such as producer and trade associations, information networks, marketing facilities, training facilities, and regulatory, standard setting, and certification systems. In most donor programs, institutions are created that strengthen the linkages among traders, processors, transporters, input suppliers, and financial institutions. There are multiple models, but there are, as yet, no firm lessons about which institutions perform best. Top- down planning and bureaucratic processes, however, can pose disincentives for private sector actors to participate.
Pro-poor value chain programs often support community- based processes to strengthen the small-scale producer. Community-based groups, with the engagement of lead farmers and contract agents, are helped to develop joint investment and quality control programs so that they can meet the quantity and quality standards required to participate in the chain.
• Financial space: Poor access to financing is generally a key constraint. Multiple efforts to design value chain financing instruments are under way. These range from product financing, receivables financing, physical asset collateralization, risk-mitigation products, and securitization and guarantee instruments. Value chain financing should be provided by financial institutions that make their decisions on the creditworthiness of the applicant. Provision of financing should not be intermingled with other value chain support measures, but value chain programs are expected to increase the creditworthiness of the applicant and reduce the risk to financial institutions.
• Fiscal space: Grants are often important instruments in donor- supported programs. They provide, for example, support for infrastructure programs, or they support the adoption of new technologies and investment programs. An objective of such grants is to strengthen the financial position of the recipient, so that he or she can qualify for lending by financial institutions. There are few sound evaluations of the effectiveness of such grant programs. It is thus difficult to judge what role grants play in the scaling-up pathway of pro-poor value chains. And grant programs can rarely be scaled up to very large scale as fiscal resources are not available in public budgets to continue grant programs at large scale. Most grant programs are thus unsustainable once donor support for the fund facilities ends.
• Knowledge space: It is particularly difficult to develop measured knowledge in a value chain program. As value chain programs are not static models, monitoring and evaluation criteria need to remain meaningful as changes in scale occur. It is essential to focus monitoring and evaluation on the primary objective of the program. If the program objectives are income improvements for farmers and small processors, monitoring and evaluation systems need to regularly measure the income impacts on these groups. Evaluations conducted so far underline that value chains favor larger farmers with better asset endowment. Small producers tend to be marginalized. Monitoring is required to help include poor producers in the chain or to support other possibilities for employment for marginalized farmers. Price developments should also be carefully monitored, as value chain programs can lead to concentration of market power and reduction in producer prices.
Conclusion
Scaling up of pro-poor value chains poses its own challenges, as chains entail both public and private actors with their differing operating cultures. Moreover, chain actors typically benefit from collaborative structures but also act as competitors. And scale objectives can vary with changing technologies and markets, as each actor attempts to strive for profit maximization. Public sector support thus needs to carefully focus on the critical junctures of the chain, where skill formation, information networks, and joint market systems can strengthen the chain actors. Much of public support needs to focus on farmer groups to ensure that poor farmers do not get squeezed out as the chain matures and reaches scale.
For further reading: T. Altenburg, Donor Approaches to Supporting Pro-Poor Value Chains (Bonn, Germany: German Development Institute, 2006); A. Hartmann and J. Linn, “Scaling Up: A Framework and Lessons for Development Effectiveness from Literature and Practice.” Wolfensohn Center for Development Working Paper 5, Washington, DC: The Brookings Institution, 2008; C. Miller, “Agricultural Value Chain Finance Strategy and Design.” Technical Note, Rome: Food and Agriculture Organization of the United Nations, 2011, particularly Table 2.1 for an overview of drivers; D. Seville, A. Buxton, and B. Vorley, Under What Conditions Are Value Chains Effective Tools for Pro-Poor Development? (London: International Institute for Environment and Sustainable Development, 2011).
Arntraud Hartmann (
arna@hartmann-berlin.net) is an adjunct professor at the Johns Hopkins University School of Advanced International Studies’ Bologna Center and the Hertie School of Governance.
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