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Sahin, Sila; Prowse, Martin; Wigh, Nadia, 2014, Agriculture and Private Sector: Agriculture and growth evidence paper series, Meta-analysis of evaluations, DFID, London, Collection of studies concerning agricultural reforms and projects in several countri

2.1 ENABLING ENVIRONMENT

2.1.1 Global and regional strategies for livelihoods with attention to social inclusion

Recommendation: For a good analysis and well-founded conclusions of the synthesis results of complex regional projects on the IE.

Reference: Sahin, Sila; Prowse, Martin; Wigh, Nadia, 2014, Agriculture and Private Sector: Agriculture and growth evidence paper series, Meta-analysis of evaluations, DFID, London, Collection of studies concerning agricultural reforms and projects in several countries.

Evidence sample: The evaluation found that there were some criteria for country selection included in process documents but these did not include criteria to group countries by type.  This resulted in a mix of countries from different regions with highly varying contexts, needs, population size and past experience that made it very difficult to identify global good practices and lessons learned.

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2.1 ENABLING ENVIRONMENT

2.1.5. Key elements in policy frameworks identification

Recommendation: 5. When working in specific enterprise development areas engage in actions such as enacting inclusive reform for Small Water Enterprises (SWE), in order to make them more reliable and compliant with Occupational Safety and Health (OSH) and provide a fair price system for SWE and their customers.

Reference: Sahin, Sila; Prowse, Martin; Wigh, Nadia, 2014, Agriculture and Private Sector: Agriculture and growth evidence paper series, Meta-analysis of evaluations, DFID, London, Collection of studies concerning agricultural reforms and projects in several countries.

Evidence sample: The evaluation is focused on Small Water Enterprises (SWE). In many cities of Africa, Asia and South America, more than half of the population obtain their water services from suppliers other than the official water supply utility. SWEs are private enterprises, usually operated by small scale entrepreneurs (with a maximum of 50, and usually fewer employees) which earn money from the sale of water.

SWEs typically provide water services alternative to, or supplementary to, those provided by water utilities. They usually supply water to places that are unserved or inadequately served by the utility or at times when the utility is not able to provide those services.

In most cities, the situation is changing and there are new opportunities for developing more vigorous and economically efficient SWE systems. Sectoral reforms are providing more opportunities for small, as well as large, private enterprises. Governments are more inclined to recognise the strengths of SWEs. Utilities are being encouraged to work with, rather than against, SWEs.

Provided these lessons can be learnt, one can expect a number of benefits particularly for low‐income neighbourhoods:

• Greater customer convenience, as SWEs become more reliable and accountable.

• Lower prices, as supplies from SWEs increase.

• Reduced burden from water‐related diseases, as hygiene improves.

The utility can also expect to benefit from:

• Less water lost, as SWEs invest in better equipment (and less illegal connections);

• Higher utility revenues, as SWEs become legitimate and reliable paying customers.

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2.1 ENABLING ENVIRONMENT

2.1.6. Improvement of impact of policy frameworks

Recommendation3. Advocate to increase expenditures on research/data collection to inform investments that will affect strengthening of rural enterprise management in subjects such as transport, storage facilities, marketing of farm and non-farm products/services, distribution of seeds, etc.

Reference: Sahin, Sila; Prowse, Martin; Wigh, Nadia, 2014, Agriculture and Private Sector: Agriculture and growth evidence paper series, Meta-analysis of evaluations, DFID, London, Collection of studies concerning agricultural reforms and projects in several countries.

Evidence sample: In an analysis of government expenditure and agricultural data (drawn from IMF, WB and FAO databases) for 43 developing countries (Asia, Africa, Latin America) from 1980 to 1998, Fan et al (2003) found that government agricultural expenditure contributed strongly to agricultural growth. The provision of public goods in the form of roads, irrigation and education all had positive and statistically significant effects. Disaggregating total agricultural expenditure into research and non-research expenditure components, revealed that although both their coefficients are positive, the coefficient for agricultural research is larger in magnitude and more significant, and suggesting that productivity- enhancing expenditures, such as agricultural research investment, have larger output- promoting effects than other forms of public spending on agriculture.

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2.1 ENABLING ENVIRONMENT

2.1.9 Value Chains and adding value to value chain components

Recommendation: 10. Pay attention to key debates of concern in value chain development on contract farming: equity of participants and fairness in quality control of products. Note that contract farming can be seen as a broad umbrella term of inclusive business models where smallholders/value chain producers are engaged and supported by larger firms to produce outputs.

Reference: Sahin, Sila; Prowse, Martin; Wigh, Nadia, 2014, Agriculture and Private Sector: Agriculture and growth evidence paper series, Meta-analysis of evaluations, DFID, London, Collection of studies concerning agricultural reforms and projects in several countries.

Evidence sample: the analysis concluded that contract farming is an important means to include people with limited resources and who live in live in rural areas in economic processes. However, the recent literature on contract farming with smallholders focuses on several key debates:

1) The degree of smallholder participation in contracting schemes.

