Power Parity. According to World Development
Indicators, $2.50 at 2005 PPP = $0.89 at market rates in 2012. 89% of the population live below this.
This poverty line is above the national poverty line identified by the government, of $0.65 cents (at
2011 prices) which covers around 50% of the population 2. This poverty reflects the level at which a
person can just, and only just, afford the calories required. For a donor programme working with
business, the slightly higher rate, $0.89 at market rates or $2.50 at 2005 PPP (the upper poverty line)
is reasonable, and $3.00 can be used to catch those 'vulnerable to poverty'.
The commercial viability index is a way of classifying the commercial strength of a business in
phases when it cannot be judged by profit, market value or return on investment. Reporting growth in
profit is likely to be impossible for most businesses, given that the MICF project is not always an
entire business and will often not yet have achieved profit for the inclusive business element.
Percentage growth in turnover will be tracked and reported, but on its own is not a sufficient guide to
commercial health. The commercial viability index is necessarily dependent on subjective team
assessments, but provides a framework to understand whether a business is overall low, medium or
high on commercial viability. The draft framework (to be tested with the first portfolio and investment
officers) gives equal weighting to the following indicators:
Has it achieved break-even? (yes/no); Management capacity and leadership (high, medium or low); It is on track against its own targets (“yes on track” = high; “roughly with some exceptions” =
medium; “no off track in several ways” = low); Does it have access to the necessary external deals and permissions, e.g. finance,
government licenses and approvals, implementation partners. (high, medium, low); % likelihood of reaching commercial viability (high, medium, low, based on MICF Team
perspective).
2 Integrated Household Survey 2011
25 MICF Annual Report
Putting these scores together, an overall high, medium or low score is achieved. Most businesses
would start off in the medium category at the time of funding, but then we expect to see some
divergence over time.
26 MICF Annual Report
IMPACT 1 Impact Indicator 1.1 Baseline Milestone (Dec 2014) Milestone (Dec 2015) Target (March 2016) Target (Dec 2016) Assumptions
35,000 105,500 251,000
(30% women) (30% women) (30% women)
Achieved
Definition Source
This indicator is the aggregate number of poor individuals that benefit
from MICF businesses through supply chains, or consumption, in a way
that leads to an increase in their incomes or delivers a positive
livelihood change. It records individual beneficiaries and therefore is
calculated by multiplying the sum of Output Indicator 4.1, 4.2, and 4.3
by the average household size of five.
Livelihood improvement is defined as both cash and non cash benefits,
for example obtaining clean water, whereas income generation is
defined purly in cash terms.
Impact Indicator 1.2 Baseline Milestone (Dec 2014) Milestone (Dec 2015) Target (March 2016) Target (Dec 2016) Assumptions
Planned 0 0 20% 20% 20%
Achieved
Definition
This indicator considers only the additional income or income saved
due to MICF projects and not the overall household income. The income
increase will be calculated by deducting the previous income due to the
project activity from the current income due to the project activity. This
indicator will be applied across all projects where income gains /
savings can be measured. It will only be applied to those with income
generating opportunities and not those seeing livelihood gains from
consuming goods or services
OUTCOME 1 Outcome Indicator 1.1 Baseline Milestone (Dec 2014) Milestone (Dec 2015) Target (March 2016) Target (Dec 2016) Assumptions
Planned 0 0 1,000
(30% female)
4,000
(30% female)
10,000
(30% female)
Achieved
Definition
This indicator considers only the income due to the MICF project and
not the overall household income. 'On track' means that there is
demonstrable evidence that in a defined time period an increase in
individual smallholder incomes will be seen that are attributable to MICF
project activities.
30% female is defined as 30% of the smallholders engaging directly
with the business are female, and not that 30% of the households are
female headed.
Source
MICF Reporting (based on feedback from companies)
• Validation surveys, household interviews and focus group discussions
• Company’s reports/databases
• Baseline, annual and final reports
Source
MICF Reporting (based on feedback from companies)
• Validation surveys, household interviews and focus group discussions
• Company’s reports/databases
• Baseline, annual and final reports
Beneficiaries can be tracked across the MICF portfolio
Exogenous shocks that undermine livelihoods do not
outweigh positive effects of MICF businesses
Assume there are no reduction in household numbers
due to some potential beneficiaries either selling inputs
provided by companies for the growing of crops or due
short term financial pressures dropping out of the
proposed programme
MICF Reporting (based on feedback from companies)
• Validation surveys, household interviews and focus group discussions
• Company’s reports/databases
• Baseline, annual and final reports
Estimated % increase in aggregate income accruing to poor
households from new earnings, increased earnings or cost savings, due
to MICF projects.
The data for calculating this indicator is reliant mainly
on information provided by the businesses with which
MICF engages. It is assumed that such information will
be provided during the baseline process and throughout
the MICF timeframe and that they have the ability to
provide reasonable estimates on aggregate income
accruing to poor households from their projects.
The MICF team will undertake snapshot surveys and
limited deep dives, but not representative surveys, to
validate this data. It is expected the independent
evaluator will also play a role in validating data relating
to aggregate income accruing to poor households
Poverty reduction in Malawi by improving
incomes and livelihoods of poor people
Additional income to the poor Number of households recording or on-track to achieving
additional income as a result of MICF Projects
Customers and suppliers of these companies have
sufficient finance, education, and market access in
order to benefit. (e.g. customers of a new improved
seed will be able to sell their crop.)
A majority but not all of the 15,000 smallholder
households benefit from income increase, i.e. others
have a livelihood gain but no income gain in lifetime of
MICF - they have more security, or productivity, or cope
with negative factors such as climate, that long-term
boost their livelihood but do not convert opportunity into
income gain within this time frame.
00PlannedAggregate number of poor people experiencing net positive
income or livelihood improvement
Revised Logical Framework
27 MICF Annual Report
OUTCOME 3 Outcome Indicator 3.1 Baseline Milestone (Dec 2014) Milestone (Dec 2015) Target (March 2016) Target (Dec 2016) Assumptions
Planned 0 0 0% 30% 40%
Achieved
Definitions
The number of MICF projects that can demonstrate evidence that they
are progressing towards going to scale with the existing innovative
business model, or expanding into new markets / products / services
based on learning from the innivative business model.
The number of MICF business projects for which the MICF team deems
there is evidence that replication by other market players is likely in
future years.
The assessment of potential for scale and replication will be a
subjective assessment undertaken by the MICF team.
Assessment of scale and replication will include an observation and
communciation tool that will record the activities by companies as well
as when the MICF team sees indirect evidence in the market of
demonstration, scale and replication.
OUTPUT 1 Output Indicator 1.1 Baseline Milestone (Dec 2014) Milestone (Dec 2015) Target (March 2016) Target (Dec 2016) Assumptions
Planned 0 50 100 150 150
Achieved
Definitions
Number of concept notes received by MICF team, cumulative
throughout all MICF rounds and windows
Output Indicator 1.2 Baseline Milestone (Dec 2014) Milestone (Dec 2015) Target (March 2016) Target (Dec 2016) Assumptions
Planned 0 21 25 25 25
Achieved
Definitions
Number of proposals approved by investment panel
Output Indicator 1.3 Baseline Milestone (Dec 2014) Milestone (Dec 2015) Target (March 2016) Target (Dec 2016) Assumption
Planned 0 12 12 12 12
Achieved
Definition
Output Indicator 1.4 Baseline Milestone (Dec 2014) Milestone (Dec 2015) Target (March 2016) Target (Dec 2016) Assumption
Planned 0 0 0 7 10
Achieved
Definition
Output Indicator 1.1 Baseline Milestone (Dec 2014) Milestone (Dec 2015) Target (March 2016) Target (Dec 2016) Assumption
Planned 0 $100,000 $500,000 $1,000,000 $8,500,000
Achieved
Definition
Number of companies receiving full MICF disbursement with
M&E completed
Source
MICF Reporting:
• Company’s reports/databases
• Project quarterly, annual and final reports
Source
MICF Reporting:
Project quarterly, annual and final reports
Additional investment directly leveraged from the Private Sector
through MICF
Sufficient demand to fill the pipeline with projects with
good Inclusive Business prospects
Support provided by MICF is additional (does not crowd
out other sources of financial support)Source
MICF Reporting:
Project quarterly, annual and final reports
Source
Total cumulative co-investment in projects supported by MICF
MICF Reporting:
Project quarterly, annual and final reports
Number of proposals received by MICF team and put forward to
Investment Panel for approval; cumulative across all MICF rounds and
windows
MICF gives sufficient training to proposal applicants to
allow them to effectively complete and submit their
proposal application.
MICF Reporting:
Project quarterly, annual and final reports
Number of companies contracted Sufficient demand to fill the pipeline with projects with
good Inclusive Business prospects
Support provided by MICF is additional (does not crowd
out other sources of financial support)
The total, cumulative number of companies who have received
their full MICF disbursement and for who the M&E process has
been completed (aside from any ex-post follow up or review by
external evaluation). Please note we envisage a 30% failure rate
as is the norm in Challenege Funds.
The total, cumulative number of companies who have been
contracted as a MICF grantee
Replication and scaling of innovative business
models
That the MICF projects are successful and activities
are demonstrated so that scale and replciation are
likely in future years
Source
MICF Reporting:
Project quarterly, annual and final reports
Independent verification
MICF has appropriate mechanisms in place
to identify, select and support inclusive
projects to ensure they achieve sustainable
results that benefit the poor
Number of concept notes received
Source
Sufficient financial capacity of the MICF Grantee
Sufficient demand to fill the pipeline with projects
having good Inclusive Business prospects
MICF call for concept notes is implemented effectively
and applicants are aware of the round and application
procedure
Number of MICF projects that are 'on track' towards achieving scale
and / or replication
28 MICF Annual Report
OUTPUT 2 Output Indicator 2.1 Baseline Milestone (Dec 2014) Milestone (Dec 2015) Target (March 2016) Target (Dec 2016) Assumption
Planned 0 40% high, 40% medium,
20% low
40% high, 40% medium,
20% low
40% high, 40% medium,
20% low
40% high, 40% medium,
20% low
Achieved
Definition
Output Indicator 2.2 Baseline Milestone (Dec 2014) Milestone (Dec 2015) Target (March 2016) Target (Dec 2016) Assumption
Planned 0 0 30% high, 40% medium,
30% low
40% high, 40% medium,
20% low
Achieved
Definition
OUTPUT 3 Output Indicator 3.1 Baseline Milestone (Dec 2014) Milestone (Dec 2015) Target (March 2016) Target (Dec 2016) Assumption
Planned 0 0% of the portfolio
reaching viability
30% of the portfolio reaching
viability
40% of the portfolio
reaching viability
60% of the portfolio
reaching viability
Achieved
Definition
OUTPUT 4 Output Indicator 4.1 Baseline Milestone (Dec 2014) Milestone (Dec 2015) Target (March 2016) Target (Dec 2016) Assumptions
Planned 0 0 0 500
(30% female)
1,000
(30% female)
Achieved
Definition
Permanent employment means the individual is listed on the
company’s payroll or alternatively the job may be part time, seasonal or
full time
Output Indicator 4.2 Baseline Milestone (Dec 2014) Milestone (Dec 2015) Target (March 2016) Target (Dec 2016)
Planned 0 0 4,000
(30% of all direct
beneficiaries will be female)
12,000
(30% of all direct
beneficiaries will be
female)
30,000
(30% of all direct
beneficiaries will be female)
Achieved
Definition
This indicator tracks the number of smallholder households that
directly engage with the business. The number can be, but has
not been, multiplied by household size to calculate the total
number of beneficiaries.
Output Indicator 4.3 Baseline Milestone (Dec 2014) Milestone (Dec 2015) Target (March 2016) Target (Dec 2016)
Planned 0 0 3,000
(40% of primary customers
female)
9,000
(40% of primary
customers female)
20,000
(40% of primary customers
female)
Achieved
Definition
This indicator captures the number of individual consumers that
benefit from the goods or service delivered. Whether they
purchase it themselves directly (e.g. a lantern), pay for usage
(e.g. mobile phone charging), rent it, or access the benefit via
another organisation (e.g. benefiting from a solar powered
clinic). The indicator counts one customer, the individual that
purchases the product or service and not indirect consumers,
others in the household who would benefit from the product or
service. The number can be, but has not been, multiplied by
household size to calculate the total number of beneficiaries.
