Agricultural value chain development has emerged as a key methodology for driving economic development in many lower-income countries. Multi- and bilateral donors, research institutions, and nongovernmental organizations (NGOs) working in international development (e.g., the United States Agency for International Development [USAID], Institute for Tropical Agriculture, International Labor Organization, Agricultural Cooperative Development International/Volunteers in Overseas Cooperative Assistance, and Catholic Relief Services), employ this methodology as a means to address rural poverty, income inequalities, and food insecurity. Webber and Labaste (2010) and Taglioni and Winkler (2016) defines value chain development as “an effort to strengthen mutually beneficial linkages among firms so that they work together to take advantage of market opportunities.”
Evidence has found that upgrading within value chains can have a significant impact on developing countries: value-added trade contributes nearly 30 percent of gross domestic product (GDP) in developing countries, as opposed to 18 percent in developed (United Nations Conference on Trade and Development [UNCTAD], 2013). If developing agricultural value chains can increase GDP, it is natural to consider ways in which smallholder producers of those agricultural products can also benefit from this wealth generation. Explicitly including smallholder farmers in value chain development (coined as “pro-poor” or “inclusive” value chain development) focuses on developing “positive or desirable change in a value chain to extend or improve productive operations and generate social benefits: poverty reduction, income and employment generation, economic growth, environmental performance, gender equity, and other development goals” (United Nations Industrial Development Organization [UNIDO], 2011). Fernandez-Stark, Bamber, and Gereffi (2012) describe a shift in agricultural products markets through inclusive value chain development, in which small farmers transition from selling products primarily on open or informal markets to competing in a sophisticated, consolidated, and regulated value chain. The authors describe four common barriers to smallholder farmers’ ability to compete in an agricultural value chain: lack of access to markets, lack of or skills and/or training, lack of collaborative networks, and lack of finance. These barriers are often compounded by weak regulatory institutions, poor infrastructure, and a lack of upstream and downstream value chain actors that provide important supplies and services for upgrading.
