(Click to enlarge)

Incorporation of small, low-income producers into the supply chains of larger companies in rural Mexico is increasingly becoming a powerful way to break the cycle of poverty.

Sabritas, a leading Mexican snack foods producer owned by PepsiCo has decided to take action. The company, with support from the Opportunities for the Majority initiative and the local financial institution Agrofinanzas, will scale a pilot programme that incorporates small farmers into its sunflower supply chain. The new production of sunflower oil will reduce the company’s dependence on expensive, unhealthy imported palm oil, while at the same time giving small farmers the chance to expand their crop output and enter the formal economy.

Sabritas has already conducted two pilot programs to test sunflower cultivation in Mexico, supporting the conversion of 350 hectares of farmland. A key obstacle to scaling production proved to be the lack of working capital loans to support smaller producers. Agrofinanzas, a financial institution that specializes in working with the agro-industrial sector, will provide such loans to the farmers for the purchase of seeds and expansion of their production of sunflower crops.

When the project reaches full scale, as many as 2000 microloans will have been made and a new sunflower supply chain will be launched. In addition to increasing their income through selling their crops, the farmers will also build up their credit histories and be able to access other financial services, like insurance or loans for purchasing homes or for higher education.