Number of low income, unskilled people getting permanent
employment as a result of MICF Projects
Source
MICF Reporting (based on their M&E processes)
• Company’s reports/databases
• Baseline, annual and final reports
This is the MICF team's assessment of the strength of the
project's innovation. Innovation can be in terms of a new product
or service or business model and can also an innovation in
Malawi or on a regional or international scale
MICF Reporting:
Project and company baseline, quarterly, annual and final reports
Independent verification
Demonstration Effect: Degree to which innovation is visible
(High, Medium, Low categorisation)
The business enabling environment is conducive to pro-
poor innovative business models.
Source
The grantee company will openly discuss activities
they are undertaking to demonstrate their business
model
MICF Reporting (based on their M&E processes)
• Validation surveys, household interviews and focus group discussions
• Company’s reports/databases
• Baseline, annual and final reports
MICF projects are commercially viable and on
track for, or achieving, profitability
Commercial Viability Index: % of MICF Projects classified as
progressing towards reaching commercial viability
MICF team high, medium, low categorisation of the degree to
which the innovative business model is made visible to other
companies
MICF Reporting:
Project and company baseline, quarterly, annual and final reports
Independent verification
Source
Number of smallholder households benefiting from new or
enhanced income generating, or livelihood improvement,
opportunities as a result of MICF projects.
Source
MICF Reporting (based on their M&E processes)
• Validation surveys and household interviews
• Company’s reports/databases
• Project baseline, annual and final reports
Number of low income direct consumers utilising new or
enhanced products/services that impact on their basic human
needs as a result of MICF Projects
Source
Selected and funded MICF projects are
innovative and demonstrate that new
business models can have positive
development impacts
Strength of Innovation: % of MICF Projects classifying as having
a 'high', ‘medium’ or ‘low’ level of innovation
Negative changes in the market or economy (such as
recession, political instability, natural disaster) do not
occur.
Source
The commercial viability index classifies businesses as
progressing toward achieving commercial viability using the
following sub indicators: - Achieving breakeven point -
Management capacity and leadership scoring - Achievement of
targets/milestones - Ability to access external leverage and
permissions - % likelihood of reaching commercial viability
(MICF Team perspective)
MICF Reporting:
Project quarterly, annual and final reports
Independent verification
That other development programmes (Government and
donor funded) do not result in market distortions which
prevent players from enacting changes which benefit
poor women and men in the long term.
The pool of successful applicants contains sufficient
numbers of companies that are able to obtain scale in
order to reach targeted numbers of smallholder
producers, low income consumers and employees
within the lifetime of the MICF
MICF projects selected have high
development impact on poor men and
women
29 MICF Annual Report
5.5 ISSUES TO TRACK WITHIN M&E
The M&E system tracks core indicators for the logframe plus other issues that illustrate how the
programme is performing. There are broadly seven different issues to track, relating to the following
questions:
What are the characteristics of the MICF portfolio? Are MICF grantees on track against plans? How are MICF grantees progressing in terms of commercial status and viability? How are poor people affected by the MICF businesses? Are the MICF grantees serving as demonstrations of innovation? Is MICF programme delivery on track? Are programme outcomes being achieved and can the contribution of MICF be ascertained?
The above questions provide seven distinct indicator groups. These are outlined in the diagram below
with a brief description of what each group is intended to measure.
Figure 8. MICF seven indicator groups
In each indicator group there are several indicators that need to be measured. These are listed in the
table below, which also highlights whether the indicator is a ‘Universal Indicator’ (i.e. a performance
metric that must be reported by every grantee and forms part of the legal agreement):
Table 6. MICF indicators
Portfolio Characteristics Indicator Universal Indicator
Size of Company Turnover ($ p/a) Universal Indicator
Number of employees (on payroll) Universal Indicator
Sector Company sector
MICF project sub-sector
Application Window Agriculture/Manufacturing
Registration Location (Domicile of registered company)
Parent company status
Date of registration
Maturity of MICF Project Year of inception idea
Current stage of maturity
Commercial Progress Indicator Universal Indicator
Turnover of MICF Project Reported turnover of the MICF project ($ p/a) Universal indicator
Investment of MICF Project Level of investment to date (record internal/external
and type)
Universal indicator
Level of investment per annum (record internal/external Universal Indicator
30 MICF Annual Report
and type)
Perceived difficulty in accessing equity/debt/working
capital
Commercial Viability Index Reaching breakeven point
Management capacity and leadership (HML)
On track against identified targets/milestones
Access to external leverage and permissions
% Likelihood of reaching commercial viability
Constraints Company's perception of constraints
Footprint on the poor Indicator Universal Indicator
Number of poor reached Number of smallholders accessing new or improved
market opportunities as a result of supplying MICF
Projects and/or accessing services from projects
(total/female)
Universal Indicator
Number of low income consumers (direct or indirect)
utilising new or enhanced products/services that impact
on their basic human needs as a result of MICF
Projects (total/female)
Universal Indicator
Number of low income, unskilled people getting
permanent employment as a result of MICF Projects
(total/female)
Universal Indicator
Number of rural/low income entrepreneurs utilising new
or improved income generating activities as a result of
MICF Projects (total/female)
Universal Indicator
Income accruing to poor people Number of smallholders recording additional income as
a result of MICF Projects (total/female)
Universal Indicator
Estimated % additional income accruing from MICF
Project Activity to smallholders
Universal Indicator
Estimated aggregate additional wages among
employees as a result of MICF Projects
Universal Indicator
Estimated aggregated additional income accruing to
entrepreneurs as a result of MICF Projects
Universal Indicator
Innovation & Demonstration Indicator Universal Indicator
Identification of the type of
innovation
Type (product/process) and reach
Strength of innovation Innovation categorised as HML Universal Indicator
Improving and developing the
business model
Improving and developing the business model in a way
that demonstrates learning from the initial innovation -
categorised as HML
Demonstration effect Degree to which innovation is visible (HML)
Programme Delivery Indicator Universal Indicator
Concept note screening Numbers of RAG (Red, Amber, Green)
Proposal award/rejection Ratio award: rejection
Milestones met % milestones met across portfolio in reporting period
Risk tracker Risk tracker is up to date and used
M+E reporting system in place and
used
M+E reporting system is in place and used
Companies contracted Number of companies contracted
31 MICF Annual Report
Companies receiving first
disbursement
Number of companies received first disbursement
Companies receiving final
disbursement
Number of companies received final disbursement
Companies for which all M+E is
completed
Number of companies for which all M+E is completed
Value of disbursements Total value of disbursements of grants to date
Grantee Progress Indicator Universal Indicator
Risk tracker status Management capacity
Financial stability of company
Technical/business model risk
Project status Cancelled, stalled, progressing slowly, progressing
well, flourishing
Grant disbursements % of grant disbursed
Milestones Number of milestones achieved to date
Programme Outcomes Indicator Universal Indicator
External finance leveraged Amount and ease with which external finance could be
leveraged prior and post MICF
Replication and adaption Not to be achieved in lifetime of project, in narrative not
indicators
Malawi export base Not to be achieved in lifetime of project, in narrative not
indicators
5.6 DATA SOURCES AND INSTRUMENTS
Data and information to support the MICF M&E system will be collected from various sources
throughout the lifetime of the programme. Understanding at programme inception what data needs to
be gathered, from where and by whom means that M&E can be fully incorporated into the MICF
management and implementation process. The main reporting instruments that the M&E System will
utilise are as follows:
Concept Note
Concept notes will be completed by the bidding companies as part of the first stage of applying for a
grant though the MICF. The M&E team will capture data from the concept notes that gives information
regarding the target sector of the innovation business model, the types of companies applying etc.
First Screening Report of Concept Notes
The first screening report will report on what percentage of the concept notes were ranked as ‘Red’,
‘Amber’ and ‘Green’ by the MICF team. This information gives an overview of the quality and volume
of concept notes being received per round and can provide interesting insights when coupled with a
basic understanding of the characteristics of the business models being presented.
Proposals
Information contained in the proposals submitted by bidding companies to the Investment Panel gives
a base set of information regarding the innovation, commercial potential and pro-poor reach of the
business model being outlined. It also gives important data for the M&E such as the main challenges
faced in initiating the business model to date, and current sources of finance for the model.
32 MICF Annual Report
Proposal Assessment Report
The proposal assessment report will be an output of the Investment Panel’s decisions regarding the
final recipients of MICF grants. The report will allow the M&E team to distinguish the number of
grantees in each window and from which sub-sectors and give the first descriptions of the MICF
portfolio.
Due Diligence Report
The due diligence report was completed by the MICF team and is a key stage is ensuring the
accountability of the MICF funds.
Project Baseline
The project baseline will be completed during a workshop with the M&E team, other MICF team
members and the company. The project baseline will start with the development of a logic model for
the business model and from this it will define the set of indicators against which the project will be
monitored. The workshop will collect the baseline data against the specified indicators and thus is a
critical instrument for the M&E system.
Validation Data
In some cases additional data will need to be gathered in order to triangulate company provided
through company/project data, this is termed validation data. The validation data will be gathered by
the M&E team and may be from secondary data sources or my involve farmer surveys or focus group
discussion etc.
Risk Tracker
The risk tracker is a tool utilised by the whole MICF team in order to track the progress of each
project. The risk tracker will be used by the M&E team to track changes in several key criteria
including financial stability, management capacity and technical/business model risk.
MICF Team Monthly One Pager
The MICF team will have regular contact with all of its recipient companies. Information from this
contact, as well as internal record keeping will inform this brief monthly to UNDP. The monthly report
will indicate progress of the overall portfolio and will highlight both issues within the portfolio as well as
the general progress of MICF implementation.
Company Quarterly Report
Each MICF recipient company will be required to fill in a simple quarterly report for the MICF team.
This report will give the team key pieces of information that allow the tracking of the project ‘at a
glance’ especially with regard to project activities, the achievement of milestone and updating the risk
tracker. The report will also be used to monitor changes to commercial progress of the project and its
footprint on the poor but to a lesser extent.
MICF Team Quarterly Report
The MICF team will compile the information from the company quarterly reports and, in addition to
records from internal data monitoring, will complete the MICF team quarterly report. This report will
provide a summary of the progress of the MICF portfolio at that specific point in time and will show
key changes from the previous report. Analysis of the report will enable strategic decisions to be
made regarding the support and activities of the MICF team with regards to specific projects, as well
as the overall portfolio.
Company Annual Report
The company annual report is one of the most important documents used to collect monitoring and
evaluation data. Depending on the competency of the recipient company, it may be the case that the
M&E team sits with the company in order to ensure accurate and robust data is collected. The annual
33 MICF Annual Report
report will provide similar information to the quarterly report, but will also collect data aligned with the
initial project baseline such as commercial progress, footprint on the poor and innovation and
demonstration activities. Analysis of the company annual report will show gaps in information or
where triangulation data needs to be gathered in order to validate company information.
MICF Team Annual Report
The MICF team annual report will give an overview of all programme activities completed in the year
and the MICF milestones that have been achieved. Against this, it will also outline plans for the year
to come. The annual report will summarise the analysis of findings from the company annual reports
and give a summary of the position and progress of the portfolio. Key lessons learnt will be
documented and programme progress against the logframe will be recorded.
The diagram below shows the timeframe and the instruments through which significant and strategic
data will be collected in line with the seven indicator groups.
Figure 9. Timeframes and instruments for data collection
5.7 APPROACH TO UNDERTAKING BASELINE SURVEYS
With the MICF disbursing grants to a widely divergent range of grantees and projects, adopting
differing approaches as well as having a range of development impacts, creating a single survey
instrument that captures all the necessary data has been a challenge. There are two types of
questionnaire that the MICF will need to undertake, one aimed at the company, whilst another will be
34 MICF Annual Report
focused more squarely on understanding impact. For the impact level, the methodological approach
adopted needs to be adapted on a project-by-project basis.
However, it is recognized that there are two common ways to measure change:
The “with and without” project intervention – this seeks to mimic the use of an experimental
control, and compares change in the specific activity location to change in a similar location
where the activity has not been implemented;
The “before and after” project intervention – this measures change over time in the activity
location alone, typically from the commencement of the activity to the end of the activity.
Given the divergent nature of the 11 MICF projects (that have been agreed to date by the Investment
Panel), some of the baseline studies examine the “with and without” project intervention scenario.
This should increase the likelihood of identifying causal factors that will generate change, and will
allow a clearer measure of the degree of change. However, it is recognized that even in similar
localities it is difficult to find truly comparable areas in terms of ecology, resources and capacities, and
is likely to be more time intensive and ultimately more expensive to undertake.
