What is contract farming

Contract farming can be understood as a firm lending inputs – such as seed, fertilizer, credit or extension – to a farmer in exchange for exclusive purchasing rights over the specified crop. This form of vertical integration is increasing rapidly in Africa and has attracted considerable policy attention and academic debate. 

 

Academic work in the 1980s and 1990s offered a mixed assessment of the extent to which contract farming engaged with and benefited smallholders. However, recent literature offers a more positive interpretation of smallholder participation and benefits. 

 

But there are risks for both firms and farms from contract farming, such that contract farming schemes often encounter high default rates and claims of exploitation from farmers.  CONGENIAL evaluates whether adding gender-specific elements increases the ‘self-enforcement range’ of the contract. That is, the range within which the contract is honoured by all actors leading to repeated exchange, greater trust and a longer-term relationship.

 

Contracts can also be designed to limit the likelihood of default and to reduce claims of exploitation from farmers. This can be achieved through various means: for example, by increasing the length of contracts; offering bonus incentives; using third parties or neutral technology to measure quantity and quality; mutual investment in specific assets; even offering farmers shares in the firm. In essence, these innovations work by increasing the trust and collateral (financial, but also social and reputational) in the relationship.

 

CONGENIAL evaluates whether including wives in contract farming operations increases the self-enforcement range of the contract, and improves the benefits farms, firms and families accrue from the relationship.

To find out more, follow these links:

 

FAO Contract Farming Resource Centre

 

Wikipedia page on contract farming

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