Monday, October 04, 2010

Empowering banana entrepreneurs
Business World - Online Edition
October 4, 2010

Ireneo D. Dalayon
Chief Executive Officer
Federation of ARB/Banana-Based
Cooperatives of Davao (FEDCO)

The Philippine Cavendish banana is considered one of the nation’s top income-generating crops. Not only is it a strong source of foreign revenue, it is also a primary source of employment for thousands of small farmers in the provinces. These, precisely, were the reasons why Ireneo D. Dalayon, CEO of the Federation of ARB/Banana-Based Cooperatives of Davao (FEDCO), decided to focus on the banana industry for his business and advocacy.

Mr. Dalayon first saw the potentials -- and the problems -- in the industry when he worked for a fruit company. His job was to look for small farmers to grow fresh bananas. His interaction with the farmers provided him with an understanding of the inner workings of the industry, gaining deeper insight and knowledge on banana production and growership agreements.

His personal assessment was that there were some inequities and flaws in the system. Many small farmers claimed they remained poor because big export corporations purchased their produce at a fixed price, depriving them of the maximum profit they could earn.

Mr. Dalayon recounts that he has met so many small banana farmers who owe millions to banks. They are unable to earn enough to pay off their loans due to the low buying prices of traders. This was what motivated him to do something to help uplift the lives of these small farmers.

To further enhance his knowledge of the industry, Mr. Dalayon became a banana grower himself. His objective was to initiate gradual yet sweeping changes in how growership agreements were conducted.

"Experiencing for myself the challenges banana farmers faced inspired me to negotiate for better prices, so that small farmers can get better returns on their labor," he says.

To achieve this goal, Mr. Dalayon spearheaded the establishment of FEDCO in 1999. Since its inception, FEDCO has served as the umbrella organization for banana growers’ cooperatives. It is composed of farmers who are agrarian reform beneficiaries operating in Davao City and the provinces of Davao del Norte, Davao del Sur and Compostela Valley. From a starting membership of seven banana cooperatives, FEDCO has grown to nearly 20 member cooperatives with around 3,600 farmers owning 5,000 hectares of land.

Traditionally, banana growers under contracts with multinational banana corporations have limited freedom to manage their own farms. The corporations can dictate the entire production process, from planting to harvesting and packaging. In some cases, the cost of production is even deducted from the growers’ small earnings.

Through FEDCO, Mr. Dalayon helped organize these cooperatives to give banana growers better control of their operations and more freedom to negotiate the selling price of their produce, based on market demand and the quality of their crops.

FEDCO also plays an important role as the marketing arm for its member cooperatives, promoting the benefits of direct linkage with international buyers. Early on, FEDCO worked on negotiating contracts directly with foreign buyers in Japan. By going directly to the buyers, Mr. Dalayon was able to raise banana buying prices to 10 times their previous rate. Under his leadership, FEDCO consequently went on to conduct trade missions and make direct contracts with global fruit buyers in China, Korea and the Middle East.

Given the opportunity to market directly to international buyers, banana growers were able to eliminate costs from third-party marketing channels and middlemen.

Freed from restrictive growership agreements that delineated their production practices, growers had more flexibility to optimize operations. Greater profits also meant that they could afford to invest more in innovations that reduced their cost of production.

"Happily, our efforts are paying off. Big fruit importers now deal directly with small banana growers, offering them much higher prices for their produce," says Mr. Dalayon.

To keep up with the high global standards demanded by foreign buyers, FEDCO collaborates with different local government agencies to continuously provide banana growers with training, seminars and market exposure. More importantly, FEDCO sees to it that its best farming practices are followed by growers in all the member cooperatives -- from planting and fertilizing to harvesting and packaging.

Over the years, FEDCO has nurtured a more inclusive and proactive business environment for its members. Beyond just improving the production process, FEDCO also keeps its members well informed about sound business practices and strategies to help them grow.

Mr. Dalayon avers, "Transparency in doing the business is very important for you to gain the trust and respect of people with whom you do business. Without mutual trust and respect, you won’t last."

Today, FEDCO continues to build relationships and export directly to the international market. In late 2009, the Japanese government sponsored a FEDCO trade mission to their country to help promote the understanding of the banana market and to assist FEDCO connect with more Japanese fruit buyers.

Mr. Dalayon is also optimistic about increasing FEDCO’s global market share once other small banana growers see the benefits of joining the cooperative.

FEDCO is also developing new products from banana by-products such as fiber, chips and animal feeds. Mr. Dalayon is optimistic that this will maximize productivity and limit waste. FEDCO has begun planning for the manufacture of its own organic fertilizers and other farm inputs, catering to the international demand for fruit products produced using organic-based pesticides and fertilizers. Anticipating potential demand, FEDCO also has plans to expand into palm oil production and collaborate with potential local and international buyers.

In the long run, FEDCO’s initiatives have helped growers better enjoy the fruits of their hard work.

Growers have also become more motivated to ensure quality in the fruit they produce. Being a member of the Davao Cluster Capacity Enhancement Project (DICCEP), FEDCO aims to empower more banana growers in the region and further improve and sustain the operations of all its member cooperatives.

Mr. Dalayon hopes to inspire all small banana farmers in Mindanao to take charge of their future, and to work together to strengthen and improve the industry.

He says, "We measure our success by how much we’ve helped banana growers improve their lives. By helping banana growers upgrade their practices and businesses, FEDCO can truly become an instrument of change in the industry."


The Entrepreneur Of The Year Philippines 2010 is sponsored by SAP Philippines. Official airline is KLM Royal Dutch Airlines, operating on behalf of the Air-France KLM Group in the Philippines. Media sponsors are BusinessWorld and the ABS-CBN News Channel. The winners of the Entrepreneur Of The Year Philippines 2010 will be announced on Oct.12 at an awards banquet at the Makati Shangri-La Hotel. The Entrepreneur Of The Year Philippines will represent the country in the World Entrepreneur Of The Year 2010 in Monte Carlo, Monaco in June 2011. The Entrepreneur Of The Year is produced globally by Ernst & Young.