For the majority of the projects, the baselines will examine the “before and after” project intervention
scenario. The advantages of this approach is that one only needs to collect data from a tight
geographic area, so demands fewer resources and provides greater motivation for companies to be
more involved in the monitoring and evaluation process. Despite these advantages, there is an
explicit recognition that it will be more difficult to identify causal factors behind change, especially
when, as in many areas where MICF projects are operating, other donor activities are concurrently
taking place in the same location. In some instances where the target group is not clearly identified at
the commencement of the project (especially in the case of new low cost products and services to the
poor), this can also lead to difficulties in assigning attribution.
Each approach will be analysed and matched against the needs of the specific MICF project, and
given the modest time and resources available, the focus will be to ensure the reliability of the data
collected. Ultimately this data will determine, in many instances, the final milestone trigger payments
that grantees will receive.
5.7.1 FIRM SPECIFIC QUESTIONS THE SURVEY WILL CAPTURE
A number of company related information will also need to be captured. This is also aimed to provide
an assessment of the initial starting point of the lead firm and its partners, against which future
change and progress can be measured. It is recognised that there will always be tensions between
seeking to reduce the burden of reporting on companies so as to not compromise their
competitiveness, while ensuring transparent reporting for management and funders on results of the
MICF. A relatively simply questionnaire will be developed, which will aim to capture the following
information:
Commercial viability: We will obtain relatively simple information of classifying the commercial strength of a business in phases when it cannot be judged by profit, market value or return on investment. Percentage growth in turnover will be tracked and reported, but on its own is not a sufficient guide to commercial health. Thus the following, subjective assessments will be undertaken to understand:
o Has the product, service, or approach has achieved break even at the time of the survey?
o It is on track in terms of revenue generation against the companies / partners own targets?
o % likelihood of reaching commercial viability – this will be subjective call based on the lead companies view cross referenced with MICF assessments
Basic Financial Performance Indicators: Some very basic financial information needs to be provided to MICF which can at a future date be cross referenced by management accounts and where possible audited accounts:
o Turnover o Total investment to date by the Company towards implementing the project o Total investment to date by Partners towards implementing the project
35 MICF Annual Report
o Number of employees in the business unit which is implementing / benefiting from the MICF project
5.7.2 DETERMINING THE SAMPLE SIZE
The choice of sampling technique is critically dependent on: i) the nature of the problem being
examined; ii) the desired precision and reliability of the indicators collected; and iii) the resources
available, in terms of cost and time factors.
For the purposes of MICF, and given that the fund is a “light touch” instrument, it seems more prudent
to pursue a simpler sampling approach. It is therefore proposed that a simple random sampling
approach is used, with lists drawn from households/farmers/workers participating in the given project
by the firms.
An essential part of undertaking a statistically significant base-line study is to determine how many
households need to be interviewed, in order to achieve the objectives of the baseline. It is a common
(and broadly legitimate) belief among researchers that the bigger the sample, the more representative
and hence the more accurate the results. However, it is not quite as straightforward as this, as it also
dependent on the sampling frame – the universe from which the sample is taken from.
The following tables highlight the breakdown for sampling sizes with projects using a 95% confidence
level and 10% confidence interval, which will enable the monitoring and evaluation team to deal with
manageable sample sizes.
Table 7. MICF grantee sample sizes
Project Universe of project beneficiaries Sample to be Interviewed
Afrisphere
(Livestock Development)
3,100 farmer households 93 Project Beneficiaries in Northern
Malawi
Agronomy Technology
(Water Filter – Primary impact on
poor consumers)
5,000 farmer households (but not
identified – will be undertaken when
agreement with pilot companies
reached)
94 Project Beneficiaries
(Across 3 value chains – regions not
identified)
Arkay Plastics
(IT Agribusiness Application –
awaiting confirmation on partnering
agreement)
50,000 Household Beneficiaries (This
is the expected number of households
which will benefit from the purchase of
water filters)
94 Potential Poor Income Households
who do not have access to clean water
Charles Stewart
(Poultry Development)
1.800 farmer households (may be
possible to develop a control group in
localities nearby to project
beneficiaries)
91 Project Beneficiaries in Southern
Malawi
Dairiboard
(Dairy Sector Development)
3,350 farmer households 93 Project Beneficiaries in Southern
Malawi
Exagris
(Groundnut Development)
5,400 farmer households 94 Project Beneficiaries in Central
Malawi
Kwithu Kitchen
(Horticultural Development)
500 farmer households (may be
possible to develop a control group in
localities nearby to project
beneficiaries)
81 Project Beneficiaries in Northern
Malawi
Satemwa
(Tea Development)
318 household beneficiaries (may be
possible to develop a control group in a
tea growing locality near to project)
74 Project Beneficiaries in Southern
Malawi
Sunseed Oil
(Sunflower Development)
10,000 farmer households 95 Project Beneficiaries in Central /
main sunflower producing areas of
Malawi
Universal Farming
(Cassava Development)
5,600 farmer households (may be
possible to develop a control group in
localities nearby to project
94 Project Beneficiaries in Southern
Malawi
36 MICF Annual Report
beneficiaries)
Balvi
(Citrus Peel Development)
Still under Contracting Stage
5.7.3 EVALUATING INCOME AND INCOME CHANGES
In order to assess the technical and economic efficiency of farms, and in particular the performance of
smallholder producers, a variety of management techniques have been developed and implemented
across numerous developing countries over the past three decades. These include gross and net
margin analysis and full cost accounting.
The gross margin per hectare or per head for crops and livestock can be compared with ‘standards’,
which were in the past developed by Planning Division within the Ministry of Agriculture and Irrigation
of what might be typically possible in average conditions obtained from other smallholder farms.
However, it is important to note that gross margins, should only be compared with figures from farms
with similar characteristics and production systems. With this reservation in mind, the comparisons
can give a useful indication of the benefit of a potential MICF intervention compared to households
adopting more traditional approaches for the same crop.
Table 8. Typical Gross Margin vs. Net Margin Calculation
Malawi Kwacha
Output
Production (MT produced by household)
Price per MT (Received to the farming household)
Area Cultivated in Hectares (for the MICF crop in question)
Variable Costs
Amount of seeds used (in kgs)
Cost of seed
Amount of various types of fertilizer used
Costs of these fertilizers
Amount of sprays (herbicides, fungicides, etc.) used in Litres
Costs of sprays
Labour days used
Costs of labour in locality per day (may vary for different
tasks)
Gross Margin Per Hectare
Allocable Fixed Assets (MK/ ha)
Cultivation per hectare (including harrowing, oxen or
mechanical power)
Costs of other mechanical operations
Net Margin Per Hectare
Despite its limitations, including the very different fixed cost structures that differing types of farms
may have even in the same locality, gross margin analysis provides a very basic understanding of the
economic return that one type of crop can derive a household at any one point in time. Thus the
survey questionnaire, when interviewing households will attempt to capture this information.
5.7.4 THE SURVEY TOOL
The baseline survey will employ a semi-structured interview methodology to collect information from
the identified sample. This method requires a balance between open-ended and focused interviewing.
The open ended questions will allow respondents to give answers using their own language and has
the added advantage that can suggest new ideas that might have been missed in developing a
questionnaire that is solely closed ended. The qualitative nature of the information gathered here will
be useful in providing greater nuance, and will help at the end of the projects when case studies and
more “real life” examples of the projects need to be demonstrated.
37 MICF Annual Report
Much of the questionnaire will, however, be in the form of closed questions, confronting the
respondent with a set of pre-determined responses. This has the advantage of helping to clarify for
the respondent the type of response sought, the listing of alternatives also clarifies the question itself.
This will also make quantitative analysis easier, as the responses can be easily coded and analysed,
and helps to ensure that the time frame in which the whole questionnaire is administered is relatively
short. It is hoped that since the sample size is relatively small, data processing will be reasonably
straight forward. The closed questions and quantitative results will also serve as the primary basis for
proving that all impact-related milestones have (or have not) been met by the relevant project.
In undertaking the baseline survey, the monitoring and evaluation team will work with the
implementing businesses to ensure that all key household members will be present for survey, to
ensure that a complete picture of the situation on the ground could be understood. That is to say, for
many commodities and in many localities in Malawi, it is often the male members of the household
that have more detailed information about sales and marketing (the activity they are more frequently
involved in), whilst female members have frequently more information about growing / harvesting side
of farm operations.
Based on the testing of the questionnaires, we will where appropriate provide standardised
conversion of units that farmers may be more used to providing such as sales in bags of units, or
through buckets or ‘pails’, etc. based on the nature of product and on observations taken in the
specific localities.
38 MICF Annual Report
SECTION 6. DEVELOPING AN IRRIGATION WINDOW
UNDP and DFID, with support from IFAD, requested the MICF team to develop a paper that
examined the potential to develop a dedicated irrigation window, shifting the country’s reliance on
rain-fed agriculture and ultimately support a transformation in the country’s agricultural sector. The
increasing unpredictability of rainfall patterns poses serious obstacles to the further growth of
productive agriculture in Malawi. However, if Malawi is to deliver a transformation to the agricultural
sector, then agricultural productivity, particularly at the smallholder level, will be one of the
determinants to ensure that this is achieved. For many economies that have been able to have
significant impact on poverty reduction and move towards greater prosperity, faster agricultural growth
has been the key to deliver a virtuous circle of rising farm incomes leading to raising demand for
industrial goods, lowering food prices, curbing inflation and inducing non-farm growth, and creating an
additional demand for workers. Rising on-farm productivity also encourages broad entrepreneurial
activities through diversification into new products, the growth of rural service sectors and the
deepening of agro-processing industries.
The key to delivering this productivity increase in a country such as Malawi is the increased use of
irrigation, particularly at the smallholder level. Although the problems involved in water management
are complex, it appears that part of the solution may be to promote the introduction of new, small-
scale, low–cost irrigation technologies and market access approaches where smallholders can
improve yields of high value crops, which can dramatically reduce water demand while improving their
quality of life. It is recognised, however, that even when enabled with irrigation technologies,
smallholders need access to inputs, markets and credit to enable them to successfully utilise that
technology.
The experience with smallholder irrigation over the past twenty years suggests that we have only
begun to tap the potential of these technologies. Markets for smallholder irrigation technologies are
evolving rapidly. Large irrigation equipment firms, which previously were not interested in the idea, are
now seriously developing equipment specifically aimed at smallholders. Although the private sector is
often understandably reluctant to target poor farmers, the efforts of the private sector can contribute to
delivering a more sustainable solution.
6.1 THE CASE FOR AN IRRIGATION WINDOW
In a country with a single rainy season and land scarcity, land with access to relatively reliable water
throughout the year plays a critical role in food security and the development of the commercial
agricultural sector. More than 90 per cent of Malawians rely on subsistence-level rainfed agriculture
for their food supply.
The overarching development issue facing Malawi agriculture is the low productivity and profitability of
smallholder agriculture, which has been characterized by low and stagnant yields, particularly in
staple food production systems. Average maize yields have remained below 1 MT / ha for the past
decade. Low and stagnant yields have been influenced by a dependence on rainfed farming and low
level of irrigation development.
At present, around 42,000 ha are cultivated under formal or semi-formal irrigation for smallholder
producers (comprising of self-help smallholder schemes, government-run smallholder schemes, and
under commercial estates). Furthermore, this figure also takes into account simple traditional irrigation
using residual moisture and supplementary irrigation on stream-bank gardens (dimba) and wetlands
(dambos).
Historically, the irrigation development across the country has predominantly been spearheaded by
Government. It is difficult to get the exact area under public irrigation but it is estimated some 20,000
hectares have been developed by the Government where some form of irrigation is being practised.
The operation and maintenance of the irrigation schemes has also remained largely under
39 MICF Annual Report
responsibility of the Government and not beneficiary communities. In recent years, attempts have
been made for the beneficiary communities to take over the running of the schemes, through transfer
of irrigation management to Water Users Associations. However, very few of these schemes have
been completely handed over to beneficiary communities after they had established Water Users
Associations, with the help of the Government and NGOs for capacity building. The government has
not yet targeted commercial farmers in providing irrigation services.
The situation in the private sector differs in that they have invested in motorized pumps feeding into
sprinkler, centre pivots and drip to grow sugarcane, such as Dwangwa Cane Growers Ltd (DCGL)
with Illovo, coffee, tea, macadamia, horticultural crops and tobacco dry planting for the export market.
