Value chain development

A product (or a service) is generally created in a process linking primary producers, input suppliers, buyers, processors, sellers and consumers in a value chain. Value chain analysis and promotion attempts to optimise any given value chain to meet market requirements, by harmonising the value chain actors, improving quality and productivity. This increases the competitiveness of the product against similar products, allows niche markets to be targeted and creates growth and new employment.

Typically the value chain approach involves identifying sub sectors and value chains to be promoted and then analysing and mapping the selected chain or sector. Following this various strategies for improvement may be identified such as upgrading markets or storage, organising producer groups to scale up supplies, linking input suppliers to producers or producers to buyers, identifying value adding activities or technologies which lower costs. How such advice or guidance can be delivered is an issue for policy-makers.

Library Resources

resource title type year resource
Trends in Agricultural Value Chains: Vertical Integration and Industry Consolidation Paper 2018

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Having a deep understanding of AVCs is essential to select and apply the relevant financing instruments. Investors can lend to the strongest chain actor to reduce risks and delegate further internal value chain lending decisions based on its first-hand knowledge of other actors. This paper summarizes the findings of a survey carried out in 2017, interviewing 31 experts from small and large companies operating in the agriculture sector that provided insights on the trends shaping agricultural value chains (AVCs) in emerging markets. It focuses on vertical integration and consolidation, their key drivers and their impact. 

Author Coralie David
Publisher responsAbility Investments AG
Number of Pages 16 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chain Finance
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Financing for SMEs in Sustainable Global Value Chains Report 2017

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Increasing access to financing for small and medium enterprises (SMEs) has been a long-standing G20 priority under the GPFI. Strengthening SMEs in global value chains (GVCs) was highlighted as a G20 goal at the Hangzhou Summit in 2016, where G20 leaders reaffirmed their intention to support the development of SMEs and linkages to GVCs. Under its presidency in 2017, Germany has underscored the importance of SME finance in sustainable GVCs by further aligning this agenda with the G20’s Sustainability Development Goals (SDGs), and by emphasizing the need for companies to adhere to basic labor, social and environmental standards.

This report demonstrates how governments, financial institutions and businesses can work together to support financing models that encourage SMEs to upgrade their production processes to comply with sustainability standards in GVCs.

 

Author Ghada Teima; et al.,
Publisher World Bank Group
Washington, DC
Number of Pages 102 pp.
Primary Language English (en)
Region / Country Global
Keywords value chain development, Small And Medium Enterprises
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Zambia Jobs in Value Chains : Opportunities in Agribusiness Paper 2017 English (en)

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This study analyzes from a jobs perspective two high potential value chains (VCs) in Zambia’s agribusiness sector poultry and aquaculture. With more than 50 percent of workers and over 80 percent of poor Zambians recording themselves in agriculture in the 2010 population census, raising agricultural productivity is a determinant to reduce poverty. Yet small-scale farmers (SSFs) and modern commercial operations in large farms exist in parallel, as SSFs typically use backward production systems with scant capitalization. Zambia’s challenge is to overcome the persistent disconnect between low productivity smallholder agriculture and high productivity modern agribusiness firms. Developing market linkages will enable the agribusiness sector to meet the growing urban demand for food products, while connecting more people to jobs.

Zambia Jobs in Value Chains : Opportunities in Agribusiness  -  English (en)

Author Sudha Bala Kr ishnan and Teresa Peterburs
Publisher World Bank
Washington, DC
Number of Pages 50 pp.
Primary Language English (en)
Region / Country Global, Africa
Zambia
Keywords Agribusiness, value chain development, Agricultural Value Chain
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Guide de l'OCDE et de la FAO pour des filières agricoles responsables Toolkit 2016 French (fr)

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Le Guide OCDE-FAO pour des filières agricoles responsables (le Guide) a été élaboré pour appuyer les entreprises à respecter les standards existants de conduite responsable des entreprises dans les filières agricoles. Ces standards incluent notamment les Principes directeurs de l'OCDE à l'intention des entreprises multinationales, les Principes pour un investissement responsable dans l’agriculture et les systèmes alimentaires et les Directives volontaires pour une gouvernance responsable des régimes fonciers applicables aux terres, aux pêches et aux forêts dans le contexte de la sécurité alimentaire nationale. Respecter ces standards permet aux entreprises de réduire leurs impacts négatifs et de contribuer à un développement durable.

Le présent Guide cible toutes les entreprises intervenant dans les filières agricoles, y compris les entreprises nationales et multinationales, privées et publiques, petites, moyennes et grandes. Il couvre les secteurs amont et aval des filières agricoles, depuis la fourniture d’intrants jusqu’à la production, les traitements post-récolte, la transformation, le transport, la commercialisation, la distribution et la vente des produits agricoles. Le Guide tient compte des domaines de risques suivants propres aux filières agricoles: droits de l’homme, droits du travail, santé et sûreté, sécurité alimentaire et nutrition, droits fonciers et accès aux ressources naturelles, bien-être animal, protection de l’environnement et exploitation durable des ressources naturelles, gouvernance, technologie et innovation. 

Lien vers la publication  -  French (fr)

Author OCDE - FAO
Number of Pages 88
Primary Language French (fr)
Region / Country Global
Keywords Chaînes de valeurs agricoles, Filières agricoles, Responsabilités, Chaines de valeurs responsables
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A Handbook for Value Chain Research Study Guide 2016

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The objective of this Handbook is to assist researchers in formulating and executing value chain research, particularly with a view to framing a policy environment which will assist poor producers and poor countries to participate effectively in the global economy. Aside from this introductory chapter, the main body of the Handbook is divided into three distinct parts, each comprising a number of chapters:

1. Part 1 provides a broad overview, defining value chains, introducing key concepts and discussing the contribution of value chain analysis as an analytical and policy tool.

2. Part 2 is concerned with underlying theoretical constructs in value chain analysis.

3. In Part 3 we lay out a methodology for undertaking value chain research.

The Handbook ends with a concluding chapter which provides some pointers to the policy implications of value chain analysis.

OECD-FAO Guidance for Responsible Agricultural Supply Chains Guideline 2016 English (en)

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This guidance has been developed to help enterprises observe existing standards for responsible business conduct along agricultural supply chains and to mitigate their adverse impacts and contribute to sustainable development. These standards include the OECD Guidelines for Multinational Enterprises, the Principles for Responsible Investment in Agriculture and Food Systems, and the Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security. The Guidance targets all enterprises operating along agricultural supply chains and proposes a model enterprise policy based on good practices; a framework for risk-based due diligence to identify, assess, mitigate and account for how enterprises should address the adverse impacts of their activities; a description of the major risks faced by enterprises and the measures to mitigate these risks; and a guidance for engaging with indigenous peoples.

OECD-FAO Guidance for Responsible Agricultural Supply Chains  -  English (en)

Author FAO-OECD
Publisher FAO, OECD
Number of Pages 84 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chain, Agriculture, Agricultural Value Chains, Agricultural Supply Chain
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Case studies of successful pro-poor value chain models in India Case Study 2015

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Objective of the research 

The objective of the research is to illustrate the successful and diverse pro-poor value chain models operating in India through real case studies. The following criteria were used while selecting the case studies: 

  1. Cases should cover diverse commodities 
  2. Cases should cover successful and diverse pro-poor value chain models 
  3. Cases should cover diverse states in India 

Research methodology 

The identification and analysis of the cases were accomplished using the following three research methodologies: 

  1. Secondary research of variety of literature 
  2. Key informant interviews 
  3. Independent analysis 

Research roadmap 

In the four chapters that follow: Chapter 2 focuses on the aggregation and marketing value chain model in Purnia, Bihar which has been developed under the Jeevika project. Chapter 3 describes the smallholder cooperative poultry value chain model in Kesla, Madhya Pradesh which has been successfully replicated in the other states of Odisha, Jharkhand and Chhattisgarh. Chapter 4 elaborates on the agriculture production cluster linked value chain model in Gumla, Jharkhand which has been recently developed by Pradan. Chapter 5 explains end to end Tasar silk value chain model in Jharkhand, which has been successfully replicated in Bihar, Chhattisgarh and Odisha. 

Développer les chaînes de valeur alimentaires durables – Principes directeurs Book 2015 French (fr)

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Destinée aux décideurs politiques, aux concepteurs de projets et aux acteurs de terrain, la présente publication jette les bases théoriques d’une nouvelle série de manuels de la FAO consacrée au développement de chaînes de valeur alimentaires durables. Elle définit le concept de chaîne de valeur alimentaire durable, présente un paradigme de développement qui intègre les concepts multidimensionnels de durabilité et de valeur ajoutée, met en avant dix principes directeurs et analyse les possibilités offertes par l’approche et ses limites. Ce faisant, le présent manuel défend avec force l’idée qu’il convient de placer le développement de chaînes de valeur alimentaires durables au cœur de toute stratégie de réduction de la pauvreté et de la faim à long terme.

