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Publication | 2020

Agricultural value chains in development cooperation: analyses and recommendations

The support of agricultural value chains has become an important approach in German and international development cooperation, not only to promote the economic development of a country but also to contribute to poverty reduction and food security by integrating smallholder farmers into value chains. In consequence, this approach can address a number of goals of the Agenda 2030 for sustainable development.

While promoting value chains has great potential to advance sustainable development, it can also have negative effects, particularly for poor and vulnerable population groups. In order for these population groups to be able to benefit from value chain support, they need targeted financial and technical support and bridging assistance. Therefore, the approach should primarily aim at poverty reduction, but also at improving food security, empowering women and sustainable natural resource management. The main challenges of the value chain approach are insufficient access to agricultural inputs, markets and agricultural credits and the lack of entrepreneurial know-how for market-oriented production.

Overall, the INEF research on agricultural value chains shows that their promotion should always start with primary production, as this is the basis for any further added value. However, the land use rights of the population eligible for support, especially women, should be clarified before any investment is made. Another critical point that any support for value chains should take into account is a country's physical infrastructure. It is necessary to connect both primary production and processing to markets.

The integration of smallholder farmers into value chains is particularly viable via primary production. In order to include resource-poor farmers into value chains as well, these should be actively supported at the beginning of the project, among other things through training in market-oriented production. Furthermore, access to financial services and bridging assistance as well as to agricultural inputs is of key importance, especially at the beginning of the growing season, and particularly when market-oriented production is started for the first time. Access to credits can be facilitated by organising in cooperatives. Furthermore, this form of organisation makes it possible to bundle resources and strengthen negotiating power visà-vis buyers. In order to ensure that smallholder farmers can continue to supply themselves with food, especially at the start of operations, a sole focus on cash crops should be avoided and instead healthy staple foods should also be promoted.

To support sustainable production, the support of value chains should always include natural resource management measures. This can increase productivity and, compared to previous practice, at the same time achieve a more ecologically sustainable cultivation of the land. In this context, secured land use rights, especially for women, provide additional incentives for farmers to invest in their fields.

The studies also show that the processing of local agricultural products and commercially harvested products offers income-generating activities especially for women. In this context, locally adapted partial mechanisation is important in order to increase production efficiency without displacing women from further processing