The largest equipped irrigation scheme in Malawi is the Nchalo Sugar Estate that belongs to Illovo
Group. This scheme was initially established in 1965. The Illovo Group in Malawi now has 13,800
hectares under irrigation within the Nchalo Sugar Estate and some 6,000 hectares under the
Dwangwa Sugar Estate.
Currently there are no local manufacturers of irrigation equipment in Malawi but there are many
producers of PVC pipes, which could be adapted to provide pipes and gutters to irrigation systems in
the private sector. A number of international firms, most notably Jain Irrigation (based in India and one
of the world leaders in small scale irrigation equipment) have developed drip irrigation systems for
Malawi Mangoes based around Salima, as well as setting up the first stage of irrigation for Crown
Agro Limited at its Oil Palm Plantation in Bwanje Valley. Netafim Israel, also another leading small
scale irrigation provider has also been supporting Malawi Mangoes with the supply of equipment for
the analysis of data on water and precipitation levels. Finally Reinke Manufacturing Company, Inc, a
US based irrigation provider has been supplying Planters Tea Agency with larger scale pivot irrigation
systems for sugar plantations.
Whilst the majority of private sector schemes have focused on larger plots, most of the smallholder
schemes are designed for plot sizes of 0.2 ha per farming household or which are assumed to be of
economic benefit to the farmer depending on the type of food crop they are growing. Plot allocation to
farmers in some government run schemes are based on the available 0.2 ha plots while in other
schemes the plots are re-demarcated to 0.1 ha so as to accommodate more beneficiaries in the area.
The plot allocation is usually done through involvement of the community leadership (chiefs), the
farmers, government staff, and in most cases aided by specific programme and project staff. In most
of these schemes, availability of water is not an issue but each scheme has Water Users Associations
(WUAs) who manage the use and control of flow of water among beneficiary plots on a scheme.
6.2 CONSTRAINTS AND ISSUES FACED
Although many public systems have provided farmers and in particular participating smallholder
farmers with benefits, there is still a significant amount of support required to improve the efficiency of
these systems. Thus for instance under some rice production schemes it is reported that the level of
water applied to the crop was about 2 to 3 times its gross irrigation requirement which has the
potential to result in environmental degradation through increased salinity and water logging.
Even when public sector schemes target the introduction of lower scale small-motorized pumps under
smallholder farmer situations, this has not delivered the kinds of success which was initially hoped
due to poor farmer organization, lack of capital to buy inputs and the unavailability of spare parts.
Furthermore, in traditional self-help schemes under customary land tenure, the annual allocation of
plots in the dambos by chiefs is often accompanied by the obligation to pay them an annual tribute
and some earn considerable rental incomes. This again disadvantages poorer members of farming
communities.
In the private sector many of the larger irrigated schemes tend to focus on one crop and are often
controlled by the dominant processor in the industry. For example, large irrigation schemes specialise
primarily in sugar cane only and are vulnerable to drastic fluctuation of sugar markets, which makes
the private irrigation developments vulnerable to sudden and dramatic market fluctuations unless swift
changes can take place to avert such oscillations. The challenge is to diversify and introduce other
high valued crops that compete favourably for local, regional and even world markets.
40 MICF Annual Report
Although a few private smallholder irrigation schemes have emerged in selected region in Malawi, the
lack of greater numbers of private sector driven smallholder irrigation schemes is more likely to be a
symptom of general low investment prevented by other constraints such as weak human capital, rural
illiquidity or low profitability due to inefficiencies in agricultural value chains. Even where these can be
overcome, the sector remains characterised by very low efficiency - estimates show that 60-70% of
water used for irrigation does not actually reach the crop.
To sum, public sector schemes have failed to deliver the amount of impact at scale that underpinned
the development of these schemes. In the private sector, irrigation has been focused on large
schemes focusing on one or two crops. Furthermore, given the limited incentives and risks based by
the private sector, it is unsurprising to note that smallholder irrigation technology utilised in Malawi
over a decade old. Most of these technologies were introduced by the public and NGO sector – with
little if any new systems developed through collaboration with the private sector, although the
irrigation as a whole globally has seen rapid development of techniques and products.
Malawi trails behind the more efficient manufacturers of irrigation systems, equipment and processes
of Southern Africa and East Asia in product, business model and technological innovation. The
spread of irrigation is still relatively limited, value added services are rare, and innovations in terms of
new irrigation systems and equipment is non-existent. This is where the irrigation window of the MICF
expects to have significant impact.
6.3 WHAT CAN AN IRRIGATION WINDOW DELIVER?
Investing in disruptive innovative technologies or in improved schemes driven by private sector
businesses has the potential to have a significant impact on the irrigation sector in Malawi.
Furthermore, MICF’s irrigation window has the potential to introduce new markets for irrigation
providers to serve smallholder customers through the design of irrigation devices inexpensive enough
for small farmers, and small enough to fit their plots.
Early adopters which MICF through the irrigation window will support are expected to demonstrate the
advantage of improved products and service offers, through better returns for smallholder producers.
Their successes will serve as a demonstration, which MICF will reinforce through communication,
encouraging wider adoption to create spill-overs that will benefit a wider number of smallholder
farmers in Malawi.
The MICF fund management team undertook a process of engagement with irrigation providers and
agribusinesses within the Southern and Central regions of Malawi to understand the potential interest
and the areas where support from an irrigation window from MICF is likely to leverage the greatest
impact. It is important to note that the following represent only indicative areas where support is likely,
although it will not be until Project concepts are received that the MICF will be able to assess actual
the breadth of coverage.
Solar-powered water pumps: This technology has been piloted throughout Africa, including in a very small scale in Malawi (in Karonga) as well as in Uganda, Tanzania and in northern Benin. The systems can be implemented in an un-electrified rural area with deep groundwater inaccessible with treadle pumps, working through boreholes and the use of storage tanks can lead to the development of a gravity fed system to a number of farmers’ fields. The key would be to encourage leading companies mostly based in Europe to develop lower cost alternatives to the current systems they sell.
Low cost drip irrigation Kits for smallholder farmers: Some firms are currently developing
low-head (0.8-meter) drip irrigation kits that are assembled from components available in countries within East Africa. The systems have already addressed the limitations Kenyan farmers have identified in the other locally available drip kits. The development of a hanging plastic water storage bag has further lowered the costs in Kenya, with a similar technology that could potentially introduced in Malawi. They systems are particularly effective for cultivation on plots under 0.4 hectares through their modular designs, and have been able to provide water savings of 30 - 70 percent in Kenya, and greatly reduce labour requirements.
41 MICF Annual Report
Rope pumps: Some producers are developing manually powered rope pumps as an alternative to treadle pumps for farmers in areas with lower water tables. Washers, knotted along a rope, push water up and out of a tube to the ground surface where it can be used for irrigation. These pumps can harvest water from depths up to 36 meters (120 feet), but have been found to provide a most practical volume of irrigation water from depths up to 18 meters (60 feet).
Adaptation of the basic treadle pump: A number of firms, such as Kenya’s KickStart (a non-profit social enterprise), have begun adapting and marketing treadle pumps that require less calorific effort and are lighter weight for small-scale farmers to adopt. The “MoneyMaker” pump currently retails at a considerable lower cost than current treadle pumps and has been sold on commercial terms to poorer segments of the smallholder farming commuity in Burkina Faso, Kenya, Mali, and Tanzania with significant impacts on the incomes of over 400,000 people.
Some South African manufacturers have developed a lower cost quality treadle pump in kit form. It is fabricated from “off the shelf” plastic pipe and fittings that are locally available, and requires less energy than many treadle pumps because it utilizes simple low friction-loss valves.
Lower cost sprinkler irrigation systems: A number of companies from India and the USA
are currently developing sprinkler irrigation systems that uses durable plastic hoses and mini-fixed-nozzle sprinklers mounted on top of movable risers and fits in a box that can be conveniently stored or carried from one field to another. The systems operate at 10 to 13 meters of pressure head at the pump and is relatively cost efficient if local materials could be adapted to the technology.
Development of low cost irrigation pipes: A number of firms in Malawi currently produce PVC pipes for rural water supply. Many of these companies have the potential to adapt their basic moulds and products lines to develop lower cost piping for smallholder irrigation systems, one of the major costs of installing an irrigation system. By working with international firms that have greater experience on the requirements of various irrigation systems, there is a potential to introduce a number of other irrigation technologies to the smallholder level that is currently not available in Malawi.
Overhead sprinkle irrigation: This has been particularly effective in: i) irrigating close
spaced crops such as carrots, beets, and onions and non-rowed crops such as small grains and forage crops; and ii) where the water contains relatively large quantities of suspended mineral or organic matter. The higher costs of such systems may be reduced through simple low-cost locally manufactured system components, the use of thin-walled lay-flat tubing, and using locally manufactured standard impact sprinkler bodies.
Developing low cost on-farm storage systems: For many smallholders, access to water for
irrigation follows a feast or famine pattern. During the rainy season water is abundant, but there are acute water shortages during dry season. Developing cost-effective storage to hold water captured from runoff or taken from small ponds, intermittent streams, or perennial wells, to use for irrigation during the dry season has been a major challenge. Recent innovations include storing water in large low-cost plastic bag-like tanks, which has been successfully piloted in Kenya - 1,000 litre capacity bag suspended above field level by a locally-made platform has been utilised to feed larger drip irrigation systems. This type of low cost system could be considered for Malawi.
Introducing hydroponics to smallholder seed production systems: Hydroponics is a method of growing plants using mineral nutrient solutions, in water, without soil. The two main types of hydroponics are solution culture and medium culture. Solution culture does not use a solid medium for the roots, as the plants are grown in containers of nutrient solution, such as plastic buckets, tubs, or tanks. Hydroponics is particularly suitable, in a smallholder setting for seed multiplication for higher value added horticultural crops. They can be implemented through low cost PVC gutters and through recycled nutrient rich water and have been
42 MICF Annual Report
assessed for their suitability by the international potato research centre (CIP) for use with smallholder producers in the central region of Malawi (although there is no smallholder application of this technology is currently operational in Malawi). More sophisticated systems could also be considered for higher value greenhouse horticultural crops through the use of micro-filters and slow release timers. A number of companies have already developed similar technologies in the US and Europe and would require linkage with Malawian producers of PVC piping products to make the system more affordable to smallholder farmers.
Thus the above provides an indication of where the MICF irrigation window can operate across the
irrigation space. The key is to ensure that the first round of challenges remain broad enough to
encourage this type of diversity and innovation to emerge.
6.4 THE APPROACH TO BE ADOPTED
The irrigation window will complement existing initiatives by using the challenge fund instrument to
increase the appetite of the private sector to innovate, directing its attention to meeting the needs of
poorer households, small businesses and small farmers supporting or requiring irrigation services in
Malawi. It is envisaged that the irrigation window will develop a portfolio of successful case studies
and enhance the case for strengthening policy. It will effect change through strategic partnerships
with the limited number of active players in Malawi, agribusinesses wishing to engage with
smallholder producers to develop new irrigated agricultural products, and publicising the window
internationally to those firms that are already innovating irrigation technologies elsewhere in the
region and globally.
What has become clear as a result of the research and consultations the MICF team have undertaken
is that the use of passive calls for proposals will not deliver the kind of impacts that the irrigation
window is looking for. The number of small and medium scale irrigation suppliers operating in Malawi
as well as agribusinesses that have the potential to promote the production of irrigated smallholder
crops, are uncertain of the scale of potential demand for lower cost versions of their products (for
irrigation providers) and risk averse in attempting to increase the scale of their production to
smallholders (for agribusinesses involved in irrigated crop production), given the lack of information
and their limited experience of brokering partnerships with more innovative irrigation suppliers in the
region and internationally. Thus interested firms will need to be engaged in dialogue, convinced of the
level of demand and the opportunity that the MICF irrigation window provides in terms of testing the
viability of business models for increasing the scale of their services and products to a new market
segment.
In order to reach this segment of the market requires a deep understanding of the irrigation sector
both within the regional and globally. The MICF will need to engage with larger more established
companies both within the region and those that have an interest to use their technologies from other
parts of the world into the Malawi environment, to inform them about the MICF irrigation window and
the opportunity it provides these firms in terms of testing new business models that have the potential
to bring significant change to smallholder producers in Malawi. It will require engaging with senior
management of these firms and “spread the word” about the aims and approaches of the irrigation
window of the MICF. By combining a process of engagement with a wide marketing campaign to
those within the industry it will allow a range of potential innovations to emerge.