Lien vers le livre  -  French (fr)

Author David Neven - ORGANISATION DES NATIONS UNIES POUR L’ALIMENTATION ET L’AGRICULTURE (FAO)
Publisher FAO
Rome
Number of Pages 106
Primary Language French (fr)
Region / Country Global, Africa, Americas, Asia, Europe, Oceania
Keywords Agricultural Value Chain, Agricultural Value Chain Finance, Sustainable Development, Poverty Reduction, Food Security
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Designing a Value Chain Project Paper 2015

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This brief aims to support effective design using a value chain development approach. Specifically, it provides guidance on how to integrate and apply key principles of the value chain approach at different stages and across various aspects of the design process.

Smallholders and Inclusive Growth in Agricultural Value Chains Paper 2014 English (en)

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This paper investigates inclusive growth in agricultural value chains, with a focus on smallholder participation, upgrading behavior, and outcomes related to agricultural productivity, agricultural profits, and smallholder incomes. The purpose of the paper is to advance understanding of inclusive growth by reviewing empirical evidence from twelve agricultural value chains that have engaged and benefited smallholders. The review of evidence focuses on three central questions:

1. Inclusion: To what extent have smallholders participated in agricultural value chain projects? What are the different types of project outreach to smallholders?

2. Upgrading: Have smallholders been willing and able to add value by upgrading? What kinds of productivity effects have been observed under what conditions?

3. Benefits: Are smallholders able to capture some of the additional value that they create through upgrading? Do smallholders and their households receive income benefits from their participation and upgrading investments?

USAID field paper  -  English (en)

Developing Sustainable Food Value Chains: Guiding Principles Guideline 2014

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Aimed at policy-makers, project designers and field practitioners, this publication defines the concept of a sustainable food value chain, presents a development paradigm that integrates the multidimensional concepts of sustainability and value added, highlights ten guiding principles, and discusses the potential and limitations of the approach. By doing so, this handbook makes a strong case for placing sustainable food value chain development at the heart of any strategy aimed at reducing poverty and hunger in the long run.

Author David Neven
Publisher Food and Agriculture Organization of the United Nations (FAO)
Rome, Italy
Number of Pages 89 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chain, Sustainable Development, Sustainability
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Value Chain Development Brief 2013

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Value Chain Development (VCD) can support pro-poor development and job creation through strengthening enterprises, business relationships, improving market structures and the business en- vironment. It can assist in developing local micro and small enterprises and help in overcoming con- straints such as poor market access and little bar- gaining power. Often these constraints arise out of specific local conditions.

Rebuilding West Africa's Food Potential: Policies and market incentives for smallholder-inclusive food value chains Report 2013 English (en)

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This book offers an in-depth analyses of value chain policies, past and present in West Africa. The book contains a large number of in-depth case studies of food value chains in particular countries, including traditional export commodities (cocoa, cotton), high value exports (mangoes, horticulture) and the most important staple food value chains (oil palm, rice, maize, sorghum and millet and cassava) in the region. It also contains a large number of private and public initiatives, and thematic analyses relating to the role of the private agro-industry and producer organisations and their role as market agents.

Rebuilding West Africa's Food Potential  -  English (en)

Author Aziz Elbehri
Publisher FAO an IFAD
Rome, Italy
Number of Pages 593 pp.
Primary Language English (en)
Region / Country Africa, Eastern and Central Africa, Northern Africa, Southern Africa, Western Africa
Keywords Inclusive Finance, Producer Organizations, Agricultural Value Chains, Agricultural Policies, Investment
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Value Chain Development by the Private Sector in Africa: Lessons learnt and guidance notes Paper 2013

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This publication explains current understanding, experiences and challengesaround inclusive business approaches in Africa. Its specific focus is on the role and responsibilityof the private sector as regards value chain development in the sub-Saharanregion. This publication main learning objectives are: i) to share key lessons learnt by focusing on factors that determine successful value chaindevelopment on the part of the private sector; and also to highlight determinantsthat contribute to unsuccessful projects in this area; ii) to explore and highlight opportunities and challenges for the private sector concerning value chain development; and iii) to capture experiences in ways that generate new insights and perspectives, and inspire innovation in inclusive business approaches and value chain development. Following these objectives, the guidance notes are aimed at helping the private sector in the region in its endeavors toadvance inclusive business approaches.

Author GIZ
Publisher GIZ - Deutsche Gesellschaft für Internationale Gesellschaft (GIZ) GmbH
Germany
Number of Pages 182 pp.
Primary Language English (en)
Region / Country Global
Keywords Value Chain Analysis, Inclusive Finance, Business Development
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Pushing the Poverty Frontiers of Inclusive Value Chain Development Briefing Paper Brief 2012

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The value chain approach aims to achieve economic growth with poverty reduction, but there tends to be a poverty ‘frontier’ beyond which value chain development programs struggle to engage. This briefing paper presents some emerging guidance around how value chain development can explicitly ‘pull’ the very poor into markets in gainful ways. It highlights program design strategies, examples of adapting value chain development principles, the importance of appropriately sequencing program interventions, as well as some key challenges when working with the very poor.

Author Anna Cuny Garloch
Publisher ACDI/VOCA
Number of Pages 4 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chains
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Gender in Value Chains Toolkit 2012 English (en)

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This toolkit intends to motivate and help practitioners in integrating a gender perspective in agricultural value chain development, by providing practical tools for all stages of the value chain intervention. It is the second and  adjusted version of an earlier.

Gender in Value Chains  -  English (en)

Taking a Value Chain Approach towards Local Economic Development and Women’s Economic Empowerment Case Study 2012 English (en)

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This documentation presents the experience of the programme in strengthening the Sericulture value chain in Quy Chau district of Nghe An province in Viet Nam, and shows how strengthening the Sericulture value chain contributed to economic empowerment of women and their negotiation power, increased income and employment opportunities in rural area, and preservation of the environment and local ethnic minority traditions. It zooms in on the Hoa Tien Textile Cooperative, a group of women weavers that belong to the Thai ethnic minority, and illustrates how the women were supported by the programme to achieve improved management and organizational skills of the Cooperative leaders, quality and productivity enhancement through better working conditions, vocational skills training, and technology innovations, improved availability of raw materials, enhanced business and marketing skills, new product and market diversifi cation, and better access to support services. This has contributed to enhanced confidence of women, better acknowledgement and support by male community members, and ultimately, increased income for the Cooperative’s members and improved employment opportunities for female community members.

Case Study  -  English (en)

The quiet revolution in Agrifood Value Chains in Asia - The case of increasing quality in Rice markets iin Bangladesh Paper 2011

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In Bangladesh—one of the poorest countries in Asia, where rice accounts for almost 70 percent of consumers’ caloric intake—the share of the less expensive, low-quality coarse rice is shown to be rapidly decreasing in rice markets and the quality premium for the best-quality rice has been consistently on the rise in the last decades. It thus seems that the role of rice as only a cheap staple food is being redefined. The off-farm share in the final consumer price increases from 27 percent to 35 percent to 48 percent for low-, medium-, and high-quality rice, respectively, and the increasing demand for higher quality is thus seemingly associated with a more important off-farm food sector—in particular, milling, retailing, and branding—as well as a transformed milling industry. 

It is also found out that the labor rewards for and the technical efficiency of growing different rice qualities are not significantly different, and farmers do not benefit directly from consumers’ increased willingness to pay for higher rice quality.

Author Minten, B.; Murshid, K.; Reardon, T.
Publisher International Food Policy Resarch Institute (IFPRI)
Number of Pages 36 pp.
Primary Language English (en)
Region / Country Asia, Southern Asia
Bangladesh
Keywords Agricultural Value Chains, Value Chain Analysis
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A Portfolio Approach to Value Chain Development Programs Report 2011 English (en)

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the USAID paper “A Portfolio Approach to Value Chain Development Programs” shows the applications of the portfolio approach to value chain development, which is a well-known strategy in the finance industry for managing risks. It illustrates the significance of the portfolio approach for selecting value chains, conducting value chain analysis and designing interventions, and for monitoring overall value chain performance.

A Portfolio Approach to Value Chain Development Programs  -  English (en)

Implementation Best Practices for Value Chain Development Projects Report 2010

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A practitioners’ roundtable was held in Washington, D.C. in February 2012. The themes were presented in the forum of the following questions:

  1. What does it mean to be market-driven?
  2. How can projects be designed to respond to dynamic market systems?
  3. What does facilitation really mean during implementation?
  4. How can projects facilitate behavior change?
  5. How can facilitation approaches be taken to scale?

