TBM ORGANIZES TRANSPARENT TRADE
farip has been working with the Tanzanian start-up company TBM for some time. It is about traceable control and financial mechanisms that can win the trust of the farmers. Because TBM works on a commission basis, and the commission depends on TBM’s marketing success, the farmers are involved in the value creation along the entire chain, ideally even all the way to the end consumer.
Bahat Twewe of TBM describes the business model as follows: TBM itself does not trade, it organises transparent trade. TBM operates control mechanisms that can ensure full transparency in operations and finances. If something does not go according to the agreements, TBM will know what happened, where it happened, who is responsible for it, and consequently who has to look after it. This creates trust and also more efficient processing along the value chain. The higher efficiency leads to better income for the farmers, and this increased income then also justifies the commission that TBM charges on the net proceeds of a trade.
A typical trade works like this:
1. TBM helps farmers find good buyers for their produce.
2. Once buyers and farmers have agreed on a price, they hire TBM to organise and supervise the trade. We investigate whether such a trade could be successful. Then we register the trade in our system, where everything is forecast, agreed and fixed as accurately as possible.
3. When farmers bring their produce to the designated collection points at the agreed time, TBM checks the quality. Many farmers depend on getting paid immediately. We pay an advance on demand – “cash-on-the-bag” (COB). The innovation: this is only a down-payment and the product remains the property of the farmer.
4. TBM now organises and controls all actions from the collection points to the final delivery to the contracted buyers: cleaning, sorting, processing, packaging, storage, transport, distribution to retailers, etc. For all these steps, TBM looks for the appropriate service providers and pays them on behalf of the farmers. We refer to the expenses for this as “cost of funds”.
Ideally, we try to distribute the goods to the many small shops in the city, which only need small quantities for each delivery. TBM contracts appropriate service providers to handle this. We call this the “distribution loop in the city”.
6. Buyers pay TBM directly on delivery.
7. TBM makes the final settlement: the total income from the buyers, minus all fund costs and advances from TBM. Usually 90% belongs to the farmers and 10% to TBM (our commission).