Supporting Responsible Investments in Agriculture and Food Systems (RAI)

Inclusive business models

The Challenge

Inclusive business models enable the responsible integration of small-scale producers into markets with the underlying principle that there are mutual benefits for them and the private sector.

Responsible contract farming is one of the business models that can sustainably increase investments in agriculture while also safeguarding the livelihoods and incomes of small-scale producers. However, irresponsible contract farming practices pose numerous risks for both small-scale producers and the private sector. In order to ensure mutual benefits for all, contract farming needs to be supported by relevant policies, regulatory and legal frameworks.

Our Response

  • FAO promotes policy dialogue and capacity development in order to ensure that contract farming is conducted in an inclusive and responsible manner.

The Bigger Picture

Promoting policy dialogue, capacity development and knowledge sharing

In the past three decades, contract farming has gained prominence as an institutional arrangement that has the potential to address some of the challenges confronted by small-scale producers. It often guarantees a reliable market for their produce and, depending on the contractual agreement, can also provide access to inputs, extension services and credit. Evidence shows that under a “favorable environment,” contract farming has the potential to sustainably increase investments in agriculture whilst also safeguarding the livelihoods and incomes of smallholders.

However, there are potential risks associated with contract farming, such as farmer indebtedness and reduced farmer autonomy. In order to ensure that contract farming is conducted in a responsible and mutually beneficial manner , it needs to be supported by relevant policies, regulatory and legal frameworks. FAO is promoting policy dialogue, capacity development and knowledge sharing on responsible contract farming with a view of encouraging the establishment of responsible value chains in-line with the Principles for Responsible Investments in Agriculture and Food Systems (CFS-RAI) and the OECD-FAO Guidance for Responsible Agricultural Supply Chains.   

More specifically, FAO and its partners have organized the following capacity development initiatives:

International symposium and workshops

In October 2019, in collaboration with the International Institute for Sustainable Development (IISD) and with the support of the Asian Farmer’s Association (AFA), FAO co-organized a three-day regional training workshop on the legal and policy aspects of contract farming in Thailand. It was designed for farmers and representatives of farmers’ organizations, with the aim of providing practical, tailored capacity development and training to help participants to better mitigate the risks and catalyze the benefits of contract farming.

In June 2019, in collaboration with IISD, the Eastern African Farmers Federation (EAFF) and the Southern African Confederation of Agricultural Unions (SACAU) FAO co-organized a three-day regional training workshop in Rwanada on capacity development for inclusive business models, with a focus on responsible contract farming.

In November 2018, FAO, the Sam Moyo African Institute for Agrarian Studies (SMAIAS) and IISD organized the International Symposium on Contract Farming and other Inclusive Business Models in Harare, Zimbabwe. The Symposium was attended by more than 120 participants from 17 countries across Africa, Asia, Europe and Latin America, including farmers, private sector companies, researchers, university students, civil society representatives and international organizations.

Symposium participants came up with recommendations for promoting responsible contract farming, which include the need for training on contract negotiation and basic legal issues regarding contracts; promoting and supporting policies that encourage the participation of youth and women in responsible contract farming; and raising awareness about the model agreement for responsible contract farming and promoting its use.

FAO is following up on the recommendations of the International Symposium through concrete actions that include organizing capacity development workshops for small-scale producer organizations, civil society, and the private sector on responsible contract farming (e.g. contract negotiation, model agreement for responsible contract farming). FAO is also publishing briefs/guides on responsible contract farming for a wide range of stakeholders including farmers and policy-makers.

Summer school

In January 2018, FAO and SMAIAS organized a Summer School on “Global Agricultural Value Networks and Contract Farming in the Contemporary Global South” in Harare, Zimbabwe. The Summer School aimed to debate contract farming in the Global South, with a focus on the roles played by governments and producer organizations in ensuring responsible contract farming, and the impact of contract farming on the livelihoods of small-scale producers. The Summer School was attended by more than 50 participants from 20 countries. Participants included university students, senior researchers, representatives of producer organizations and civil society.

International conference on the hazelnut supply chain

In April 2018, FAO and the Consorzio Città dell’Altra Economia (CAE) organized the International Conference on the hazelnut supply chain: Case studies of Italy, Turkey and Georgia in Italy. The conference focused on developing the capacities of small-scale hazel producers from Italy, Georgia and Turkey and their organizations through knowledge and experience sharing on responsible contract farming, CFS-RAI principles and the OECD-FAO Guidance on Responsible Agricultural Supply Chains.