The intention of the practitioners’ roundtable was to further the process of reaching consensus on what constitutes best practice in the implementation of value chain development projects. The proposed best practices are:

  1. Interventions must be market driven
  2. Implementers need flexibility to be able to respond to dynamic markets and context
  3. Implementers should facilitate – rather than drive or replace – the actions of stakeholders
  4. Implementers should catalyze behavior change
  5. Facilitation mush be taken to scale
Quantitative Value Chain Analysis Paper 2010

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This paper analyzes the competitiveness of the country’s key agricultural commodities—tobacco, maize, cotton, and rice—using prices that prevailed in the 2007/08 agricultural season. The paper employs a quantitative value chain methodology to assess the country’s prospects for competitiveness and suggest weak links along the value chain that require attention in order to improve trade competitiveness.

The results indicate that Malawi has some competitive advantage in the production and exportation of tobacco and cotton, and that this mostly derives from its low labor cost advantage. However, the results indicate that based on 2007/08 prices and costs, Malawi does not have competitive edge in maize and rice production for export. As such, Malawi would better pursue an import substitution strategy in these cereals, and perhaps only aim at the export market when regional market opportunities arise. Key factors that underpin Malawi’s narrow competitiveness include the high cost of inorganic fertilizer and other inputs, low productivity, and the higher trader margins and intermediation costs along the value chains. Furthermore, farm gate prices in Malawi are higher than in other countries, and this undercuts its trade competitiveness.

Agro-Food Value Chain Interventions in Asia: A review and analysis of case studies Paper 2010

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This working paper has been set off by UNIDO with the purpose of synthesizing approaches and experiences in value chain development projects in Asia region. It consists of a conceptual review of different forms of value chain development projects emerging from the literature. It then engages in a comparative analysis of six field studies of value chain development projects in Sri Lanka, Vietnam and Indonesia. Finally, the paper synthesizes a number of key issues emerging from both the review and the case studies. The synthesis focuses primarily on the issues of project design and formulation while featuring, to a lesser extent, issues related to other parts of the project cycle such as implementation, monitoring and evaluation. The paper pays particular attention to the peculiarities of developing pro-poor and gender-balanced value chains.

The working paper is part of the results of a project that aims at consolidating methods and tools of value chain analysis in Asia region to develop a guideline for pro-poor value chain development interventions in the agro-food sector. The guideline will provide a simple step-by-step approach to analyzing value chains and designing pro-poor value chain development projects. It will assist practitioners in design and management of value chain development projects as well as public officers at national, regional or local level dealing with agri-business and/or agro-industrial value chain development programmes.

Author L.F. Henriksen Lone Riisgaard Stefano Ponte Frank Hartwich Patrick Kormawa
Publisher UNIDO/IFAD
Number of Pages 60 pp.
Primary Language English (en)
Region / Country Asia, South-eastern Asia, Oceania, Micronesian Region
Indonesia, Sri Lanka, Vietnam
Keywords Agricultural Value Chains, Value Chain Analysis, Value Chain Governance
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Microfinanzas rurales y cadenas de valor Agropecuarias Paper 2010

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El documento plantea el desarrollo de modelos que puedan mejorar las estrategias de las microfinanzas para un desarrollo rural más inclusivo mediante un rol pro-activo por parte de las microfinanzas en la elaboración y la reorganización de las cadenas de valor agrícolas promoviendo la eficiencia, la inclusión social y la justicia de género. Así mismo, argumenta a favor de un enfoque denominado "Finanzas Plus", haciendo énfasis en la necesidad de articular las microfinanzas con los procesos de cambio social y provisión de servicios no financieros complementarios.

Author Bastiaensen, Johan, Marchetti, Peter
Publisher Institute of Development Policy and Management - University of Antwerp
Number of Pages 42
Primary Language Spanish (es)
Region / Country Global
Nicaragua
Keywords inclusión financiera; microfinanzas rurales
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Building Competitiveness in Africa’s Agriculture: A Guide to Value Chain Concepts and Applications Book 2010 English (en)

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Building Competitiveness in Africa’s Agriculture: A Guide to Value Chain Concepts and Applications describes practical implementation approaches and illustrates them with scores of real African agribusiness case studies. Using these examples, the Guide presents a range of concepts, analytical tools, and methodologies centered on the value chain that can be used to design, implement, and evaluate agricultural and agribusiness development initiatives. It stresses principles of market focus, collaboration, information sharing, and innovation. 

 

The Guide begins by examining core concepts and issues related to value chains. A brief literature review then focuses on five topics of particular relevance to African agricultural value chains. These topics address challenges faced by value chain participants and practitioners that resonate through the many cases described in the book.

The core of the book presents methodological tools and approaches that blend important value chain concepts with the topics and with sound business principles. The tools and case studies have been selected for their usefulness in supporting market-driven, private- sector initiatives to improve value chains. The Guide offers 13 implementation approaches, presented within the implementation cycle of a value chain program, followed by descriptions of actual cases. Roughly 60 percent of the examples are from Africa, while the rest come from Europe, Latin America, and Asia.

The Guide offers useful guidance to businesspeople, policy makers, representatives of farmer or trade organizations, and others who are engaged in agro-enterprise and agribusiness development. These readers will learn how to use value chain approaches in ways that can contribute to sound operational decisions, improved market linkage, and better results for enterprise and industry development. 

The Guide  -  English (en)

Author C. Martin Webber and Patrick Labaste
Publisher The World Bank
Number of Pages 204 pp.
Primary Language English (en)
Region / Country Africa, Eastern and Central Africa, Northern Africa, Southern Africa, Western Africa
Keywords Agricultural Value Chains, Competition
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Integrated Financing for Value Chains Technical Note 2009

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This technical guide provides an overview of WOCCU’s recent initiatives to help credit unions finance agricultural production in Peru and Kenya. It highlights best practices in providing value chain finance to increase income among small farmers, promote economic growth and ensure food security.

Author WOCCU
Number of Pages 12 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chains, Credit Unions, Value Chain Finance
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Purchase Order Finance in Bolivia: Innovations in Financing Value Chains Case Study 2009

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Value chain finance is defined as financial products and services that flow to or through a value chain to increase returns on investment and growth and competitiveness of that value chain. The “Innovations in Financing Value Chains” competition was held in December 2008, and two selected winners were honored at an awards ceremony in February 2009. This case study details the methodology and experience of one of the winners, Crimson Capital/Chemonics’ Rural Competitiveness Activity in Bolivia.

This case study comprises four main sections: Section II describes the Bolivian context and rationale for the intervention; Section III outlines Crimson Capital’s methodology; Section IV describes how the approach was implemented in the coffee value chain in the Yungas region of Bolivia; and Section V provides conclusions and lessons learned.

Author United States Agency for International Development
Publisher USAID
Number of Pages 9 pp.
Primary Language English (en)
Region / Country Americas, Central America
Bolivia
Keywords Agricultural Value Chains, Innovation, Agricultural Development, Financial Products
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Three Steps in Value Chain Analysis Article 2009

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Projects go through distinct stages: analysis, strategy development, planning, implementation, and control. This note presents a bird eye’s view on the analytical stage of value chain projects. Three main steps can be distinguished in value chain analysis (VCA). (1) Identify the main functions and types of firms in the value chain; (2) Analyze struc-tural connections, and (3) Analyze dynamics.

SE Asia - Agricultural Value Chain Financing Paper 2009

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A critical input in the business of creating value in these changing agricultural chains is finance. Financial products need to respond also to the changing market requirements. Mechanisms in terms of improving effectiveness of financial products, access and repayment need to be examined. It is within this overall context that the Southeast Asia Regional Conference in Agricultural Value Chain Financing was held in December 12-14 2007 in Kuala Lumpur Malaysia. It was organized by the Food and Agriculture Organization of the United Nations (FAO), and the Asian Productivity Organization (APO).

Lessons Learned from Cases on Value Chain Financing:

  1. Work with lead firms where impact on poverty alleviation is significant
  2. Focus on sustainable, primarily commercial markets
  3. For poverty reduction, support markets or value chains
  4. Use technical assistance to address market requirements and improve repayment rate
  5. Reduce transaction costs and improve efficiency of chain through the use of information and communication technology
  6. Identify market opportunities where small-scale producers have competitive edge
  7. Differentiate products to establish niches in markets
  8. Develop small-scale groups to improve access to credit
  9. Effective chain-wide coordination requires a well-defined direction and function
Author Dr. Larry N. Digal
Number of Pages 111 pp.
Primary Language English (en)
Region / Country Asia, South-eastern Asia
Keywords Agricultural Value Chains, Agricultural Value Chain Finance
Related Resources
Finance in Value Chain Analysis – a synthesis paper Paper 2008

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The objective of this paper is to present a systematic approach to incorporating finance in value chain analysis (VCA). As the lifeblood in the value chain, finance is often one of the critical constraints to economic growth. Understanding the financial structures both within and between firms in the value chain is necessary for the development of upgrading strategies that effectively increase competitiveness. The paper synthesizes some of the more pertinent literature on the topic and adds to this some key insights gained from a recent set of case-studies completed under USAID’s AMAP FSKG project.

