Dietmar Stoian CATIECeCoEco

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Dietmar StoianCATIE-CeCoEco
Relevance for the poor business organization and
institutional arrangements to raise the share of
the poor in chain income

• International Conference
• "Value Chains for Broad-based Development"
• GTZ, Berlin, May 30-31, 2007

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The problem (1)

• Limited benefit capturing of poor smallholder
  households in existing supply chains
  ? sales in local markets or through
  intermediaries
• Limited access to global value chains, though
  opportunities exist
  ? differentiated
  agricultural or forest products (e.g., organic
  agricultural, fair trade certified, gourmet,
  nostalgic/ethnic, lifestyle and health products
  certified wood and non-wood forest products)
• Series of endogenous and exogenous constraints
  that limit, if not impede, their integration in
  value chains

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The problem (2)

• Endogenous constraints that limit integration
  of poor smallholders in value chains
• limited production volumes
• low quality products
• little value adding
• lack of technical and entrepreneurial
  skills/capacities
• lack of land, labour, capital, electricity,
  communications and storage facilities, processing
  technologies, and transport means
• diversified livelihood strategies potential
  trade-offs for investment in any one business
  activity risk adverse
• limited ability/willingness to pay for effective
  services
• lack of trust relationships with business partners

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The problem (3)

• Exogenous constraints that limit integration
  of poor smallholders in value chains
• lack of enabling political-legal and
  institutional environments for smallholder
  business organization and value chain development
• poor access to market information and effective
  technical, business development and financial
  services
• minimum threshold levels of required skills and
  capacities ? possible barriers to entry

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The problem (4)

• Equity and participation dilemma regarding
  value chain development
• poor smallholders not considered chain
  stakeholders when prime goal of VC development is
  generation of foreign exchange and urban
  employment and income
• top-down vis-à-vis bottom-up approaches
• ? top-down works for urban rather than rural
  settings
• ? bottom-up approaches to rural sector value
  chain development require minimum skills,
  capacities and assets possibly little potential
  for scaling-up

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Supply chain integration of poor smallholders
Third or higher level clients
Second-level clients
First-level clients
Smallholders
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The solution (1)

• Successful value chain integration of poor
  smallholders requires
• Smallholder business organization
  ? economies of scale and addressing
  endogenous constraints
• Institutional arrangements at macro, meso and
  micro levels

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The solution (2)

• Benefits of smallholder business organization
• achieving minimum production volumes demanded
• opportunities for quality grading, product
  development, branding, and other forms of value
  adding
• risk and benefit sharing
• specialization and labour division ? developing
  appropriate technical and entrepreneurial skills
• capital accumulation and opportunities for joint
  investments in personnel, facilities,
  technologies, etc.
• better access to market information and
  technical, business development and financial
  services
• formation of trust relationships with downstream
  stakeholders

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Value chain integration of small-holder business
organizations
Third-tier organization
Second-tier organization
First-tier organization
Smallholders
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The solution (3)

• Institutional arrangements for smallholder
  business development and value chain integration
• good governance central vs. local governments
• involvement of local governments in SME support
  platforms
• risk/benefit and information sharing mechanisms
  among chain stakeholders and with technical,
  business development and financial service
  providers
• agreements among multiple tiers of smallholder
  businesses for economies of scale and value
  adding
• agreements among smallholder businesses and other
  chain stakeholders and input or service providers
• mandatory and voluntary certifications
• public-private partnerships, including joint
  investment schemes and shared market information
  systems

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The solution (4)

• Possible enhancements regarding VC promotion
• outreach of VC promotion through pyramid
  structure of skills and capacity development

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The solution (5)

• Possible enhancements regarding VC promotion
• long-term advantage of value chain integration
  through multi-chain and stepwise approaches
  
• ? minimum threshold levels vary according to
  chain
• ? chain-wise upgrading according to skills and
  capacity development
  
• ? VC promotion from a livelihoods perspective
• effectiveness of capacity building through
  pyramid structure stepwise and multi-chain
  approaches on-the-job training market-based
  service delivery
• structured learning processes research
  accompa-nying VC processes (e.g. participatory
  action research)

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Multi-chain approach from a livelihoods
perspective at household level
Local Market
Regional/ national market
Internatio-nal market
Trade-offs between livelihood realities/ needs
and business realities/needs
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Multi-chain approach from a livelihoods
perspective at territorial level
Local market
Product 1
Product 2
Product 4
Product 3
Regional/ national market
International market
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Key issues and questions

• Combination of approaches (outreach and impact
  monitoring)
• VC development from a livelihoods perspective
• Multi-chain approach from a livelihoods and
  territorial perspective
• Others?
• Enabling institutional environment (outreach,
  race to the top)
• Bilateral vs. multilateral institutional
  arrangements
• Multi-stakeholder platforms public vs. private
  sector
• Clear identification of shared and conflicting
  interests
• Mechanisms for scaling-up and conflict
  management?
• Enabling service environment (capacity building)
  
• Improved technical, business development and
  financial services for smallholder business
  organizations
• Integrated service offer with appropriate
  mechanisms
• Financially self-sufficient service delivery as a
  goal?

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La Ciencia Inútil("Useless Science")Remedios
Varo

• What do we know about business organization
  processes and institutional arrangements that
  increase the share of the poor in chain income?
• What do we think we know?
• What ought we know?

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Challenges

• Enabling political-legal frameworks
• concerted approaches between public and private
  sectors regarding laws and policies conducive to
  VC development
• public-private partnerships for joint investments
• Enabling institutional environment
• multi-stakeholder platforms for VC development
• clear identification of shared and conflicting
  interests
• mechanisms for scaling-up and conflict management
• Enabling service environment
• improved technical, business development and
  financial services for smallholder business
  organizations
• integrated service offer with appropriate
  mechanisms
• financially self-sufficient service delivery as a
  goal