2) The impact of participation on smallholders’ incomes/welfare. (equity issues)

3) Crops exhibiting high variation in quality, that perish easily, that are hard to grow, or that command a higher price per kilo are more likely to be grown through contract farming. Standard crops that have uniform quality and are not perishable are usually traded in spot markets since the transaction costs are low.

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2.3 DIRECT ACTIONS IN COMMUNITIES

2.3.2 Entrepreneurship: Capacity strengthening on economic activities

Recommendation: 32. Review contract farming as a potential approach for involving smallholders in agroindustry development, increasing employment and improving the inclusiveness of growth. Note that marginal smallholders may find better prospects as wage labourers on larger farms—including in processing of agricultural outputs—instead  of participating in improved supply chains as independent producers. Consider, however, that in some cases there is evidence that contract farming can benefit better-equipped farmers, excluding the poorest ones. Depending on project objectives, this will need to be taken into account and addressed.

Reference: Sahin, Sila; Prowse, Martin; Wigh, Nadia, 2014, Agriculture and Private Sector: Agriculture and growth evidence paper series, Meta-analysis of evaluations, DFID, London, Collection of studies concerning agricultural reforms and projects in several countries.

Evidence sample: Contract farming can be defined as agricultural production carried out according to an agreement between a buyer and farmers, which establishes conditions for the production and marketing of a farm product or products. Typically, the farmer agrees to provide agreed quantities of a specific agricultural product (FAO website). 

The evaluation claims that contract farming can reduce firms’ transaction costs and risks and provide an efficient means of sharing incentives and risks in some sub-sectors. In many developing countries with weak judicial processes and law enforcement institutions this is likely to be limited to circumstances where side-selling is difficult (e.g. where the contracting buyer has a monopoly) or unattractive (e.g. where buyers coordinate to discourage side-selling). In terms of poverty reduction, contracting with smallholders can be beneficial: small farms are owned by the poor, often use local labour, and often spend income nearby.

For firms, contract farming can offer a number of opportunities: increased reliability in supply quantity and quality; greater control over the production process and crop attributes, to meet standards and credence factors; reduced co-ordination costs, as a more regular and stable supply permits greater co-ordination with wider activities; greater flexibility in expanding or reducing production compared to full vertical integration (and economies of scale in procurement of inputs). On a broader note, and especially where access to land is highly politicised, it can overcome land constraints.

Contract farming also offers numerous opportunities for farms: it can allow access to a reliable market; it can provide guaranteed and stable pricing structures; and most importantly, it can provide access to credit, inputs, production and marketing services (seed, fertiliser, training, extension, transport, and even land preparation). On a wider note, contract farming can open doors to new markets for a farm’s produce, stimulate technology and skill transfer (particularly for higher-risk crops, which resource-poor farmers might typically avoid), and it can support farmers in meeting vital standards.

In contrast, additional studies suggest that poorer smallholders are often excluded.

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2.3 DIRECT ACTIONS IN COMMUNITIES

2.3.4. Leadership, life skills, empowerment training, literacy/numeracy

Recommendation: 1. Promote group formation in producer organisations (PO). Smallholders might benefit in terms of overall production, quality assurance, costs, marketing and sharing of information. Nevertheless, attention is strongly needed in relation to POs’ typology and kind of produced commodities. Note that member-based POs that only provide benefits to members are preferable to broader community-based POs.

Reference: Sahin, Sila; Prowse, Martin; Wigh, Nadia, 2014, Agriculture and Private Sector: Agriculture and growth evidence paper series, Meta-analysis of evaluations, DFID, London, Collection of studies concerning agricultural reforms and projects in several countries.

Evidence sample: A World Bank (2013) study found that producer organisations (POs) can reduce transaction costs per farmer and address information and communication blockages although collective action will also incur internal transaction costs within the POs. Smallholder integration into more demanding value chains may be more successful where producer organisations can facilitate training, aggregation and compliance with standards.

POs can also: facilitate higher producer prices by supplying bulk quantities that have some quality assurance; adapt to market conditions more quickly by seeking alternative buyers; negotiate more effectively with prospective firms; and facilitate finance and technology by channelling outside actors to their members. In this respect, such organisations may play a dual role, acting as a bonding mechanism within communities, but also providing an important bridging function with outside actors (such as firms and development agencies).

However, other empirical studies are more sceptical about POs’ utility. Huang and Reardon (2008) fulfilled a research in 8 countries and found that membership of producer organisations was correlated with participation in modern markets in only half of the countries. For the rest the correlation was not significant or was negative.

They also agreed that the type of PO matters: member-based POs that only provide benefits to members is preferable to broader community-based POs.

The type of commodity is also significant. Barrett (2008) highlights how POs have improved smallholder engagement with firms for cash crops, especially dairy and horticulture. On the contrary, there is limited evidence of successful PO intermediation for staple-food crops. Bernard (2010) concludes that poor small farmers are not well-represented in staple-food producer organisations as the costs of membership are prohibitive.

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Alessio Lupi
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18 May 2018

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