This report has two main components. First, the value chain analysis approach is summarized to provide the contextual framework for the report. Second, the set of case-studies developed under the AMAP FSKG projects are summarized and used to support a systematic discussion on the various issues relevant to the analysis of finance in a value chain context. An annex provides a list of recommended key informant questions.

Author USAID
Publisher USAID
Number of Pages 23 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chains, Agribusiness Finance, Case Studies
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Successful Practices in Value Chain Development Report 2008 English (en)

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The purpose of this paper is to articulate successful practices for the implementation of value chain development projects based on JE Austin Associates’ (JAA) practical field experience. Six key principles emerged for successful value chain development project implementation:

1. Base project designs on good market analysis and direct them toward market opportunity

2. Conduct direct industry benchmarking to identify, design and generate stakeholder buy-in

3. Leverage value chain analysis to empower stakeholders to participate in improving their sector competitiveness through sustainable interventions

4.Maximize impact and outreach through the identification and promotion of replicable business models

5. Enlist the financial system as a partner in implementing proposed solutions

6. Ensure that institutions delivering the proposed solutions appear credible to stakeholders

Successful Practices in Value Chain Development  -  English (en)

Incorporating Finance into Value Chain Analysis – Case study: Ataulfo Mango Value Chain in Chiapas, Mexico Case Study 2008

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This case study describes one approach to incorporating analysis of financial aspects of value chains into broader value chain analysis. The document is a companion to the Ataulfo mango value chain analysis1 that the Mexico-based AFIRMA2 project conducted along with the AMAP3 Financial Services Knowledge Generation project, both projects funded by USAID.

Finance is not always part of a solution to the issues that value chains face; access to finance often does not make the top of the list of immediate bottlenecks, as was the case in the Ataulfo chain in Chiapas. However, value chain analyses sometimes treat finance as an afterthought, or as an input at one level of the chain, rather than as an issue that cuts across the chain often with profound (though not always obvious) influence on chain dynamics at various levels. The approach described here examined financial aspects throughout the value chain analysis.

The goal of the case study is to contribute to the growing body of literature on value chain analysis that USAID, its partners, and others are building, by documenting how the AFIRMA project and FSKG incorporated finance into analysis of the Ataulfo mango value chain. The authors hope this case study is useful in informing similar efforts.

The report has five sections including this introduction. The following section describes the approach the team took to address financial aspects within the broader analysis. The third section provides some of the finance-specific approach and findings that may be relevant for other such efforts. The fourth section describes the initiatives that the AFIRMA project is planning, indicating where finance plays a role. The final section offers conclusions and key insights.

Author USAID
Number of Pages 22 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chains, Value Chain Finance, Agricultural Finance, Financial Flows
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Using Value Chain Approaches in Agribusiness and Agriculture in Sub-Saharan Africa Study Guide 2007

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This Guide to value chain approaches provides the user with actionable methods and tools to increase the productivity and performance of sub-Saharan African (SSA) agriculture.

The Guide is intended for use by a number of audiences. Most directly, it provides planners, decision makers, and implementers with practical tools for creating effective value and supply chain development programs. It also provides public and private stakeholders with a common framework for prioritizing decisions on sector and sub-sector competitiveness. Policy makers, business leaders, members of the development community, researchers, and practitioners can use these methods and approaches to promote the development of traditional and non-traditional value chains in sub-Saharan Africa. Using concrete examples, mostly from African countries, this Guide presents, reviews, and systematically illustrates a range of concepts, analytical tools, and methodologies which, in turn, can be used to design, prepare, implement, assess, and evaluate agribusiness development initiatives. It presents and comments on various conceptual, methodological, and practical approaches to improving the competitiveness of agricultural supply and value chains. The Guide stresses the importance of value chain-based approaches and analysis for agro-enterprise and agro-food chain development in SSA.

The Guide first examines core concepts and issues relating to value chains. A brief literature review then focuses on five themes, of particular relevance to African agricultural value chains, which can contribute to effective implementation tools and approaches:

  • Trust and cooperation
  • Governance
  • Market power
  • Innovation and knowledge
  • Focus/intervention points.

This Guide offers 13 value chain implementation tools, presented within the implementation cycle of a value chain program.

  • Designing strategies and business plans—Obtaining and using information
  • Developing robust new businesses
  • Supplying the market—Aligning supply to match market opportunity
  • Reaching the market—Market positioning and market opportunities
  • Improving the business and policy environment
  • Monitoring results in value-chain development

Each tool is followed by descriptions of one or more actual cases. These cases illustrate the tool’s application, and are coupled with embedded mini-cases for additional illumination. Roughly 60 percent of the examples are from Africa; others come from Europe, Latin America, and Asia. 

Author Martin Webber
Publisher The World Bank
Number of Pages 216 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chains, Agribusiness, Agricultural Finance
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Mali Value Chain Finance Study Paper 2007

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This paper is part of a body of work being conducted under the AMAP FS Knowledge Generation Task Orders with Abt, Chemonics, and DAI focused on value chain finance. The overall goal of the value chain finance work is to understand how best to facilitate finance to and within value chains in order to both:

  1. increase the competitiveness of those value chains and
  2. increase the incomes of poor households active within those value chains.

The focus of this paper is work conducted in Mali in March through May of 2007. The basic process followed for the study discussed below was to:

  • identify value chains with the perceived potential to grow and benefit a number of low income households;
  • identify upgrading needed for that growth; and
  • identify financing needed for that upgrading.

Value chain finance is defined as that finance which enables one or more types of upgrading to occur, whether that finance is provided: (1) through and among the value chain actors; (2) from financial institutions to value chain actors; or (3) some combination.

This paper very succinctly summarizes the issues of end markets, upgrading, and finance. The term upgrading refers to improvements in one or more of four different areas, such as: process upgrading, product upgrading, functional upgrading and chain (or channel) upgrading.The type of upgrading needed will determine what, if any, financing is appropriate.

Although, the study was done in Mali the finding can be applied in other countries.

Author USAID
Publisher USAID
Number of Pages 69 pp.
Primary Language English (en)
Region / Country Global, Africa, Western Africa
Mali
Keywords Agricultural Value Chains
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Value Chain Approach to Poverty Reduction: Equtable Growth in Today's Global Economy Article 2007

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This paper provides an overview of the Value Chain Approach as an effective tool for identifying and analyzing the relationships between firms to effectively design donor-sponsored economic growth interventions that reduce poverty by increasing the competitiveness of an industry and the firms within that industry.

Author USAID
Publisher USAID
Number of Pages 4 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chains, Agribusiness Linkages
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Value Chain Finance Role Play Training: Uganda sugar Value Chain, Peru Artichoke Value Chain Document 2007

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Key Learning Objective of the Training Guide: Help participants understand how and why finance is extended within a value chain (direct value chain finance), as well as why financial institutions do or don’t provide credit to the various value chain actors (indirect value chain finance).

Competencies: By the end of the session, participants should be able to:

  • Identify risks and opportunities impacting an agricultural value chain and its access to finance;
  • Distinguish between direct value chain finance and indirect value chain finance in terms of decision making, information and product design;
  • Understand how contracts can facilitate finance and interfirm cooperation.
Author USAID
Number of Pages 55 pp.
Primary Language English (en)
Region / Country Global
Keywords Training Guide, Agricultural Value Chains, Value Chain Finance
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Approaches to linking producers to markets Paper 2007

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Supply chains are changing rapidly, with transactions increasingly based on chains that involve coordinated links between farmers, traders, processors and retailers. It is against this background that organizations working with farmers, such as donors, NGOs and government extension services (“linking organizations”), are seeking to promote farmer welfare by using the "linking farmers to markets" approach, which usually involves organizing farmers into groups to supply identified markets.

This Occasional Paper examines experiences of linking farmers to markets, in order to reach some tentative conclusions regarding success factors. It considers examples of linkages promoted both by linking organizations and by the private sector without external support and then reviews in detail the linkage activities of the former. Emphasis is placed on markets chosen for linkages, on the capacity of the linking organizations, and on the relationship between the private sector, linking organizations and farmers. Mutual trust between all actors in a chain is essential and the paper discusses how such trust can be developed. Linking farmers to new markets invariably involves farmers organizing into formal or informal groups. Experiences with group organization are reviewed, as is the question of finance. Problems faced by farmers in maintaining linkages are examined and sustainability and scaling-up of linkage activities considered.

Broader issues also emerge. Working with farmers will have little impact if the enabling environment that governments provide is inappropriate for development of market linkages. A question that may merit research is whether linking organizations are actually increasing the size of the market or whether they are just replacing one group of farmer suppliers with a new set of “target beneficiaries”. Finally, it needs to be asked whether the limited donor, NGO and government resources would be better channelled towards activities likely to benefit a larger number of farmers.