The guiding principle is that the MICF grants are made through an open transparent process and
applicants compete for a limited pool of funding during multiple competitions that are organised by a
fund manager. There is no attempt to second guess what the market demands, the mechanism
responds to the creativity of the private sector. The mechanism is very flexible and will be capable of
adjusting to additional funds coming available. After each funding round, it will review market
response and where necessary, change the types of ideas it will back and where appropriate vary the
size of funding available of the private sector.
More detailed information is provided in a December 2014 report produced by the MICF team on
developing an irrigation window.
43 MICF Annual Report
SECTION 7. LESSON LEARNT TO DATE
During the first year of implementation a number of lessons were learnt, these are included in the
following section:
7.1 MARKETING OF MICF
Attracting Companies: The MICF consultancy team has been successful in attracting companies
that have not previously sought or engaged with donor financed initiatives and projects to submit
concept notes to the MICF. These companies required a considerable level of engagement to allow
them to understand in clear terms what the MICF is looking for particularly with respect to innovation,
social impact and inclusiveness of their business models. During the concept note phase, this took a
considerably longer period of time than was envisaged and with the advent of elections, it was agreed
that the deadline for submissions would be extended by one week. In order to reach out a wider range
of companies various channels of communication were used. During the PCN Stage over 150 target
companies were visited with the aim of introducing the fund. Due to interest generated during these
visits some companies came back seeking more information. Target beneficiary companies were also
reached out through newspaper advertisements, www.micf.mw website, radio and TV news features
with fund management team. Communication messages were also created and delivered through
print communication materials like brochures, banners and the website. These communication
materials provided more information on the fund.
Even those firms that have previously worked with donor financed initiatives required considerable
support to fully understand the aims and approach of the MICF, given that this is a new instrument for
Malawi. For the proposal phase, more time has been provided to ensure that high quality proposals
will be submitted to the Investment Panel and the process of engagement commenced with proposal
workshops held in both Blantyre and Lilongwe in early July 2014 for successful short-listed applicants.
7.2 ENGAGEMENT WITH COMPANIES
Company Engagement: The MICF Team engaged with each of the companies at least three times
during the two months of the Proposal Stage. During these interactions some of the companies noted
that they were unable to translate their project concept into a more detailed proposal due to a lack of
skills within the organization to write the proposal and hence outsourced this activity by engaging
professional consultants.
The advantage for the company is that they will be able to put forward a professional document to the
Investment Panel but there is also a risk that at times the consultant was not able to clearly
understand the project and was unable to underline key elements of the project in the proposal.
Therefore the MICF Team were forced to engage with both the consultant and the company at the
same time, which increased the frequency of engagement with each project. However, those
companies that were more successful and were ultimately invited for negotiation had a much closer
interaction between consultant and key decision makers / project managers in the lead firm.
Improving the quality of submissions: The interaction between the MICF team and the companies
during the proposal stage resulted in more detailed proposals emerging. The questioning and
discussions that were posed often led the companies to refine their existing proposals, often adding
new elements and new partnerships to either strengthen or clarify certain aspects of their proposals.
Thus the engagement process with companies was critical to ensure that the best possible proposals
could be put forward by the companies.
Discussions with companies on their proposals needed to focus on details on the various elements of
their proposals rather than generic set of responses. In this way, the company valued the input and is
more forthcoming with the real issues that they face. By building this level of engagement, it is
44 MICF Annual Report
possible to enter into a more substantive partnership with the MICF, whilst also recognising that the
projects are ultimately owned and run by the participating companies.
Besides refining business ideas, the engagement process significantly helped companies involved, in
enhancing their thinking processes on various elements of the project. Most of the companies
introduced new means of enhancing their project by bringing in integration of various technologies
such as ICT to enhance their project. Various project planning tools were introduced to companies
which will live with them beyond implementation of MICF projects.
Deeper Due Diligence: The due diligence process adopted for the MICF has been considerably
deeper and more intense than other second generation challenge funds. This involved a much closer
examination of financial statements, the capacity of the firm to implement and the potential risks that
the projects posed. Despite this, the due diligence process is considerably less intense than that
adopted by fund managers in the impact investment space. However, it is critical that more detail due
diligence, similar to that attempted by the MICF should become more entrenched in the challenge
fund instrument to reduce (although not eliminate altogether) risks of defrauding the challenge fund
and to identify gaps in lead firm/or partner early enough which might pose a threat to project
implementation at a later stage.
The Role of Senior Management: By insisting that senior management of lead companies and
senior staff of key partners were present at many of the face to face interactions that were undertaken
by the MICF team, there was much greater understanding of both the aims of the fund and buy-in to
the decisions made at these meetings.
Using the Logic Model to Further Improve Projects: During the preparation of the logic model, it
was noted that there were certain elements in the proposal that the company had not thought through
clearly and hence had to go back and revisit either the data provided or the actual activity itself. By
doing this the companies could clearly see the logical sequence of activities leading to the final impact
and led to much clarity on what the fund was looking for. Furthermore, by working with the company it
became more apparent as to the “missing elements” of their initial submission which enabled the
company, with only minor guidance from the MICF team to reconfigure and improve their
submissions. For future rounds of the MICF it may be necessary to place even greater emphasis at
the proposal stage in supporting companies to develop their logic models.
Commitments for the Milestones: Setting the milestones and coming up with milestones budget
was one of the difficult and critical elements during the contract negotiations stage. At this stage
companies had to get committed to means of verifications for each milestone which will trigger
payment claims by beneficiary companies. While some projects would want all the funds available
during the early stages of the project, the fund management team had to make sure that the funds are
spread across the project in order to spread the risk. It was crucial that the Fund Management Team
thoroughly understand each project including the project time line and the cash flow for the business,
as presented in the full proposal, to later covert them into the proposed milestones, means of
verification and the MICF grant proportion for each milestone. Without this through understanding of
the project it is not possible to enter into the negotiation stage and discuss with companies the grant
proportion attached to each milestone. However, the fund management team successfully managed
to negotiate and no single company walked out.
Introducing through negotiation monitoring tools for companies to use: The logic Model,
Milestones and Milestones Budget have been appreciated and adopted as key project monitoring
tools by all beneficiary companies. The use of an incremental approach allowed companies to
understand more deeply the rationale why these tools were introduced and the potential benefit that
this could deliver to their businesses. Thus they have been more widely adopted than initially hoped -
the Logic Model has been described by some companies as a project charter and clearly maps the
projects from setting key project activities to getting impact.
Project time span: The project time span for MICF is two years. Almost all companies had indicated
that this is a very tight time line especially in a country where the quality and availability of services
such as electricity, water and other resources, particularly for agricultural production are very poor.
There are many constraints such as logistical challenges when importing equipment, availability of
45 MICF Annual Report
foreign exchange to make payments, delays from ESCOM when supplying power to new factories
etc. As each milestone and the related grant proportion once set it not negotiable, companies have
come forward informing the fund managers that the 2 year timeline does not give them any chance to
plan for any delays. It was their opinion that a 30 month time line is more appropriate for MICF. If the
fund had resources this would be a more ideal approach as it would also provide the opportunity to
deliver greater impacts than the current time constrained impacts that have been developed.
Historically challenge fund projects have been able to demonstrate greater impacts over time allowing
demonstration and replication effects to also set in.
MICF Project implementation time line: Starting from the launch of the Fund in April 2014, the Fund
Management Team had to work very closely with the Private Sector and Donors to ensure that the
final contracts are signed before the onset of rains during December 2014 as most of the projects are
in one way or another directly related to Agriculture. The biggest risk being that if companies were to
miss organizing farmers during this season the projects would be delayed and this could have had a
very negative impact on the implementation. It is important to ensure that in an economy based on
rain fed agriculture commencement of projects must be before or as soon as the annual rains
commence. All MICF project documents were submitted to UNDP by the 29th of November 2014.
UNDP approved all projects and signed contracts were given to the Fund Managers by the 18th of
December 2014.
46 MICF Annual Report
SECTION 8. WORKPLAN
Based on the discussions with UNDP, DFID and through the testing of assumptions during the first
year of project implementation, the MICF consultancy team has developed the following workplan for
the up-coming year.
The level of work and implementation requirements will be significantly increased as currently almost
all the MICF funds are committed and grantees contracted, whilst 2015 also signifies the launch of a
new irrigation window financed by IFAD. This has required a very marginal increase in consultancy
inputs than the original proposal submitted to UNDP to cater for the additional workload.
The following workplan thus aims to provide a snapshot of key activities and milestones on a month
by month basis for the coming year.
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Figure 10. MICF Workplan
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49 MICF Annual Report
SECTION 9. CONCLUSIONS
The process of engagement by the MICF management team has allowed companies to think more
realistically about how they could engage with smallholder producers to deliver more inclusive
impacts, which has permitted MICF to consider more risky and innovative ideas and attempt to push
the innovation frontier in Malawi.
Although in the past year there have been an increasing number of donor financed initiatives working
in the area of private sector development and direct engagement with companies, the MICF remains
a unique instrument. The establishment of MICF and its first year of operation has highlighted the
potential to deliver a much closer collaboration between the funding donors – UNDP and DFID and
Malawi’s very divergent and growing private sector. What has also been clear is that organisations
are interested in further collaboration and learning from their continued engagement with the MICF.
However, it is important to understand that this does not follow that their motivations has been
changed, so that they are now focusing on obtaining donor funds. The number of firms that withdrew
from the proposal and contracting stage provides strong evidence that companies were first and
foremost interested in developing and testing business models which fit to their long term business
goals.
Like all challenge funds, MICF projects are providing public goods that help improve market access,
deliver lower cost goods and services, and in most instances build the capacity of Malawi’s poor. The
selection criteria and focus has given a preference to innovative projects. It is encouraging to report
that a number of innovative projects (innovative in terms of their application to Malawi or to a
particular sector) have emerged to test ideas that can have long term positive impacts on Malawi’s
poor. All have applied technology that in most cases are not new but certainly new to Malawi, and
their innovation has focused on how Malawi’s poorer farmers are able to participate in new or niche
supply chains that they previously had no access to.
Overall what the MICF has demonstrated over the past year is that there is a resilient and emerging
private sector in Malawi that has acquired capacity to innovate and evolve despite the country’s
challenging economic environment. What is very encouraging to note is that the MICF has been able
to identify a vanguard of Malawi’s private sector that has embraced the need to have better
integration with the poor either as producers in their supply chains or as new customers that need to
be served by better and lower cost products and services. Given the size of the economy and the
relatively limited number of early adopters in the private sector, it is unsurprising that some of these
companies have been able to engage with other donor financed programmes, although often for
different types of projects or at different stages in their planning and implementation of projects.
50 MICF Annual Report
ANNEX 1: TOR FOR INVESTMENT PANEL
Background
Despite efforts, progress on economic transformation has been slow and stagnant especially in recent
years. Malawi has not diversified its economy and its exports. The economy remains highly
dependent on agriculture which contributes around 34% of GDP, supports 85% of the population and
produces over 80% of exports revenues. It remains driven by smallholder agriculture, which is
characterised by low inputs and productivity, dependence on rainfall and declining soil fertility. This is
further constrained by weak links to markets and limited access to agricultural land, credit and
extension services.
The manufacturing sector accounts only 8 per cent of GDP. The limited manufacturing that does take
place relies on the processing of agricultural commodities (tea, tobacco, sugar) and is inward oriented
as only 14 per cent of the manufacturing output is exported. Manufacturing is being held back by a
lack of power, inadequate infrastructure and a continuing shortage of foreign exchange that restricts
the import of raw materials and intermediates.
To compound these issues the private sector in Malawi presents a dualistic structure. On the one
side, there are a few, large and often foreign owned companies engaged in the production of tea, the
processing and marketing of tobacco, growing and exporting sugar and producing a limited range of
fast moving consumer goods. These are the main contributors to economic growth. On the other,
there are a large number of micro and small enterprises that mainly operate in the informal sector.
The weakness of the private sector severely hampers the country’s ability to achieve high and
sustainable economic growth rates, as well as create formal jobs. Malawi has one of the lowest rates
of total investment (24% of GDP calculated by the World Bank in 2009) in Sub-Saharan Africa (SSA).
The Malawi Innovation Challenge Fund (MICF) supported by the United Nations Development
Programme (UNDP) and the UK Department for International Development (DFID) aims to overcome
these constraints by increasing the incentive for businesses to innovate technology/services and
business models that connect the poor to markets more efficiently in manufacturing and agriculture.
