Pro-Poor Value Chain Development - Capacity.org

24
transactions and production processes that occur before a product is brought to
market. Furthermore, there is need to study how these economic agents interact
with a variety of stakeholders that might influence such relations (for instance
policymakers, researchers and service providers).
The main assumption made in applying value chain thinking within the development
sector is that vulnerable actors in developing countries (such as smallholder farmers
and small and medium-sized enterprises) can be both constrained and enabled by
the broader institutional environment and the interplay of economic relations in
which they operate.
The evolution of value chain thinking is not limited to academic circles alone. Its
growing influence has induced a paradigmatic shift in the practice of development
cooperation, and particularly in the design of interventions targeting poor agricultural
producers. Many rural interventions traditionally focused on strengthening the supply
capacities of smallholders without paying attention to markets. In the worst-case
scenario, the resulting productivity improvements contributed to driving down prices,
leaving farmers even worse off. One of the key lessons learnt from decades of often
disappointing results is that any intervention that seeks to enhance the productivity
of smallholder farmers must ensure that there is demand for the commodities
produced.
The adoption of value chain thinking also led to a shift in the general assumption
within development practice that the economic advancement of one actor inevitably
occurs at the cost of other actors. 2 In a recent article in the Harvard Business Review
Porter referred to this as ‘shared value’ or the economic rationale for companies to
forge synergies between company performance and societal needs.
The fine tuning of value chain principles to foster pro-poor development is
characterised by a number of features:
a. A holistic approach that stresses systemic constraints and opportunities derived
from the configuration of market and extra-market relations (networks);
b. The notion that economic development is achieved through joint action by all
relevant actors;
c. Recognition of the private sector as a key engine of growth and a willingness to
strengthen the action of lead firms, particularly with regard to their linkages with
more vulnerable agents in the value chain;
d. A shift in the ‘centre of gravity’ from the creation of supply capacity to the
creation of market linkages and the establishment of business relationships.
Pro-poor value chain development
The core assumption behind ‘pro-poor’ value chain interventions is that vulnerable
upstream agents (such as smallholder farmers) can be ‘pulled’ into specific markets,
and therefore successfully integrated into economic dynamics to which they were
hitherto excluded, or, at best, only participated under very unfavourable conditions.
Practitioners aim to accomplish this through: (i) building and enhancing linkages
between the ‘middle’ of the value chain (processors, traders, exporters and farmers’
organisations) and the market; (ii) strengthening the relationship between the
same ‘middle’ of the value chain and smallholder farmers and, (iii) strengthening
the supply capacity (ability to produce increased volumes of goods or services with
particular attributes) to ensure that these goods and services are produced at a
lower cost and in line with market requirements, increasing overall competiteveness.
A key feature of value chain interventions is thus the recognition that one of the
main causes of poverty traps is inefficient, or missing, linkages between producers
2 BOAM recognised that for value chain development to occur, all actors involved needed to become
successful. This meant that BOAM did not ‘take sides’ by trying to advance smallholder farmers at
the cost of traders and other private sector actors.