The paper is aimed at staff of NGOs, both those working at the policy level and in the field; at donor organizations and the projects they support; and at ministry of agriculture policymakers and extension services. It is hoped that it will also prove useful for private sector companies seeking to develop linkages with small farmers.

Author Shepherd, A.W.
Publisher Food and Agriculture Organization of the United Nations (FAO)
Number of Pages 80 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Supply Chain, Market Linkages, Value Chain Analysis
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Analyzing and Financing Value Chains: Cutting Edge Developments in Value Chain Analysis Paper 2007

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Developing rural financial systems has proven to be very challenging in Africa. Many countries have implemented financial sector reforms designed to create viable financial institutions, increase the supply of financial services for unbanked segments of the population, and stimulate competition to reduce the costs of financial services. Considerable progress has been made in some countries in expanding urban microfinance, but progress has been slower in reaching rural areas and especially farmers. There is a widespread perception that there is less agricultural credit available today in most countries, especially for the poor, compared to the situation prior to the financial reforms. Agricultural marketing companies are becoming more important in supplying credit for small farmers, especially for the export crops of cotton, tea and tobacco. Microfinance institutions (MFIs) are beginning to play a role in rural finance, but there is a concern that farmers cannot pay the high interest rates they typically charge for loans. This situation has prompted some countries in Africa and elsewhere to propose the reintroduction of government-owned financial institutions and other measures designed to enhance the supply of financial services in rural areas.

There is a great deal of enthusiasm today for using the value chain approach as an additional tool to tackle the stubborn agricultural finance problem (USAID/ AMAP, 2005). Integrated economic activities are increasingly the norm in the world economy. Integration involves both the financial and non-financial sectors with the objective of facilitating a smooth flow of commodities and services from producers to consumers within clusters of activities or sub-sectors. Value chain analysis is one way of analyzing how these activities are organized and how they can be improved for the benefit of developing countries. In this paper, the author highlights some key features of value chain analysis, provides some examples of agricultural value chains, and suggests how this analysis can help identify interventions to expand financial services to farmers and rural communities. He gives special emphasis to problems of reaching small farmers.

The author concludes that value chain analysis can be important in focusing attention on where financial interventions may have the highest payoff. It can identify where there may be unmet effective demand and where lending costs and risk may be lowest. The next step is for financial institutions to follow up with the more detailed analysis required to design products, develop lending capacity, and generate diversified loan portfolios.

For example, lending to farmers in the value chain requires asking questions such as “what other economic activities does the farmer and the household engage in? What cash inflows and outflows do they produce? What are the sources of income to repay the loan if the value chain crop fails? How much can be prudently lent and how should the loan be structured given the household’s cash flow?” The issue of portfolio risk requires addressing the questions of “what share of the total loan portfolio should be lent to agriculture? What share should be lent to this value chain? How can the lender’s risk be mitigated to deal with the effects of systemic risks such as drought or disease?”

These questions imply that a combination of value chain and financial systems analysis is needed to solve rural and agricultural financial problems. Value chain analysis provides a commodity by commodity approach to learning about current financial arrangements and potential demands for financial products and services. This is a useful starting point for identifying possible interventions. The results of the analysis logically lead to broader questions about how to create systems and institutions that evaluate the credit worthiness of potential clients, and the types, terms and conditions of financial products required to meet the potential demands.

This paper was presented at the 3rd African Microfinance Conference in Kampala, Uganda in August 2007.

Author Meyer, R.
Number of Pages 23 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chains, Agricultural Finance
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Value Chain Governance and Access to Finance: Maize, Sugar Cane and Sunflower Oil in Uganda Paper 2007

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Value chain finance leverages value chain relationships in order to successfully screen clients, monitor their activities, and enforce formal or informal credit contracts. Value chain relationships allow value chain lenders to resolve the same problems that financial institution lenders face: knowing whether the client will be able to repay, and deciding whether the client will be willing to repay.

The value chain governance structure is important in determining how well a finance provider within the value chain can screen and select clients, how well it can monitor their activities, and how effectively it can enforce contracts. Three value chains in Uganda were analyzed to better understand the relationship between governance and value chain finance.

Author Johnston, C.; Meyer, R.; USAID
Number of Pages 69 pp.
Primary Language English (en)
Region / Country Africa, Eastern and Central Africa
Uganda
Keywords Value Chain Finance, Value Chain Governance
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Value Chains and Financial Intermediation: Some Theory and a Case Study about Creditworthiness, Supermarkets and Small Producers in Central America Paper 2007

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Renewed interest in the role of value chains in agricultural credit flows generates questions about the role of governments and donors in promoting rural financial deepening. Is value chain finance a substitute for financial intermediaries or are value chain contractual relationships a trigger for deeper intermediation? The choice of approach will have significant consequences on rural economic growth and the inclusion/exclusion of small farmers from finance and high-value added markets. The research examines whether shallow financial intermediation is a barrier to the participation of small producers in modern value chains, whether the contractual arrangements associated with participation in the chains help in creating and enhancing creditworthiness, and whether these indirect influences of value chains (rather than the traditional interlinked credit contracts) create externalities that broaden the supply of intermediation services.

Preliminary conclusions are based on a new conceptual framework and a case study of small producer suppliers of fresh fruits and vegetables to the procurement centers of a supermarket chain in Central America. Supermarket managers, bank officers, and producers were interviewed in depth in three countries. Direct credit from the chain to the producers has been insignificant, but the explicit or implicit contracts with the supermarket chain have become a strong intangible asset that improves the ability of borrowers to signal and the ability of lenders to recognize creditworthiness. This is strengthened by a set of compatible incentives among the chain, bank, and producers. The paper examines how specific dimensions of contractual arrangements influence various types of credit risk (volume, price, payment for sales, product rejection, consumption smoothing) and thus improve loan transaction conditions. Influences of country environments are identified.

The results have implications for those in charge of promoting credit, value chain, and business development/farmer extension programs. They help identify the role of each approach in improving rural incomes.

Author Gonzalez-Vega, C.; Chalmers, G.; Quiros, R.; Rodriguez-Meza, J.
Number of Pages 65 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chains, Contracts, Creditworthiness
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Growing Export-Oriented Crops in Kenya: An Evaluation of DrumNet Services Paper 2006

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This paper evaluates a program in Kenya that encourages the production of export oriented crops by providing smallholder farmers with credit linked to agricultural extension and marketing services. While over 90 percent of smallholder farmers in all but the arid regions of Kenya produce horticultural products, fewer than 2 percent do so directly for export. The few Kenyan smallholders who have succeeded in producing for the export market have faced a new set of challenges since January 2005 under the EUREPGAP requirements. These requirements are driven by increasing consumer demand for quality and food safety in the UK and continental Europe, and by an increased emphasis on the need for traceability of horticultural production.

Apart from this the lack of information flows among producers, financial institutions, and marketers of agricultural produce is a major problem in Kenya. The lack of means of transportation among smallholders and poor road infrastructure are also factors that prevent markets from functioning properly. DrumNet, a Pride Africa project, tries to overcome the lack of information flows by directly linking commercial banks, smallholder farmers, and retail providers of farm inputs through a cashless microcredit program that encourages the production of export-oriented crops. Its model tries to overcome the constraints to technology adoption that farmers typically face.

To assess the effectiveness of the project, the researchers use an experimental design in which farmer self-help groups are randomly assigned to either a control group, a group receiving all DrumNet services, or a group receiving all services except credit. We find among the services offered by DrumNet, credit is the most important. Since the production of export crops requires a significant investment in capital and inputs, without credit farmers are less likely to plant the suggested crops.

Initially, DrumNet focused on passion fruit, a profitable but challenging crop sold both in export and local markets. The favourable climate and small farms in Kirinyaga favours this fruit crop, and DrumNet farmers have seen strong results. Beginning in 2004, the DrumNet team began to also support the production of two other crops in high demand with Kenyan exporters, French beans and baby corn. These crops have additional advantages over passion fruit — they are less capital intensive, simpler to grow, and have shorter growing periods leading to faster economic returns.

The results of the evaluation show that DrumNet is an effective model for encouraging the production of export-oriented crops. More and more farmers are planting these crops, invest more in inputs and as a result are seeing higher net margins and higher gross prices for their produce. In addition, clients seem satisfied with the institution. A key to profit and long-term sustainability of DrumNet is the volume of farmers, volume of farm produce, and a successful portfolio of credit products. The main challenge in the implementation and expansion is the need to establish a close relationship with farmers through transaction agents while minimizing costs.

Small and Medium Forest Enterprise Development for Poverty Reduction: Opportunities and Challenges in Globalizing Markets Book 2006

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Balancing between poverty alleviation and conservation of biodiversity is not a simple task. Around one billion people living in poverty depend on forest products for all or part of their livelihoods, making them prone to overexploiting the resources. Of these, many live in the tropics, where biodiversity is rich. For these people not to overexploit the resources and protect biodiversity, means must be provided for them to make a living from the resources, but in a sustainable manner. As such, developing small and medium sized forest enterprises that adopt sustainable forest management is a promising option to fighting poverty while also protecting the environment.