By doing this it can overcome market failures of information, coordination and thus help to increase
the incomes of the poor and reach out to Micro Small and Medium Enterprises (MSMEs).
MICF is a US$ 8 million competitive facility through which businesses can apply for grant funding for
innovative projects, which if successful, can deliver large social impact and help the country diversify
from its narrow band of exports, but where commercial viability is unclear. The MICF provides up to a
matching grant to innovative business projects to help absorb some of the commercial risk in
triggering innovation, speeding up implementation of new business models and/or technologies that
have high social impacts. The MICF is designed to accept high commercial risks, is private sector
friendly and is looking for big positive impacts on Malawi’s poor.
The MICF will establish two windows, one in agriculture and one in manufacturing, to provide support
to inclusive business projects. It is important to note that the matching grants provided by MICF will
only back projects and not individual firms, or organisations. So, they will be linked to progress on a
specific project with tranche payments linked to the achievement of agreed milestones.
The Role of the MICF Investment Panel
The MICF Investment Panel (IP) will be constituted with a maximum of 7 members, including a
chairperson. The panel will be composed of leading business people within Malawi and the region
that have expertise in: i) commercial agriculture / agribusiness; ii) manufacturing sector; and iii)
banking / finance sectors. Its composition will also include expertise in social inclusion.
The core role of the IP is to evaluate and allocate MICF grants, to ensure the programme achieves its
objectives in the most effective and efficient way. This selection process for each of the agricultural
51 MICF Annual Report
and manufacturing windows will take place through two bidding rounds, with each bidding round
involving a two stage process. First, selecting a ‘short list’ of candidates from the submitted project
‘concept notes’ for full proposal development. Secondly, making a final selection of grantee recipients
from the full proposal submissions for MICF funding.
Selection will be based on the IP’s assessment of the project’s potential to meet MICF’s objectives of
diversifying Malawi’s export base, supporting import substitution industries and sectors and delivering
social impact in the form of new jobs created and improvement of incomes of the poor participating in
these business projects.
MICF supports projects and not organisations, and hence MICF supported projects should:
Develop new, unproven business models with the potential to be commercially sustainable;
Be innovative meaning they involve new products, services, marketing approaches, business
models, supply chain systems that could be: i) a new approach, idea or service that has not
been tested anywhere; ii) an approach, idea or service that is new to Malawi; or iii) an
approach, idea or service that has not been applied to the sector in question in Malawi ;
Deliver sizeable benefits to a significant number of the poor who participate in the value chain,
product or service proposed;
Have the potential for impact beyond the project, through replication or changing the way a
particular market or markets function;
Have an impact in terms of developing exports or reducing the reliance on imported goods
and products; and
Address any environmental concerns arising from the project.
The total grant funds requested must be between US$200,000 and US$ 750,000. Although it is
recognised that larger funding requests for projects with the potential to deliver sizeable systemic
impact in a particular market or markets would be considered.
Scope of Work
The IP is expected to meet up to three times per year, in the first year, for a period of no more than
two full days for each meeting. IP members will also need to devote some additional days to review
proposals prior to the meetings. MICF will be willing to cover the travel and accommodation costs of
the IP members in attending meetings.
More specific tasks of the IP include:
Evaluate MICF funding proposals and allocate/approve MICF grants
Ensure that the programme remains aligned to the overall Goal and Purpose of the logical framework for MICF, as set out in the UNDP project document
Provide guidance to the MICF Management Team and access to a network of key people, organisations and businesses that may be potential MICF grant beneficiaries, and may contribute to the success of MICF funded projects.
The IP will be provided with eligibility and scoring sheets (to follow) on which to judge and record the
various applications submitted to the MICF. However, it is anticipated that IP members will have to
exercise personal judgement in comparing the relative (and potentially diverse) merits of the various
applications.
Composition of the Independent Panel
The IP will be constituted from outside the public sector. Members of the IP will be expected to
adhere to a Code of Conduct, and perform this role with the highest degree of probity and discretion.
The members of the independent panel will serve on a voluntary basis and will be only reimbursed for
reasonable expenses including travel and where appropriate hotel expenses.
Chairperson of the Investment Panel
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The chairperson of the MICF will play a crucial role in guiding the selection discussions of potential
applicants to the fund at both project concept note and full proposal stage. The chairperson will have
the final casting vote should there be a split decision between panel members. Given the importance
of the role it is proposed that the chairperson should have at least the following qualifications and
experience:
• Qualified to at least degree level;
• A significant and successful track record of running and managing private sector companies in the
Malawian context;
• A good understanding of private sector development in Malawi;
• Experience of allocating funding to private sector organisations, through any or all of debt, equity
or grant instruments within Malawi;
• A respected figure within the private sector of Malawi; and
• An understanding of social entrepreneurship.
Other Members of the Panel
The members of the panel will comprise of the following:
• A high profile financial sector expert preferably holding or previously holding a senior position
within a major financial institution in Malawi. Should have a degree and have extensive
experience of supporting project financing across a number of industries and sectors.
• An expert in fund management, ideally an individual who has experience of impact investment in
the region, internationally and ideally within Malawi.
• One or two respected individuals in commercial agriculture in Malawi, preferably in a senior
management position within an agro-processing enterprise. The individual(s) should have a
number of years’ experience in agriculture processing, a strong understanding of export markets
for agricultural products as well as agricultural value chains.
• One or two respected individuals in the manufacturing sector in Malawi, preferably in a senior
management position within a leading enterprise. The individual(s) should have a number of
years’ experience in operating businesses in Malawi and a strong understanding of export
markets
• A high profile individual with previous working experience of within Non-Governmental
Organisations in Malawi. They should preferably have a graduate qualification and also have
experience of working with poor and disadvantaged communities within Malawi to support
economic development and a good understanding of the application of gender concepts to the
Malawian context.
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ANNEX 2: INVESTMENT PANEL CODE OF CONDUCT
Applicability
This Code of Conduct (hereafter the "Code") applies to all individuals working for, or on behalf of, the
Malawi Innovation Challenge Fund (hereafter “MICF”), whether in a full-time, part-time, advisory or
occasional capacity. This includes members of the MICF investment panel.
This Code will be issued to all relevant individuals who are expected to comply fully with the content
and spirit of this Code of Conduct. Upon receipt of this Code, individuals are expected to have read
the document, and must adhere to its content. Should an individual be uncertain of his/her obligations
under the Code, or wish to receive guidance on a particular issue, they should contact the MICF
Project Director.
All relevant individuals will be asked to certify that they will comply with the Code of Conduct by
signing an Acknowledgment Form, to be submitted to the Managing Director, Imani Consultants Ltd,
the local implementing partner of MICF.
Definitions
For purposes of this Agreement, “Confidential Information” means any data or information that is
proprietary to the Disclosing Party and not generally known to the public, whether in tangible or
intangible form, whenever and however disclosed, including, but not limited to: (i) any marketing
strategies, plans, financial information, or projections, operations, sales estimates, business plans and
performance results relating to the past, present or future business activities of such party, its
affiliates, subsidiaries and affiliated companies; (ii) plans for products or services, and customer or
supplier lists; (iii) any scientific or technical information, invention, design, process, procedure,
formula, improvement, technology or method; (iv) any concepts, reports, data, know how, works-in-
progress, designs, development tools, specifications, computer software, source code, object code,
flow charts, databases, inventions, information and trade secrets; and (v) any other information that
should reasonably be recognized as confidential information of the Disclosing Party advisory or
occasional capacity.
Interests of MICF
MICF’s general policy is that the interests of the MICF are paramount, and must come before any
conflicting or competing interests of individuals associated with the Project. It is critical that the
reputation of MICF is held in the highest regard, and that the Project’s ethical approach cannot be
questioned.
Conflicts of Interest
Individuals working for, or on behalf of MICF, shall not use their position or relationship with the
Project, or any business opportunities that may arise as a direct result of their positions or relationship
with MICF, in a manner that is inconsistent with the best interests of the Project.
Should an individual find that a real or potential conflict of interest may or has arisen, for whatever
reason, then they should disclose this, in writing, to the MICF Project Director, so that a reasonable
solution can be found.
Should an individual suspect or believe that someone else is in a position that poses a real or
possible conflict of interest, or may be acting in a manner that is not in the best interests of MICF, they
should report this, in confidence, to the MICF Project Director immediately, who will take it to the
relevant governance structure.
Confidentiality
The Project will receive and generate Confidential Information in the pursuit of its stated goals. All
individuals associated with the MICF will hold all such Confidential Information in the strictest
confidence and not disclose or use it, unless prior agreement to do so has been given by the MICF
Project Director, as the first point of contact.
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All individuals must take reasonable precautions to ensure that all Confidential Information received is
stored in a secure and proper manner. Should an individual suspect that there has been a real or
possible breach in Confidential Information security, they should report this to the Managing Director,
Imani Consultants Ltd immediately, who will take it up with the relevant project governance structure.
Prohibited Activities under MICF
An individual may not use, or take advantage of, information received as a consequence of their
association with MICF for personal gain, or for the gain of third parties.
An individual may not use his/her association with MICF in order to derive any benefit that is not in the
best interests of the Project.
An individual may not seek to ‘front run’ MICF’s grant disbursements, or pursue any activities that
might be perceived as ‘insider dealing’.3
Penalties for Breaching this Code
It is the intention of MICF Project to achieve 100% compliance with all requirements of the Code. A
pattern of relatively minor violations, or a single egregious violation, of this Code by an individual will
result in the Project reviewing, and potentially severing, its association with that individual.
For an individual that is recruited to undertake a consultancy input for the MICF this will result in
dismissal of post and may, dependent in the severity of the breach result in legal proceedings taken
by either Nathan Associates London Ltd. or Imani Consultants Ltd.
Compliance
The MICF Team Leader will serve as the Project’s chief of compliance with regard to this Code and its
adherence by all individuals associated with MICF.
Acknowledgement
I, the undersigned, confirm that I have read the Code of Conduct for MICF, and will comply with the
spirit and content of this Code.
Signature:
Name:
Date:
3 Front running entails taking advantage of information on a possible future grant disbursement by MICF, for personal benefit. Insider dealing entails using confidential information, gained as part of work conducted for or on behalf of MICF, for personal benefit.
55 MICF Annual Report
ANNEX 3: DUE DILIGENCE REPORT
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ANNEX 4: BRIEF OF PROJECTS SELECTED FOR CONTRACTING
Agricultural Window
Summary of Services – Exagris Limited
The overall objective of the project is increase exports of Smallholder Groundnuts through Innovations
in Storage Management by controlling and monitoring Aflatoxin during post-harvest storage. This will
be achieved by introducing Ultra Hermetic Storage and Decentralised Aflatoxin Testing as methods of
managing post-harvest aflatoxin development and by improving the tracking of groundnut stock to
enable reliable monitoring of stocks along the route from field to export.
The introduction of these new technologies will complement other efforts that the company is currently
engaged in on managing aflatoxin, which include training of smallholder farmers in post-harvest
management and buying nut in shell, which can be graded for aflatoxin risk before shelling. This
project will be able to demonstrate a technology that could be scaled up nationally across other value
chains for reduction of post-harvest losses in Malawi.
After harvest, the aspergillus fungus continues to metabolise and produce aflatoxin unless storage
conditions are unfavourable for its proliferation; these conditions include presence of adequate
moisture and oxygen. While every attempt is currently made to control moisture below 7%, this is a
challenge when buying thousands of small consignments from smallholders, and re-introduction of
moisture is beyond the company’s control once the produce is shipped in containers. Temperature
fluctuations during day and night or between climates where the cargo is passing, result in
condensation because of air movement between the top and bottom of the container. Saturated air at
the top of the container releases moisture, particularly in the humid conditions in the export ports such
as Beira.
The project is expected to provide a minimum 25% increase in sales to these markets. These higher
value markets increase the average overall price and margin obtained from the groundnut business,
which in turn translates into the ability to purchase more tonnage from smallholders. Moreover, the
company needs to introduce new technology that will allow them to spread sales over the entire year,
avoiding the risk of running into increased aflatoxin levels with time from harvest, particularly when
humidity levels increase during the rainy season.
