Value chain development and rural poverty reduction: Knowledge gaps and a potential role for ICRAF

Value chain development Value chain development

and rural poverty reductionand rural poverty reduction

Knowledge gaps and a potential role for ICRAFKnowledge gaps and a potential role for ICRAF

Staff Seminar SeriesICRAF HQ, Nairobi, Kenya

February 28, 2012

Jason Donovan, Ph.D.Jason Donovan, Ph.D.

ICRAF – Latin AmericaICRAF – Latin America

ContentContent

1) What we know and think we know about the poverty impacts of value chain development

2) Knowledge gaps

3) The “5Capitals” assessment tool

4) Lessons learned in the design of 5Capitals

5) Proposal for ICRAF’s value chain work in CRP2

Note: VCD = value chain development VC = value chain

What we know about VCD and poverty reduction

What we know about VCD and poverty reduction

Beginning in 2000s: proliferation of VCD in response to poverty-related MDGs

VCD is complex, involving various actors with different motives existing assessment tools focus on few basic indicators

Incomplete picture of the VCD impacts: 2007: GTZ conference on value chains 2010: Humphrey & Navas-Alemán

Some reasons for concern: limited poverty reduction in response to non-traditional ag. export programs

What we think we know about VCD and poverty reduction

What we think we know about VCD and poverty reduction

VC framework is necessary, but insufficient for designing interventions that address rural poverty Need for complementary conceptual frameworks

Asset endowments matter: poor households and small enterprises require minimum assets to benefit from VCD

Asset-based approach provides a useful framework for considering poverty (Moser 1998); however, limited application of approach for assessment and design of interventions

Services embedded in the chain are important, but likely insufficient for helping the poorest to meet asset thresholds

External services are also critical: need for range of services at the right time and in the right combination

Knowledge gapsKnowledge gaps

Can smallholders build assets and reduce their vulnerability through participation in VCD?

Can small businesses build their assets and evolve into viable businesses in response to VCD?

How inclusive is VCD? Can the poor meet thresholds?

Do positive and negative feed-back loops exist and what are the related implications for asset building?

Given the diversified livelihoods of rural households, are they able to intensity their participation in VCs?

What is the potential for an asset-based approach to assess VCD, taking into account the tradeoffs between rigor and user friendliness?

“5Capitals” assessment tool “5Capitals” assessment tool

Salient features

Multi-scale and multi-dimensional

Impact pathways, with pre-defined set of expected outcomes

Focus on changes in livelihood assets for understanding poverty impacts

Focus on changes in business assets for understanding business performance impacts

Designed with over 4 years with two interactions of inputs from development practitioners and researchers

Collaboration for tool designCollaboration for tool design

Process

2007: Ford Foundation hired CATIE for reviewing existing knowledge on the poverty impacts of VCD lack of appropriate tools

2007-09: Tool design – Phase 1

2009-11: Tool design – Phase 2 (with ICRAF included as key partner)

2012-?: More rigorous implementation for addressing knowledge gaps and refining tool

Partners

CATIE + CG (ICRAF, CIP, Bioversity) + NGOs + consultants + Ford Foundation

Asset-based approach for assessing VCDAsset-based approach for assessing VCD

Regional and local markets

Product 1

Product 2

International market

Product 3

Contextpolitical – legal – institutional – market – cultural

Remittances Off farm work

Market oriented

agriculture

Subsistance agriculture

Household assets

+

To what extent do diversified rural livelihoods allow for the building of assets in response to VCD?

Enterprise level

interventions

Community 1 Community 2 Community 3

Project 2

Household level

interventions

State agency

Cooperative

Provider of financial services

Buyer 1

Project 1NGO

Farm

ing

hous

ehol

dsS

ME

s (C

oops

,

Ass

ocia

tions

)

Buy

ers

/

proc

esso

rs

Ret

aile

rs

Con

sum

ers

Asset-based VC assessmentAsset-based VC assessment

Changes: Asset endowments

of farming households

Changes:Asset endowments

of upstream enterprises

VCD interventions

Human capital• Knowledge and skills for business

administration • Good manufacturing practices,

including labor safety• Capacities and skills to meet the

service needs of affiliated producers• Inclusiveness of the workforce

Social capital• Intensified asset building through

linkages with affiliated producers • Intensified asset building through

linkages with buyers and service providers

• Influence on enabling conditions through linkages with decision makers

Physical capital• Buildings and other infrastructure• Machinery, equipment, tools

VCD outcome domains Expected VCD impacts

• Better economic performance

• Higher client satisfaction

• Increased social benefits for local communities and society

• Lower environmental impact

• Higher response capacity to new market and policy trends

• Gender equity

Financial capital• Cash flows and debt levels• Working capital• Investment capacity

Enabling conditions• Access to public infrastructure and

services• Access to government programs

• Input provision

• Technical services

• Business services

• Financial services

• Changes in the political-legal and regulatory frameworks

Impact pathway - householdsImpact pathway - households

VCD interventions

Human capital• Knowledge and skills for business

administration • Good manufacturing practices,

including labor safety• Capacities and skills to meet the

service needs of affiliated producers• Inclusiveness of the workforce

Social capital• Intensified asset building through

linkages with affiliated producers • Intensified asset building through

linkages with buyers and service providers

• Influence on enabling conditions through linkages with decision makers

Physical capital• Buildings and other infrastructure• Machinery, equipment, tools