To reflect on the critical issues facing the development of these enterprises in the tropics and on how to best support them for the benefit of the rural poor, representatives of the private sector, governmental and non-governmental organizations, development and donor agencies and research centers, will gather in Turrialba, Costa Rica from 23 to 25 May 2006. Jointly organized by FAO and the Tropical Agricultural Research and Higher Education Center (CATIE), the conference will focus on identifying key strategies that would better enable the development of such enterprises so that people who depend on forests for their survival may continue to benefit from the forests as well as conserve biodiversity.

Objectives of the conference:

  1. Develop a common understanding of the actual and potential role of small and medium forest enterprises (SMFE) in poverty reduction strategies and sustainable forest management;
  2. Share lessons learned in SMFE development in Asia, Africa and Latin America with a focus on the critical success factors for developing value chains of forest products which ensures adequate benefit sharing by community-based forest enterprises; and
  3. Identify opportunities to strengthen the political, legal and institutional frameworks, as well as the need to provide technical, business and financial service, aiming at enabling environments for successful SMFE development and related poverty reduction.
Author Various
Number of Pages 79 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chains, Globalization, Poverty Reduction, Forestry-Product Value Chains, Forest Enterprise Development
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Chain empowerment - Supporting African farmers to develop markets Book 2006 English (en)

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This is a book of hope for Africa’s smallholder farmers. It shows how they can earn more from their crops and livestock by taking control over the value chains they are part of – chains that link them with consumers in Africa’s towns and cities, as well as in other countries.

The book describes two basic strategies that groups of farmers can use to improve their incomes: vertical and horizontal integration. Vertical integration means taking on additional activities in the value chain: processing or grading produce, for example. Horizontal integration means becoming more involved in managing the value chain itself – by farmers’ improving their access to and management of information, their knowledge of the market, their control over contracts, or their cooperation with other actors in the chain.

This book contains 19 case studies showing how groups of farmers throughout Africa have adopted one or both of these strategies to improve their incomes. It shows how development organizations have helped them do this – how they have succeeded, and how they have sometimes failed. It shows the need to invest in improving the quality of existing products, developing new products, establishing market linkages, and building farmer organization and capacity.

The book provides numerous insights for those striving to empower smallholder farmers to develop markets. It will be of particular interest to government policymakers and staff involved in agricultural development, non-government organizations, university faculty and students, trainers, evaluators, and donors seeking ways to promote agriculture in Africa and elsewhere in the developing world.

The book is written in easy-to-understand language and is richly illustrated with line drawings.

Chain empowerment - Supporting African farmers to develop markets  -  English (en)

Global value chains in the agrifood sector Paper 2006

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This paper is about agriculture and poverty reduction in the context of globalization. Agricultural growth is central to poverty reduction in rural areas, and one opportunity for such growth lies in increasing exports of agricultural products from poor countries to global markets.

Global agricultural markets have become increasingly complex because of concentration at all points in the value chain and the increasing scope and complexity of food standards, particularly those relating to food safety. Therefore, realizing the potential benefits of agricultural export growth for poverty reduction requires careful analysis of trends in global markets and the policies that will unlock the potential for growth and poverty reduction.

Trends in global agribusiness and their consequences for strategies to eradicate poverty through increasing export growth are analysed in this paper using the GVC perspective. This perspective analyses inter-firm linkages in global agribusiness, placing agricultural production and processing in developing countries in the context of the dynamics of the broader global agribusiness and agrifood systems.

The value chain perspective has highlighted issues of codification of knowledge in value chains, supplier competence, strategies to reduce the costs of governance, power asymmetries, and concentration. These issues are decisively affected by the two major trends in agribusiness value chains, the increasing importance of standards and increasing concentration, subjects of this paper.

The paper is structured around the following six heading:

  1. Agribusiness and poverty
  2. GVC analysis applied to agribusiness
  3. Standards
  4. Concentration in agribusiness value chains
  5. Strategies for decreasing powerlessness in global markets
  6. Making a difference: policy options for agribusiness and poverty reduction
Author Humphrey, J and Memedovic, O
Publisher UNIDO
Number of Pages 68 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chains, Agribusiness, Poverty, Performance Standards
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Globalization and the Small Firm: An Industry Value Chain Approach to Economic Growth and Poverty Reduction Report 2006

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This position paper articulates the overall USAID AMAP BDS Knowledge and Practice strategy. The paper argues that linking the poor to growth opportunities is key to generating sustainable economic growth with poverty reduction. Moreover, in light of intensified global competitive pressures, such efforts must focus on the performance of the whole industry in which small firms participate. This includes the business enabling environment and essential supporting and service markets. It also includes the degree to which vertical and horizontal relationships among industry participants contribute to overall industry competitiveness and impact the millions of small firms upon which many of these industries in developing countries depend.

This paper translates recent research into practical approaches for designing interventions that foster economic growth to reduce poverty. The paper starts with the conceptual and moves toward the project cycle, offering practical guidance to the project designer in selecting industries for intervention, analyzing selected industries, developing a vision for competitiveness, and designing project interventions.

The intended audience for this paper is the broader enterprise community, including both donors and practitioners, and project designers seeking to achieve economic growth and poverty reduction.

This paper presents an approach to intervening in globalized markets aimed at:

  • Improving the competitiveness of micro and small enterprise (MSE)-dominated industries, and
  • Expanding the depth and breadth of benefits to MSEs participating in competitive industries.

This paper is intended to open a dialogue on programs that link economic growth with poverty reduction.

Author Kula, O.; Downing, J.; Field, M.
Publisher USAID
Number of Pages 47 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chains, Globalization
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Private Sector Promotion in Conflict Environments Paper 2006

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In recent years much has been published on the subject of private sector promotion in post-conflict countries. However, very few experiences have been documented with regard to private sector development operations in on-going conflicts. This short paper describes how the Nepal-German Private Sector Promotion Project (PSP) tries to address the ideology-based conflict between the government of Nepal and the Maoist rebels. There may be a number of lessons to be learned for other similar projects in conflicts around the world.

The paper explains how sub-sector or value chain analysis can be used to get a better understanding of an on-going conflict and to design conflict transformation activities for the private sector. The value chain mapping exercise is typically conducted in a workshop with stakeholders and various questions can be addressed, e.g. which actors are affected by the conflict and how are they affected; what kind of risks are they facing; what role do natural resources play in the conflict; what are or can they do to influence the situation. The key to conflict-sensitive, value chain upgrading is dialogue and win-win improvements. The authors describe a project intervention in the hand-knotted carpet sub-sector which shifted from an export performance oriented approach to a conflict sensitive approach. By analysing the impact of the conflict and opportunities to address some of the root causes of the conflict in the value chain, they expect to contribute more to the improvement of people's livelihoods.

The PSP-Project in Nepal also found that a Local Economic Development (LED) approach, including use of a participatory appraisal method to analyse competitive advantages (the PACA tool), is a good way to work in conflict situations. LED enables actors from institutions in a given location (municipalities, local chambers, etc.), as well as national level bodies, to jointly analyse competitiveness of localities and implement actions to stimulate the local economy. It combines business promotion and business location development with regional or urban development planning. The transparent, action-oriented and participatory approaches contribute to crisis prevention and conflict transformation.

The paper is written in a succint manner and contains a number of useful diagrams and checklists to explain the important lessons being derived from the project in Nepal.

Author Hofmann; Bagwitz; Grossmann
Publisher GTZ Nepal
Number of Pages 18 pp.
Primary Language English (en)
Region / Country Global
Nepal
Keywords Value Chain Analysis, Enterprise Development, Economic Development, Conflict Resolution
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Hortifruti in Central America: a case study about the influence of supermarkets on the development and evolution of creditworthiness among small and medium agricultural producers Case Study 2006

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This case study takes a close look at two dimensions of the process of expansion of access to financial services (particularly credit), for small and medium agricultural producers in developing countries, both related to their participation in new types of value chains. The analysis attempts to look past the question of where small farmers now typically turn for the satisfaction of their demands for credit. It focuses, instead, on the several ways that existing or potential value chain relationships can facilitate increased access to a broad range of financial services. In addition, the case study looks at the converse direction of causality; that is, it explores ways in which expanded access to the services from financial intermediation can facilitate increased and improved smallholder participation in such chains.

Author Gonzalez-Vega, C.; Chalmers, G.; Quiros, R.; Rodriguez-Meza, J.;
Publisher USAID
Number of Pages 77 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chains, Financial Markets, Financial Development, Creditworthiness, Rural Credit
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Lessons Learned on MSE Upgrading in Value Chains Paper 2006

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The paper points to economic growth key to reducing poverty more quickly. It notes that one way to link growth and poverty reduction is by promoting the participation of MSEs in growing industries – since MSEs provide income to large numbers of poor people, widespread MSE participation in productive, competitive value chains offers significant opportunities to increase the income of the poor.