The company is one of the largest buyers of grounds in Malawi, procuring approximately 1,500 mt of
groundnuts and offers a market to more than 10,000 smallholder farmers located near its 12
commercial farming estates and across the country. The profitability of marketing these smallholder
groundnuts hinge on the proportion of the crop that can be sold into higher value markets, which in
turn is determined by the level of aflatoxin contamination. This project aims to deliver a 24% increase
in incomes to 5400 farmers who are engaged in ground farming around the company farm in Mitundu.
Ultra Hermetic Storage, Decentralised Aflatoxin Testing, Centralised Shelling and Real Time Stock
Management are four integrated technologies/systems that will deliver these benefits. By introducing
this new technology the company will be able to increase the proportion of the smallholder crop (a)
that can be exported and (b) that can be used throughout the year in the production of therapeutic
food by Valid Nutrition.
Summary of Services – Satemwa Tea Estate In this project Satemwa Tea Estate (STE) and its main partner, Msuwadzi Smallholders Tea Growers Association, will form a partnership with the aim to access Specialty Tea markets through the exports of high value added tea in bags. The product will be a herb/ flower/ fruit flavoured tea that is packaged in tea bags and specialty boxes then either branded for the wholesale client in the foreign market or
64 MICF Annual Report
exported unbranded to the clients. The herbs, flowers and fruits used for flavouring will be grown by the farmer association and Satemwa will grow the tea. This will be first attempt by a Tea Company in Malawi to venture into niche markets in Europe and America and follow in the footsteps of other such successful ventures from Rwanda in Central Africa and the first attempt of moving what is essentially a commodity into a much higher value added product which is less prone to the vagaries of the international tea market. The project will also work closely with the smallholder tea farmers and provide them with technical backstopping to help them supply the project with the herbs/fruits/flowers and the high quality green leaf. The top three World Tea Exporters are Sri Lanka (315 million kg), Kenya (314 million kg) and China (287 million kg). Malawi is on position eight with 42 million kg per year. It is estimated that the production of commodity tea will increase in the next 5 – 10 years due to increased small holder production programs and mass planting schemes in Kenya and China. As there is too much tea on offer, it is a buyers’ market with the growers unable to make consistent profits. In such a scenario where the commodity tea market is stagnant, this project is adding value to produce a high value speciality tea in bags with support from the smallholder farmers it is currently working with to counter balance this trend and be less dependent on bulk tea markets where prices have been steadily declining over the past 3 years. While the commodity tea market is stagnant, the Specialty Tea market has had an upward climb in 2013 and continues to improve through 2014 as consumers seek out exotic and unique teas. According to a study entitled ‘Tea and ready-to-drink tea’ in the US from Packaged Facts, the tea retail market will grow from approximately 6.6% in 2012 to 8.7% in 2014, reaching US$8.3 billion that year. The Msuwadzi Smallholder Tea Growers Association (MSA) is an organisation of 300 small holder tea farmers. STE has individual contracts with 198 of the MSA members. On average each member owns less than 0.5 ha of land per household. Their main income is subsistence farming and the sales of green tea leaves to STE. They have very limited access to financial resources, they are very far from the markets they are selling to (they depend on middle men) and they do not have means to add value to their raw commodity product. The project will help the MSA farmers to get (direct) returns from new and untapped markets by adding value to their products. In this project STE and the MSA farmers will set up a value chain for herbs and flowers that will be blended with black tea. The farmers will also plant herbs which will help them diversify their income without giving up existing crops. Secondly MSA farmers will also continue to sell their green leaf to STE. By improving plucking standards this green leaf will be used to make Specialty Tea. In this project STE will be able to pack these products loose or in high quality Tea Bags branded with the MSA / STE story. These products will be markets in the overseas specialty tea markets. This project will create 70 new jobs and will integrate smallholder farmers into the supply chain thereby improving the livelihood of 78 farmers who supply the herbs by 48% and 198 farmers who supply the green leaf by 7%.
Summary of Services – Kwithu Kitchen
This project lead by Kwithu Kitchen, a women lead co-operarative, will create an inclusive business model sourcing fresh garden tomatoes from smallholder women farmers, preserve them using natural preservatives and market the product in high quality jars for the local and regional markets. This project focuses significantly on women empowerment both in terms of the beneficiaries (women farmers) and in terms of the management of the cooperative (which is a women led movement) to add value to a non-traditional crop. Although dependent on agriculture, Malawi has been unable to develop agriculture processing sectors and any efforts to produce value added agricultural products are on a very small scale and not of very high quality. More than half of the people of Malawi live below the poverty datum line - on less than a dollar a day. The majority of this population is women. Women comprise or head the majority of the
65 MICF Annual Report
households living in poverty. Primarily because of poverty related causes less than 10% of the children entering school graduate from secondary school. The company has over the past couple of years worked with the women farmers and engaged with them by providing them with tech nical backstopping on Good Agriculture Practices, selection of the right varieties of tomato and irrigation techniques. The project, which was started on a trial basis, had very good results and approximately 11 MT of the preserved tomato product has been sold last year, indicating that there is market acceptance for the product both in terms of quality and price. Having found acceptance in the market, the Company now intends to scale up its operations by increasing its production base, bringing in partners to secure the supply chain and provide specific backstopping on agronomy as well as initiate a bigger marketing campaign for the product. In this project the Company aims to scale up its operations to produce and sell 43 MT of tomatoes in jars in the first year and 230 MT in the second year. The company is using multiple strategies to work with the farmers, primarily poor female farmers, living near to or vulnerable to poverty and providing them with alternative livelihood options. One of the key activities will be setting up of green houses for farmer groups, providing them with the right variety of seed and technical backstopping. The key partner, Self Help Africa (SHA) will also introduce the Transparent Trading Security Service for this project. This service has been successfully tried in other parts of East Africa. By using this facility SHA will procure the produce for the company from the farmer and pay them the current prevailing market price so as to prevent any side selling of the tomatoes. This fund is designed to review and offer price information to the farmers based on data collected on prevailing trends to help them take an informed decision to sell to the Company. By setting this up the company intends to prevent side selling and maintain the loyalty of the farmers. The project will engage with 500 women farmers who will benefit from a 35% increase in their incomes and the company will process and sell 300 MT of garden fresh tomatoes in jars to the domestic market and will over time increase quantities sold into regional markets.
Summary of Services – Afrisphere The project promoter, Afrisphere Limited, trades as Nyama World (NW). Nyama World proposes a revolution in the meat industry for the Nyika Belt in Malawi in the way it intends to engage with smallholder farmers in the production and marketing of distinctive, traceable and high grade Nyika Meat products for local and international markets. The Project will introduce innovations in the meat industry that have not been tried before in Malawi with a clear business model that ensures that the gains of the project are equitably shared and contribute towards the overall national development goals. To achieve production of high quality beef and beef products, Nyama World intends to introduce a new breed of cattle – the Bonsmara which will be used in a well-organized cross breeding programme using latest technological developments in artificial insemination. In general, the project is fostering four main areas of intervention: developing infrastructure for production and processing of quality beef; provision of support services and alternative livestock technologies for smallholder farmers; promoting livestock marketing development and linkages, and; facilitating effective partnerships throughout the value chain for sustainable change. This project will contribute significantly to the income generating potential of livestock farmers, as it will provide a ready and competitive market for their livestock. The crossbreed of the Bonsmara bull and a Malawi Zebu cattle is expected to increase the weight of the offspring by more than 40 per cent, thereby increasing the income of the smallholder farmer by 30 - 50 per cent as the crossbred calf weight at weaning will be higher than that of a regular Zebu calf. As a result, smallholder livestock farmers will also contribute to growth of the livestock sector, increasing the current share in agricultural GDP from the current 9.9 per cent to at least 20 per cent and also increase per capita red meat consumption from the current 9.45kg to the SADC average of 15kg. With increased production and further market development, the Project will be able to penetrate the regional export market with its high quality meat and meat products.
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The project will also create significant job opportunities in the Northern Region of Malawi and amounting to 200 new employment. The key components of the project include:
Development of an Export-Oriented Halaal-Certified Abattoir that meets world class standards for the slaughter and primary processing of beef cattle and goats
Development of a modern feedlot for finishing off beef cattle Training of farmers and staff in modern livestock management techniques Provision of technologies, information and essential services to livestock farmers Provision of a market avenue for small holders for selling their agro-livestock products
Manufacturing Window
Summary of Services – Universal Farming and Milling Limited
The project will produce Cassava Starch and Liquid Glucose (for the first time) within Malawi at a
relatively large industrial scale and supply various sectors such as Food manufacturers, textile
industries, paper and plywood. Currently there are no large scale manufactures of Cassava based
starch and glucose in the region. Universal Farming and Milling (UFML) will implement an inclusive
business model which will target over 7,000 smallholder cassava farmers in Thyolo, Mulanje,
Chiradzulu, Zomba, Machinga, Blantyre, Neno and Mangochi Districts to provide fresh cassava roots
for the project. The project aligns itself to the National Export Strategy by adding value to locally
grown commodities and import substitution.
In Malawi, Amryl/Corn Starch and Liquid Glucose is currently being imported by food, confectionery,
beverages, textile and other industries. Despite fresh cassava being locally produced, the crop has
not been commercialised due to lack of investment in further processing into value added products
such as Starch and Liquid. The company will import new technology into Malawi, establish a Starch
and Glucose processing factory, liaise with smallholder and large scale cassava growers to establish
a vibrant and consistent supply chain of Fresh Cassava Roots that will be supplied to the UFML
factory for production processing, and market excess Starch and Liquid Glucose in both domestic and
regional markets
The main activities of Cassava starch and Liquid Glucose projects are divided into four key functional
areas namely; (i) establishment of processing plant, (ii) Cassava production and strong supply chain –
which will involve mobilisation and supporting farmers to produce cassava and supply it to the
company, (iii) quality control, factory and processing operations – which include production of finished
products and; (iv) business development (marketing and sales)
The project has a unique model of creating Mobile Processing Units across the main growing areas
which will enable farmers to complete the first stage of processing and sell a value added product to
the company thereby increasing their incomes while at the same time company saves on transport
cost and time.
The project will use of ICT tools and mobile technology to effectively provide extension/advisory
service to farmers, link the farmers with cluster groups and UFML in production and selling of the
produce. The project will employ a suite ICT- enabled extension services: 3-2-1 on-demand
information system offering audio job aids for extension workers and audio extension and marketing
messages for farmers thereby offering smallholder farmers access to the necessary information for
decision making.
The project is also expected to create at-least 470 - 612 jobs at the factory and mobile processing
units across 8 cluster groups. Every unit is expected to employ not less than 68 people and when the
project is aggregated it will employ between 470 – 612 employees in the first two years. The project
aims to increase the incomes of 7,000 smallholder farmers by an average of 25%
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Summary of Services – Moringa Miracles Ltd
The project will commercialize farming of Moringa Trees – a locally grown forest crop that currently
has limited commercial value, adopt new production/harvesting techniques from the Tea Industry and
compliment the model with an extensive out grower programme thereby owning the supply chain to
ensure quality of its raw material. The project aims to be a leading supplier of African originated
Moringa Oil and Powder to the global Moringa industry. By combing new technology and innovative
production techniques coupled with an extensive outgrower programme, the project aims to position
itself at the forefront of the US$4bn world moringa industry and to be a leader in the production and
processing of Moringa in the Eastern and Southern Africa region. The company will generate foreign
exchange through exports of a high value product into international markets and will be adding value
to a non-traditional crop.
MML will pioneer the commercial cultivation of Moringa and will be the first large scale grower of
moringa in Malawi. The project will produce both leaf powder and seed oil for sale in bulk quantities to
the international wholesale health food and cosmetics industries
The international market for Moringa products is relatively young and undeveloped, however, it is
already worth an estimated US$4bn per annum. There is a growing demand for Moringa, but the
market currently has a relatively low number of players that are growing and supplying Moringa on a
large scale and is dominated by East Asian countries; worldwide there are only approximately 2,200
registered commercial moringa producers. Initially MML will produce moringa powder and moringa oil
and will focus on 2 key markets – the Health Food industry and the Cosmetic industry.
The moringa industry is currently unregulated and both wholesale producers and moringa retailers
often make unverified claims about quality and benefits of their produce and products. As demand for
moringa products looks set to continue to exceed the supply in the coming years, the issue of quality
is becoming an area of increasing concern to major wholesale buyers of moringa. This has led some
moringa retailers, such as Zija and Moringa Source to own the entire moringa supply chain. Research
done by the company has indicated that buyers are keen to identify and partner with moringa
suppliers who will act in a transparent manner and guarantee quality levels; MML will do so and this
will become a significant source of competitive advantage for MML.