VCD outcome domains Expected VCD impacts

• Better economic performance

• Higher client satisfaction

• Increased social benefits for local communities and society

• Lower environmental impact

• Higher response capacity to new market and policy trends

• Gender equity

Financial capital• Cash flows and debt levels• Working capital• Investment capacity

Enabling conditions• Access to public infrastructure and

services• Access to government programs

• Input provision

• Technical services

• Business services

• Financial services

• Changes in the political-legal and regulatory frameworks

Impact pathway - small businessesImpact pathway - small businesses

Case studies – Phase 1Case studies – Phase 1

Partner Chain Country

Bioversity International Organic banana Bolivia

CRS Plantain El Salvador

CATIE & LWR Certified coffee Nicaragua

CATIE & Technoserve Taro root Nicaragua

University of Plymouth& Swisscontact

Dairy Sri Lanka

MEDA Handicraft Pakistán

M. Harper & R. Roy Frozen shrimp India

EDA Honey India

LWR Basic grains Burkina Faso

KIT & BioRe Organic cotton Tanzania

KIT & FAIDA-MaLi Allan Blackia nut Tanzania

Case studies – Phase 2Case studies – Phase 2

Partner Chain Country

AIACA Handicrafts India

CEDO Bean seeds Uganda

Bioversity International Platain Dominican Republic

R. Roy & M. Harper Chicken India

Aimee Russillo &Winrock-Wallace Center

Organic produce USA

Intercooperation Beans Ecuador

Technoserve Coffee Colombia

Swisscontact Dairy Bolivia

Technoserve Fresh horticulture Colombia

Farm ConcernInternational, KARI

African vegetables Kenia

MEDA Fresh horticulture Afghanistan

Lessons learned in case studiesLessons learned in case studies Asset-based approaches are powerful tools to design and

assess value chain interventions

…but they require systems thinking, critical analysis and willingness to dig deeper

The middle ground between rigor and ease-of- implementation continues to be elusive

Lighter tools as possible entry point but no substitute for full-fledged impact assessment

Complementary tools needed to determine impact at other levels (e.g., intra-household, community)

Attitude matters: 5Captials is useful only when applied by those with a commitment to poverty reduction; openness to mutual learning; and willingness to admit failures

Lessons learned in case studiesLessons learned in case studies To effectively build assets in response to VCD,

households need a minimum level of asset endowments

For those above the asset threshold, VCD has greater potential to stimulate asset building and related positive feedback loops (“VCD ready")

For those below the asset threshold, VCD alone has limited impacts of asset building – thus the need for development interventions that are not market-based

The high-risk, high-cost context in which the enterprises and households operates implies long and winding pathways for asset building

Despite the growing recognition of multi-dimensional poverty concepts, integrated attempts to reduce poverty through VCD have yet to emerge

Some outputs to dateSome outputs to date

Methodologies/tools (CRP 6.1)Donovan & Stoian, with contributions from Thiele, Ratner & Katerberg (2012) 5Captials: A tool for assessing the poverty impact of value chain development. Donovan & Stoian (Eds.) (2012) Does Value Chain Development Reduce Poverty? A Case-Study Companion to the 5Captials Assessment Tool.

Peer-reviewed publicationsStoian et al (2012) VCD for Rural Poverty Reduction: A Reality Check and a Warning. ED&M. Donovan & Poole (2012) Asset Building in Response to VCD: Lessons from Taro Producers in Nicaragua. IJAS. Garming et al. (2011) Farmers' Community Enterprise for Marketing Organic Bananas from Alto Beni, Bolivia. ED&M Katerberg et al. (2011) Evaluating Value Chain Impact Using a Sustainable Livelihoods : Study Horticulture in Afghanistan. ED&M

What we still don’t knowWhat we still don’t know How can VCD interventions better respond to different

contexts and rural populations with different asset endowments?

Under what circumstances can positive feedback loops be achieved through VCD? (and can negative ones be avoided?)

How effective are collective enterprises in helping to build the assets of their member households?

What are the options for building synergies between VCD interventions and other types of interventions by the private and public sector? (joint investments?)

The potential for 5Captials to improve the design of VCD interventions (ex-ante assessment)

ICRAF in CRP 2.2 (Linking small producers to markets)

ICRAF in CRP 2.2 (Linking small producers to markets)

Development opportunity: Increased contribution of the production and marketing of underutilized fruits for strengthening rural livelihoods; combined with increased demand for fruits/veggies in South

Development problem: Major barriers on the supply and demand side

Potential solution: value chain development, combined with more enabling business environment, related to the production and marketing of underutilized fruits

Potential role for ICRAF: ex-ante assessment of VCD options using the 5Captials tool

ICRAF in CRP 2.2 (Linking small producers to markets)

ICRAF in CRP 2.2 (Linking small producers to markets)

General objective: identify effective options for building viable, pro-poor value chains for underutilized fruits (UUF) in Peru, Cameroon, and Kenya

Specific objectivesIdentify the potential of small-scale enterprises that buy and process UUF to benefit from VCDIdentify the potential of smallholders that produce UUF to participate in and benefit from VCDGenerate new insights for improving the design of VCD interventions and on the design of 5Captials

ICRAF in CRP 2.2 (Linking small producers to markets)

ICRAF in CRP 2.2 (Linking small producers to markets)

Implementation period2012-2015

Key activities:Stage 1: Analysis of value chain contextState 2: Ex-ante assessment of 2 existing or potential value chains using 5Captials

Data collection methods:Household surveysKey informant interviews, review of secondary information, focus groups

Key ICRAF staff:Jason D., Amos G., Judith O. Steve F., and N.N.