The process of responding to market opportunities by innovating and increasing value-added is referred to as “upgrading”. It is suggested that through upgrading, MSEs can enhance the competitiveness of a value-chain, and thus contribute to economic growth. At the same time, the benefit to the MSE is felt through higher returns.

This paper examines how MSE owners respond to the benefits, costs and risks associated with upgrading opportunities. The conditions that promote upgrading opportunities, and MSE owners’ responses to these opportunities, are all interpreted within the context of the value chains in which the firms operate. The paper uses data provided by project documents and reports associated with nine value chains and considers four specific types of upgrading:

  1. Process upgrading – an increase in production efficiency, resulting in either greater output for the same level of inputs or the same level of output from fewer inputs.
  2. Product upgrading – a qualitative improvement that makes the product more desirable to consumers.
  3. Functional upgrading – the entry of a firm into a new, higher value-added level in the value chain.
  4. Channel upgrading – the entry of a firm into a pathway that leads to a new, higher value-added end market in the value chain.

Following the introductory section the paper presents the introductory framework for the analysis of MSE upgrading. This is followed, in section III, with a description of the key features of each of the nine value chains – 6 are related to agriculture and three are related to small-scale production of handmade goods. The main findings from the analysis, in terms of lessons learned about MSE upgrading, are presented in section IV. The final section provides a brief discussion of the implications of the findings for facilitating MSE upgrading and enhancing MSE benefits.

Author Dunn, E, Sebstad, J, Bartzdorff, L and Parsons, H
Publisher USAID
Number of Pages 44 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chains, Financial Markets, Agribusiness Linkages, Enterprise
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Commodity chain analysis: Financial analysis Study Guide 2005

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This module belongs to a set of modules which show how to proceed step by step with commodity chain analysis. The modules are intended for a wide audience, ranging from policy analysts and decision makers, to development practitioners, training institutions, and media. They are of particular relevance to senior and mid level officials and professional officers in ministries of agriculture, livestock, forestry, rural development, and cooperatives, including line departments and training institutes/units. They should also be of interest to senior executives of parastatals, financial institutions and NGOs/CBOs. Suitably adapted, they may also be used as a reader in undergraduate courses in development.

This is the second module and is concerned with the financial analysis of commodity chains. A chain is composed of a series of operations or transformations, which visibly comprises a set of agents and a system of markets (in terms of both physical flows and their monetary equivalents), but also includes the behaviour of the agents as guided by their economic interests. This means that it is important for the analyst to remember from the outset that the chain of a product covers far more ground than simply its channels of commercialization.

The first part of this module explains the principles of financial accounting and introduces the concepts of value added, production-trading accounts and the consolidated accounts of commodity chains. The second part explains how to set up the accounts of individual agents and the consolidated account of the chain. In the third part, the module explains how to conduct a financial analysis of the chain and determine the profitability of activities in a chain.

Other modules in this series include:

  • Constructing the commodity chain functional analysis and flow charts
  • Commodity chain analysis: Impact analysis using market prices
  • Commodity chain analysis: Impact analysis using shadow prices

The modules are complemented by two case studies from Mali. The case studies are linked to spreadsheets in which to conduct the exercises.

Author Tallec F.; Bockel L.
Publisher Food and Agriculture Organization of the United Nations (FAO)
Number of Pages 22 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chains, Financial Systems Analysis, Monitoring And Evaluation
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Value Chain Finance Paper 2005

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This brief note is based on "Value Chains and Their Significance for Addressing the Rural Finance Challenge", microREPORT by Bob Fries and Banu Akin – which can also be downloaded below. It suggests a value chain is the series of actors and activities needed to bring an agricultural product from production to the final consumer. Value chain finance then arises when credit or other financial services flows through the actors along this chain – this may or may not include support from formal financial institutions.

The paper contends that identifying relationships along the value chain, mitigating constraints, exploiting opportunities for value chain finance, and exploring how formal financial institutions can enter the equation can improve the overall effectiveness and efficiency of the value chain. Such interventions, if designed well, can increase the competitiveness of small producers, a range of agricultural and agribusiness enterprises.

This note aims to provide an overview of the nature and potential of value-chain finance, as well as some of the lessons learned in using value-chain finance to promote agricultural sector development.

It begins with discussion on value chains, from both a supply and demand perspective, and how they are financed. Finance is split between direct value chain finance and indirect value chain finance; and the complimentary nature of the two is also considered. The note then profiles some common forms of value-chain finance – trader credit, contract farming/outgrower schemes and warehouse receipt systems – and discusses the advantages and disadvantages of each. The note ends by highlighting the implications for program design, drawing on recent experience using value chain analysis in Mozambique.

Author USAID
Publisher USAID
Number of Pages 6 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chains, Agricultural Value Chain Finance
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Value Chain Analysis for Policy-Makers and Practitioners Guideline 2005

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Value Chain Analysis (VCA) is said here to be an increasingly useful approach to gain a comprehensive view of the various inter-locking stages involved from taking a good or service from the raw material to production and then to the consumer. This paper aims to fill a gap where the insights of VCA could provide useful information for policymakers, at national and local levels, who must take important economic and social decisions, especially in countries who are trying to upgrade their industries. It is targeted specifically toward policymakers and planners at different levels of government, business associations and trade unions and others responsible for developing strategies for enterprise development and local economic development, trying to improve the ability of local enterprises to compete in the global economy.

This guide notes that recent work on local networks and clusters suggests that improving local relationships is critical, highlighting the relationships amongst local enterprises and the relationships between these enterprises and support institutions. The central message being that the density and quality of local relationships matter for competing in global markets. However, the guide points out that the connection between the local enterprises and their global customers are also factors of success. Enterprises are not exporting into an anonymous global market, it notes; often they feed into supply chains that are governed by powerful global actors.

This extensive guide begins with a presentation of the key insights of the value chain approach and the questions it raises about how the global economy is organised and how local enterprises can participate more effectively in it. Section 2 sets out why this new analytical approach is important for policymakers and practitioners. Sections 3 to 8 then tackle specific problems and provide practical ideas about how to address these challenges. These latter sections cover:

  • Customer demand as the driver of change
  • Gaining market access
  • Upgrading local enterprises’ capabilities
  • Improving local employment practices and working conditions
  • Bringing together key stakeholders
  • Drawing donor agencies into a common strategy
Author Schmitz, H (Institute of Development Studies, University of Sussex, England)
Publisher International Labour Organization
Number of Pages 81 pp.
Primary Language English (en)
Region / Country Global
Keywords Value Chain Analysis, Enterprise, Agricultural Supply Chain
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Weaving Micro and Small Enterprises Into Global Value Chains: The Case of Guatemalan Textile Handicrafts Paper 2005

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This study describes the Guatemalan textile handicrafts value chain, the firms that operate in it, and the nature of the relationships between them. It focuses on micro- and small enterprises (MSEs) and examines the relationships these MSEs have with each other and with other firms in the value chain. In addition, this study explores the factors that influence MSE owners’ decisions to upgrade in order to increase their value-added contributions to the value chain. The paper states that through upgrading, MSEs can help to enhance the global competitiveness of the value chain while, at the same time, improving their own opportunities for deriving increased benefits from their participation.

The report represents the results of a qualitative field study conducted in Guatemala in July and August of 2004. The purpose of the field study was to advance an overall research agenda for supporting economic growth with poverty reduction by working within the context of value chains. Within this overall research agenda, the purpose of the study was to collect empirical information within a specific value chain in order to explore a set of hypotheses about the relationships between MSEs and other firms in the value chain and the factors affecting MSE upgrading behaviour.

Following the introduction the paper begins by describing the research approach used in the study, including the set of research hypotheses, the conceptual framework underlying these hypotheses, and the qualitative methods used to collect the data. The next section presents descriptive information about the Guatemalan textile handicrafts value chain and covers the following features:

  • Overview of the structure of the value chain;
  • Characteristics of MSEs participating in the value chain;
  • Opportunities and constraints affecting MSE upgrading;
  • Vertical and horizontal relationships between firms, including a discussion of governance relationships and how global market information is transmitted through the value chain; and
  • The enabling environments and supporting markets for firms in the value chain.

The next section then looks at the findings compared to the hypotheses before the paper moves onto suggesting a number of possible strategies for improving value chain competitiveness and enhancing the benefits to participating MSEs.

The paper concludes with a brief discussion of the implications for future studies, identifying a number of critical areas where research is needed in order to create a more complete picture of the value chain and gain a better understanding of the opportunities and constraints to MSE participation in the Guatemalan textile handicraft value chain.