The project will establish a 30 hectare Moringa plantation using high density planting methods never
before tried in the Industry. It will also closely work with 1600 small scale farmers who will be provided
with seedlings and technical backstopping to ensure that they manage the crop using good agriculture
practices. The harvested moringa leaves will be cured and processed in a strictly controlled
environment to meet UK Food Standard Agency and International Standard Organisation (ISO)
standards using a cold press process that will ensure end products retain their extremely high
nutritional value.
This project will work closely with the 1600 farmers and provide them with a market for Moringa seed
thereby improving incomes by 30% and creating 30 new jobs.
Summary of Services – Dairibord Malawi Ltd
This project aims to set up a full traceability system with targeted agro-vet services for farmers in dairy
supply chain and for the first time in Malawi, and through this offer a premium for high quality milk
supplied by smallholder farmers, which the current milk pricing system in Malawi is failing to deliver.
The project will also produce a long life milk product in Cartons that can be marketed in times of low
production-high demand thus reducing imports and assuring farmers of a ready market and more
stable prices throughout the year.
Dairy farming is dominated by small scale farmers and contributes significantly to household incomes
and livelihoods in Malawi. The industry cycle is such that raw milk supply is highest from November
to March when feed is abundant due to rains meanwhile domestic demand is weakest due to
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pressure to supply agro-inputs (November, December) school fees (January to February) and high
cost of food before the harvest (January to March). Milk supply during this period exceeds domestic
demand and unless alternative markets or longer life products are found farmers suffer huge losses
due to spoilage of uncollected milk. At an average of 5.5 litres per cow per day and 1 dairy cow per
family the average farmer earns less than USD500 per annum, which is low by regional East African
standards.
The project will introduce a new way of testing and rewarding for quality. Dairibord will introduce a
quality premium scheme that benefits the individual farmers rather than the bulking groups. Bulking
groups (essentially a collection centre within a particular milkshed) will be given testing equipment
that enables them to do a much more complete analysis on each farmer’s milk upon receipt. The
volume and quality of milk can be recorded and then used for paying the farmer at the end of the
month.
The farmers will be offered dairy animals (50) and semen to improve the genetics and improve both
yield and quality. This will also be followed up with targeted training on good animal husbandry,
nutrition, animal health and animal breeding to preserve the genes. By providing this training the
project aims to increase productivity of each animal from the current 5.5 L/day to 13.5L/day thereby
doubling income (not only through better outlets for their milk by converting some of this milk to UHT
but through an improved premium based pricing system). The distributed animals are expected to
increase in number through breeding; assuming 1 calf per year and 50% females. A heifer pass-on
scheme will be initiated using the 50 animals to benefit other farmers in future.
The project will also develop 3 new bulking groups, the first time in over a decade that this has
happened in Malawi. These will become a centre for information that can be used for further
improvement and support to farmers in particular; performance of individual farmers can be tracked
and such information can be used for 1) processing loans and payment of farmer through the quality
premium scheme and 2) providing veterinary and animal husbandry support if production levels are
seen to be declining
By setting up and securing the supply chain the project will ensure that the company is able to source
the required quantity of milk at the right quantity for UHT Processing Plant. The processing plant will
include a new carton filling equipment (Tetra Pak) to produce a UHT product with a longer shelf life of
9-12 months. The product will be destined for both domestic and export markets. The projects aim to
export 150,000 litres of UHT Milk to the regional market per month. The project will involve a total of
3,550 smallholder farmers, a substantial proportion of the active smallholder dairy farmers in the
country.
Summary of Services – Sunseed Oil Company Limited
The lead firm, Sunseed Oil Ltd intends to set up a sustainable vertically integrated program
incorporating poorer smallholder farmers to ensure a steady supply of raw material of the right quality
and quantity for its innovative new long life fridge free Margarine project. This project is closely
aligned to the National Export Strategy by offering a ready market for Sunflower seed farmers while at
the same time generating foreign exchange through exports of 20% of all the company’s proposed
production into the region. The main objective of the project is to promote import substitution and
value addition of locally grown produce in order to increase the revenue base, create employment and
generate forex.
By implementing the project, it will be the first time that a long life margarine product meeting
international specifications is produced in Malawi, in a factory that has dual certification- HACCP food
safety standard and ISO 14001 environmental standard. About 80% of the population in Malawi
resides in the rural areas where most of them have no access to electricity and therefore no
refrigeration facility for proper storage of these highly perishable products. As indicated in research
conducted by the Company, the market demand for the long life Margarine products is over 400 MT
for domestic consumption per month and over 1000 MT is the requirement for industrial and
commercial purposes.
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The project will for the first time introduce hybrid high oil content Sunflower seed for small holder
farmers which will enable the farmer to get higher yields and at the same time ensure that the
company has a better yield per MT of crushed seed. It will also work with other registered seed
producers in the country such as Pannar Seed to set up a 67 hectare seed plot for seed multiplication
and distribution across the country. To ensure that the farmer engagement is sustainable the
company is setting up an Agriculture Extension Department with trained extension staff that will
provide farmers with the requisite technical backstopping at critical phases of the growing cycle. By
setting up 60 collection depots across the main growing areas the company will ensure that it has
trained staff close to the farmer to monitor and guide them during the pre and post-harvest times to
reduce any losses that may occur. The company will also provide access to short term finance to the
farmers who will be using the receipt system.
The project will work closely with over 10,000 farmers who are organized into groups and providing
them with an opportunity to improve their livelihoods. The project will also create 100 new jobs at the
processing facility.
Summary of Services – Charles Stewart Day Old Chicks
This project will process egg into “Liquid Egg Products” for the domestic market and for the region
and set up a smallholder based supply chain to supplement its requirement of eggs for processing.
The egg product, the first time it will be introduced in Malawi, will prolong the shelf life which allows for
better stock management. Shell eggs on average have a shelf life of 14 days, egg liquid stored at
room temperature have a shelf life of 28 days, when stored in a refrigerator 65 days and 1 year if
frozen.
Egg products are frequently preferred to shelling eggs by commercial bakers, food manufacturers and
the foodservice industry because they have many advantages, including convenience, labour savings,
minimal storage requirements, ease of portion control, and product quality, safety, stability and
uniformity. Over the last couple of decades there has been a substantial growth in the baking and
confectionary industry in Malawi where there is a need for eggs as raw material. There has also
been a growth in the hospitality industry where there a substantial and growing demand for eggs.
The progression of the Malawi poultry industry closely resembles that of India based on the methods
and practices of poultry farmers and the trends on the poultry markets. Currently India ranks fifth in
the world with annual egg production of 1.61 million tonnes of which approximately 60 % is further
processed into value added products. Both poultry and egg processing units have come in a very big
way in the country. Mainly India exports eggs, egg powder, frozen egg yolk and albumin powder to
Europe, Japan and other countries. Malawi is currently increasing its egg production and due to the
limitations of storage and transportability of raw eggs the next logical step in egg production and
processing is for the Malawi poultry industry to move to value added egg products for both the local
and export market
CSDOC currently does not have the in house capacity to produce all the eggs that are required for
this project and hence will increase its current egg production capacity through the implementation of
backward integration of its production processes to incorporate locally produced eggs which will in
turn have a direct impact on improving livelihoods and job creation. The company will provide
technical backstopping to farmers in addition to chicks and feed, with a buy back policy. The aim
being to improve farmers productivity as well as get them involved in a long term partnership with the
Company. The chicks also require a specialized feed and the company will buy raw materials from the
farmers for this feed mill.
The project will set up a small holder engagement plan with targeted activities geared to engage with
the farmer closely to ensure that there is constant monitoring of the flock to prevent disease outbreaks
and to also monitor the collection and transport of the egg. The company will provide cage units and
point-of-lay birds which the groups will buy. To co-ordinate this intense farmer engagement program
the company with use technology at various fronts
70 MICF Annual Report
- Geo Tagging farmer clubs to map out their locations and provide targeted technical
backstopping through a team of specially trained extension staff.
- To isolate areas of disease outbreaks
- Sending out targeted extension messages to the farmers for technical backstopping
The company will provide the farmers with a ready market for the 6.4 million eggs that they will
produce per annum. The farmers will earn additional income from selling the spent hens. The project
will create 65 new jobs and make a significant impact on livelihood of 300 chicken farmers
Summary of Services – Arkay Plastics Limited
The project will introduce a new house hold Water Treatment and safe Storage (HWTS) product in the
form of low cost table top water filters for the Malawian market. This will be the first time that such a
product is mass produced in Malawi and made available at a price point which is 60% lower than the
current price for such filters making it affordable for low income families. This project aims to
manufacture and assemble HWTS products in Malawi for both the domestic and regional market.
The project aims to provide-
Increased access to quality, lower cost table top filters targeting 50,000 who will benefit from
improved health.
Improved health means improved economic productivity. WHO estimates that for every $1.00
invested in hygiene and sanitation results in $9.00 economic benefits.
Savings made in through import substitution, especially in foreign exchange
Additional foreign exchange earnings through export of our products to the region
Increased economic opportunities to resellers of the filters, especially female entrepreneurs
using a “Tupperware” business model
The main product is a 9 litre table top unit with a diatomaceous earth filter that is effective in
eliminating diarrhoea causing bacteria and turbidity (dirt) in water that causes water to have an
unattractive taste and appearance. The plastic table top units are produced locally by ARKAY.
The occurrence of water related diseases in Malawi is high. Diarrhea is the fifth leading cause of
death of children under the age of 5 (UNICEF 2012) in the country. Three key underlying causes of
water related diseases are:
poor hygiene behavior (limited hand washing with soap),
low sanitation coverage (limited disposal of human faeces)
low access to safe water sources (limited treatment and storage of household drinking water).
Most households do not have access to a regular water supply or do not have in-house connections.
Drinking water is collected from communal water points and transported to homes through various
means and vessels. Water is not used directly upon reaching the households and stored for a period
ranging from few hours to several days. If not handled properly, water from safe sources can get re-
contaminated during collection, transportation and storage. Studies indicate that consistent use of
HWTS products and practices including HWTS can reduce the risk of contracting water related
diseases, in particular diarrhea by as much as 50%. Yet, despite the compelling benefits for personal
health, approximately 67% of Malawian households do not treat their drinking water adequately (10,7
million people)
The Malawian government and the water sector are confronted with declining access to drinking water, due to a lack of infrastructure investment. Therefore, increasing the use of HWTS has recently become one of the Government of Malawi key diarrhea (MDG7) control interventions. The Government of Malawi (GoM), together with the WHO and UNICEF, has developed the National Action Plan on ‘Household Water Treatment and Safe Storage (August 2012). The plan aims to significantly increase the adoption of HWTS products and services by 2018. HWTS is already implemented in the antenatal program of the MoH, in which pregnant women receive a hygiene kit during their visit to a clinic, including chlorine and four free refills. This program has shown positive
71 MICF Annual Report
results of women becoming aware on safe drinking water and treating their drinking water. The plan states that private sector involvement is important to increase the availability of affordable HWTS products in the market in Malawi and Arkay Plastics Ltd will be the first private sector company in Malawi which will offer such a product to the market.
72 MICF Annual Report
ANNEX 5: RISK ASSESSMENT FOR INDIVIDUAL MICF PROJECTS
The risk assessment framework is intended to be an internal management information system that will
be regularly updated for all projects within the MICF portfolio. The risks will be assessed based on
three metrics with a risk rating for each:
Technical Viability: This is the risk associated with the incorporation of a technology / process
that is fundamental to the success of the project.
Financial Viability: This is the risk that the project will not be able to continue profitably due to
concerns over the current business model, or due to a lack of funding of the business.
Development Impact: The risk associated with the project falling short of its development
indicators, due to the overall performance of the project to date or due to unforeseen
circumstances in the environment in which the project operates.
These three risks will be rated on a scale of 1 -5, with one being a low probability of occurring to 5
where risks are likely to be imminent. The assessments are based on judgement and are open to
interpretation. Based on these three risk ratings, an overall traffic light (green, yellow and, red –
signifying high risk) will assigned to each project by the designated MICF Project Officer and agreed
with the MICF team leader.
The MICF risk matrix will be reviewed at least monthly, and more frequently depending on the risk
profile of each project. This will be undertaken by the MICF team leader and project officers. The
review will prioritise actions that could be taken to reduce the risk rating, or prepare for the closure of
projects if the risk ratings are all consistently rising and cannot be managed downwards.