Facilitating Smallholder Farmers’ Market Access
In the OIC Member Countries
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and institutional arrangements, or if macroeconomic conditions are unfavorable, opening
up greater space for the private sector does not necessarily translate into greater
investment and benefits for smallholder farmers. Policies intended to prop up traditional
crops or to anticipate emerging winners will likely fail, but policies that build on
comparative advantage and support farmers and investors along the value chain can
provide a framework that promotes adaptation and success for the sector as a whole.
Investments in transport and energy infrastructure are fundamental for improving
access to markets. In addition to investing in new infrastructure and upgrading existing
infrastructure, adequate attention needs to be given to consistent investments to maintain
it. Improvements in logistics are also essential, as they impact the efficiency and reliability
of supply chains.
Telecommunications infrastructure plays an outsized role in modernizing marketing
and widening participation in value chains. Mobile phones make it possible to convey
timely, accurate information on prices, buyer contacts, distribution channels,
specifications for grades and standards, and storage recommendations. Such information
significantly reduces the transaction costs for smallholders. Phones can also be used to
reach smallholder farmers more effectively and improve their access to agricultural
inputs, advice, and a growing range of financial services.
Improving access to finance will go a long way in linking smallholder farmers to
markets. Innovations are needed to permit more flexible forms of agricultural lending
while guaranteeing that borrowers repay. Although many innovations in agricultural
financing already exist, they are not widely known; this paper reviews some promising
innovations.
Governments, the private sector, donors, and non-governmental organizations are
facilitating linkages for smallholders in a number of ways, and the primary lesson
from these efforts is that finding ways to manage transaction costs is a prerequisite
for connecting smallholders to more coordinated supply chains. For governments and
donors, an important means of reducing the transaction costs of linking smallholder
farmers to markets is to facilitate aggregation by helping to form producer organizations,
associations, or cooperatives (or to strengthen existing ones). In addition to producer
organizations, productive alliances, a four-step approach that organizes farmers, links
them to markets, provides technical assistants and provides production investments, can
be effective. Contract farming, which provides farmers with a guaranteed market for
what they produce is another way for small-scale farmers to enter markets from which
they are normally excluded. In some places, women face additional market-entry obstacles
due to societal norms. When this is the case, efforts are needed to ensure that women as
well as men have equal opportunities to benefit from transforming agri-food supply
chains.
A final consideration is that insufficient or uneven investment in rural health and
education places smallholder farmers at a disadvantage in adjusting to rapidly
evolving agri-food markets. The technical skills and knowledge that all farmers,
particularly smallholders, require to participate effectively in modern agri-food value