Author Dunn, E and Villeda, L
Publisher USAID
Number of Pages 60 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chains, Supply Chain, Microenterprises
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Design of strategies to increase the competitiveness of smallholder chains Toolkit 2004

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The International Center for Tropical Agriculture (CIAT) through its Rural Agro-enterprise Development Project has been developing methodologies that aim to respond to the needs of development organizations in the field of Rural Agro-enterprise Development (RAeD). At present, the center has a territorial approach for RAeD composed of four interconnected methodological steps that seek to improve local capacities. The four elements are: (1) formation of local teams for rural agroenterprise development, (2) identification of market opportunities, (3) analysis of chains and the generation of strategies for their improvement, and (4) the design and provision of business development services.

This manual covers the third component of the territorial approach for RAeD: the design of strategies to increase competitiveness. These strategies seek to improve competitiveness of the chain by means of concrete research and development actions identified and implemented in collaboration with chain actors. Through this process, trust and collaborative problem solving is facilitated so that, at the end of the process, the groundwork has been laid to move from a production chain to a value chain.

The manual is divided into 10 modules or chapters with the aim of explaining not only the reasons behind the methodology, but also concrete steps that may prove useful in the field. The modules are:

  1. Territorial Approach for Rural Enterprise Development
  2. Chain Approach: Basic Concepts
  3. Basic Principles of a Strategy to Increase Competitiveness
  4. Selecting a Chain
  5. Market Information and Contacts
  6. Identification of Actors in the Chain
  7. Analysis of the Chain with the Actors
  8. Analysis of Critical Points
  9. Negotiation and Design of the Strategy to Increase Competitiveness
  10. Monitoring the Strategies to Increase Competitiveness: General Guidelines

Each module is further divided into the following sections: guiding questions, conceptual support, appropriate tools, practical examples and a review.

Author Lundy, M.; Gottret, M.V.; Cifuentes, W.; Ostertag, C.F.; Best, R.
Publisher Centro Internacional de Agricultura Tropical – CIAT
Number of Pages 83 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Value Chains, Market Research, Competition
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Agricultural Marketing Companies as Sources of Smallholder Credit in Eastern and Southern Africa Paper 2003

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This study, undertaken by the Eastern and Southern Africa Division of IFAD, arose from their concern that access to production finance among the region’s smallholders is very limited and that the pace of formal rural finance system development will be quite slow in the short term, particularly with regard to production finance. The challenge was to identify alternative systems of finance that enhance the production and income generating capacity of the region’s smallholders.

The report documents what many had already suspected, i.e., that credit under contract farming arrangements is one of the major (indeed, often, the only major) forms of access to production finance among smallholders. Rather more unexpectedly, it concludes that these credits are not necessarily exploitative (although the case of Mozambique suggests that they may be under certain conditions), and that farmers who access them definitely derive concrete benefits. The report findings are based on studies that were carried out in Kenya, Zambia and Mozambique. These studies focused on the agricultural credit operations of marketing and processing companies, looking at their mode of operations, the terms of the credit provided and related commodity prices offered, the characteristics of the provider companies and their clientele, the credit volumes, outreach, and recovery performance, the current role of donors and NGOs, and other key aspects of their operations.

In Kenya, which has a better-developed and more diversified agricultural sector, contract farming and the related company input delivery is more widely practised than in Zambia and Mozambique. Money from agricultural marketing companies was found to be essential in Kenya for the production of many high-value and export crops. The study focuses on the tea industry in Kenya, the country’s leading export crop, with looks at the sugar and tobacco industries on the side. In all these industries, high credit disbursements were found to be standard. In Zambia, a much more limited agricultural environment, the largest company credit schemes were in the cotton sub-sector, with quite restricted interventions in other sectors; in Mozambique, company input credit is principally associated with cotton and tobacco companies operating on government-allocated concessions.

In the increasingly liberalized markets in Africa, there is very little public sector field presence left in the agricultural input or output markets or in the rural sector in general. Thus, to intensify smallholder farming and to increase household incomes, new approaches and partnerships need to be considered and tested, with such partners that have the ability to perform in the roles of the input and credit provider and the produce buyer. In many cases, this will in the future mean working with private processing and marketing companies. This calls for both IFAD and the governments to use creative approaches in programme designs, with adequate room for private sector participation in the implementation process.

Trickle-Down, Trickle-Up or Puddle? Participatory Value Chains Analysis for Pro-Poor Enterprise Development Paper 2003

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The main focus of the paper is on the potential contributions of one modelling and analytical tool in the context of pro-poor enterprise development - value chains analysis used as part of a participatory assessment process. The paper begins by considering pro-poor enterprise development in a globalised world and argues that such development not only has the potential for trickle-down, ensuring that the benefits of economic growth are more equally distributed, but also has the potential for trickle-up and the stimulation of economic growth. It states also that there is increasing consensus that there is no ‘magic bullet’ for pro-poor growth, but instead points to the need for a range of strategies at different levels.

The paper notes that participatory value chain analysis was initially developed for academic research to understand processes of globalisation and industrialisation. In particular researchers are interested in understanding why many of the potential benefits of globalisation fail to reach the very poor, why particular countries and particular types of enterprise find it difficult to enter certain sectors and the macro level policy implications. As well as providing a practical guide to value chains analysis, this paper focuses on the ways in which value chains action can be used as part of a suitable participatory process for strategic learning and ongoing accountability within and between enterprise sectors.

The second section of the paper discusses participatory value chains analysis in more detail and, in particular, considers the underlying principles, key stages, potential users as well as practical guidelines. Within this, the potential for integrating gender analysis is also considered. The final section of the paper then looks at the possibility of moving from participatory analysis to the empowerment process. It notes that despite its shortcomings, the former does have considerable potential as a focus for setting up ongoing structures for accountability and empowerment as part of a participatory and sustainable learning process.

An evaluation of a market entry model for agricultural input supplies in less developed countries Report 2001

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This paper attempts to examine the interactions between the public and private sectors found in agribusiness, specifically the agricultural input supply sub-sector at a worldwide level, by analyzing several programs in sub-Saharan Africa and examining one case-study in Zimbabwe in detail. The problems of marketing agricultural input supplies in less developed countries (LDCs) are well known, e.g. the lack of distribution networks and rural retailers; the lack of affordable finance and a rural banking sector; the lack of product knowledge in the smallholder market and low volume of input sales; high deposit requirements for Letters of Credit and the shortage of foreign exchange; poor rural infrastructure and a poorly organized private sector; and donor programs which interfere with the market.

A development approach known as The Agricultural Inputs Rural Guaranteed Enterprises and Training (TARGET) model is proposed in this paper as a means of addressing some of these problems. It comprises a credit guarantee fund and a retail-oriented, business training component aimed at manufacturers, distributors, wholesalers and retailers of agricultural inputs in LDCs. This idea draws on the writing of Edesess and Polak (1993) who argued that when product development is undertaken by private individuals or corporations because the return on their investment is sufficient to warrant the capital outlay, development programs need not and should not become involved. However, there are situations in which there is an “investment gap” and development assistance is warranted. In the basic TARGET Model, the “investment gap” occurs between the agricultural input suppliers and the rural retailers. It is at this point where the credit guarantee component of the TARGET model performs a critical function. The business development services are usually provided by NGOs.

The AGENT program in Zimbabwe is an example of this model in practice. It involved a partnership between the NGO CARE, local government and the private sector. CARE had the following responsibilities:

  1. Needs Assessment – mapping of potential areas,
  2. Organize orientation sessions with all concerned (e.g. Agritex, DAs, RDCs, communities),
  3. Identify and recruit rural retailers,
  4. Train rural retailers and introduce them to suppliers (wholesalers, seed companies and fertilizer companies),
  5. Provide partial guarantee,
  6. Regularly monitor rural retailers’ repayments and overall performance,
  7. Undertake random & comprehensive audits,
  8. Participate in the review of rural retailers’ performance to determine whether an rural retailer “graduated” to a full direct relationship with supplier.

The local communities/government authorities (e.g. Agritex, DAs, RDCs etc) assisted with identification of potential areas, identification and selection of rural retailers, providing feedback on rural retailers’ progress/performance, and providing advice and technical assistance to rural retailers (e.g. Agritex). The private sector (input suppliers, distributors and manufacturers) assisted with rural retailer selection, participated in training, procured and transported inputs to retailers as per orders, provided partial guarantees, and monitored the retailers’ performance.

The paper also describes the CNFA’s RAISE program in Zimbabwe and compares the methodologies. For example, RAISE has taken a more “hands-off” approach. It has trained and certified trainers to train the rural retailers. The RAISE program then provides a list of trained retailers to the suppliers. The RAISE rural retailers are left on their own to establish contact with the suppliers of their own choosing and apply for credit accounts with credit limits set by the retailer and supplier. The author concludes that the TARGET market entry model shows great potential to change the way public-private sector initiatives work together and he provides a list of recommendations for both businesses and public sector development organisations.

Author Mitchell, M.C.
Number of Pages 37 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Supply Chain, Business Development Services (Bds), Credit Guarantee Scheme
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