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Topic: |
Collective Action for Smallholder Market Access: improving market access for the rural poor
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| Author(s): |
Helen Markelova, IFPRI (CGIAR), Washington, DC (USA)
Jonathan Hellin, CIMMYT (CGIAR), Mexico City (Mexico)
Ruth Meinzen-Dick, IFPRI (CGIAR), Washington, DC (USA)
Stephan Dohrn, IFPRI (CGIAR), Washington, DC (USA) |
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Background document providing these lessons learned: |
Markelova H.; Hellin J.; Meinzen-Dick R.; Dohrn, S., Collective Action for Smallholder Market Access, in Food Policy, special issue on Collective Action and Market Access for Smallholders, 2008 (forthcoming).
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Further reading: |
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Introduction
There is increasing evidence from both research and practice that one way for smallholders to overcome market imperfections and effectively participate in the market lies in organizing into farmer groups or producer organizations. Acting collectively, smallholders may be in a better position to reduce transaction costs for their market exchanges, obtain the necessary market information, secure access to new technologies, and tap into the high value markets, which would give them an advantage when competing with large farmers and agribusinesses.
This paper is a synthesis of a forthcoming article prepared by CAPRi, which examines the conceptual issues and empirical evidence on the role of collective action institutions in improving market access for the rural poor. The article also aims to identify policies that can facilitate collective action for market access among smallholders as well as the appropriate interventions by public and private sectors, and civil society to stimulate producer organisations; it also examines who is better positioned to pay for such interventions.
Making collective marketing effective
There is clear evidence in literature and practice that collective action can help smallholders reduce barriers to entry into markets by not only lowering the transactions costs of accessing input and output markets, but also by improving their bargaining power vis-à-vis buyers and intermediaries, enabling them to negotiate better prices for their products. The benefits of organizing around marketing activities go beyond monetary gains; such collective action can also fulfill a socio-cultural function if the smallholders are an ethnic minority or the products chosen for commercialization are underutilized, but culturally important species. In addition, it can promote linkages across the market chain and connect producers, processors, and buyers into networks that would be beneficial for all actors.
However, farmer organizations do not usually form spontaneously, but require certain pre-conditions and are often catalyzed by an “outside” agent. In other words, certain interventions must take place to make collective action around marketing activities effective. These interventions include provision of necessary infrastructure, financial service delivery, supportive legal and judicial structures, and access to market information, inputs, and technology. Good governance that ensures legal and credit systems in favor of the poor will undoubtedly increase economic opportunities for smallholders and provide incentives to join with others.
Interventions aiming to promote producer organizations must also consider the development of marketing systems that would give advantage to the smallholders. Innovations in marketing arrangements can transform market relations in their favor by allowing producer organizations to take advantage of new approaches. For example, product transformation through processing and other value-adding activities has proved to be an innovative way to get higher prices.
In addition to creating new demand for the traditional products, another marketing trend adopted by many producer associations is finding new customers. Instead of export companies who often prefer to work with large farmers, smallholder groups can turn to domestic markets, especially to the supermarkets, who are not only growing in number, but also have been increasingly buying agricultural products from smallholder suppliers.
Institutional innovations have been identified as one of the crucial factors needed for increased productivity of a resource (or a commodity in this case). Many of these innovations involve various forms of collective action based on its competitive advantage (e.g. trust among stakeholders, willingness to work together for a common goal), which make the marketing activities of producer groups more effective.
Farmer organisations: who helps and who pays?
Collective action and farmer organizations do have a positive role to play in enhancing farmers’ access to markets. However, i t is clear that some degree of outside assistance, both financial and in capacity-building is required for producer groups to form and operate successfully. Farmer organizations rarely self-organize on a formal as opposed to an informal basis. More often than not an external input is needed to bring about the establishment of a formal farmer organization since a minimal level of formality is needed to supply restaurants or supermarkets, and even more so to export agricultural produce due to food safety and other quality standards required by consumers in both national and international markets. Most cases of successful collective marketing thus emphasize the crucial role of a facilitator or a “development intermediary,” an agent who catalyzes collective action, provides information and technical assistance, and builds the capacity of a group to effectively engage in marketing activities.
The poor are usually unaware of marketing opportunities and, for that matter, of how collective action can help them to overcome certain constraints that they face in reaching markets. Here is where skillful facilitation is needed to develop entrepreneurial and leadership capabilities which are essential for successful collective action.
While the literature is clear about the important role of a facilitator, the consensus breaks when it comes to who is better positioned to take on this role. Many agree that non-governmental organizations (NGOs) may be the best possible facilitator of collective marketing activities (but not necessarily a donor). However, while NGOs have been identified as good facilitating and capacity building partners to producer organizations, the issue of who should financially support the establishment and (at least initially) the functioning of such groups is part of a wider debate about service delivery. The question is critical because major decisions have to be made about the allocation of public and private monies.
In general, the private sector role in supporting farmer groups is related to improving the production and marketing capacities of the groups by enabling them to conform to quality and safety standards and access certification opportunities for their produce to fulfill the requirements of formal markets. Although the private sector might be best placed for such activities, the government must play a vital role in guiding and facilitating this development, ensuring the provision of the “basics” mentioned above and creating an enabling environment for farmer groups to form and operate.
Thus, while NGOs may be well-suited for the role of the catalyzer of collective action for marketing, it falls on the public and private sectors to ensure that there are incentives in place for farmers to organize via policies and programs that allow smallholders to access stable and competitive markets. There is an important and complementary role for both government and private sector in enabling producer groups to deal with various constraints they face in marketing their products.
When dealing with the issues of facilitation and outside intervention, be it by NGOs, public or private sectors, it is important to keep in mind that the groups formed by smallholders should be controlled by the members and adjusted to local conditions to ensure loyalty and sense of ownership. Such local ownership can be promoted through active local participation and through institutional arrangements that are complementary to local conditions, such as available human capabilities and technology.
