Household assets, higher-value markets, and the tackling of rural poverty: Study reveals important link
Although links to specialty and organic coffee markets were promoted as a way to reduce rural poverty in several Central American countries following the coffee crisis, studies show that improved market access does not guarantee a reduction in rural poverty. Donovan and Poole explain, in an article published in Food Policy, that even under relatively favourable market conditions and with considerable external support, improved market links can only help if households hold adequate assets and investments. According to their research, those households that are better-endowed in the first place stand to benefit most from interventions that strengthen value-chains and link smallholders to markets.
During the 1999–2005 coffee crisis, prices paid for green coffee in Central America were so low that producers could not even cover their variable costs of production. Most smallholders reduced investment in coffee, replaced it with other crops, or abandoned it altogether. To improve prospects for smallholders, efforts were made to link them to coffee markets, including those for certified fair-trade and organic coffee. To access these markets, smallholders had to meet stricter quality requirements or obtain access to certification. Subsequent interventions were aimed at improving coffee quality and productivity, facilitating access to certification, strengthening collective enterprises, and promoting diversification out of coffee for regions with less potential.
But did improved access to fair-trade and organic coffee markets actually result in reduced poverty in these areas? Recent studies indicate persistent low yields, relatively high labour requirements, declining prices relative to conventional coffee, and limited capacity of smallholders to intensify coffee systems. In truth, few value chain studies have explicitly documented the impact of improved market access on poverty, gender or the environment. Assessments generally focus on just a few generic impact indicators, thus providing limited understanding of the determinants of household participation and the benefits for different types of households. This also means there is little to guide those who design interventions that seek to help farmers benefit more from links to higher-value markets.
The more consolidated a household’s asset base, the greater is its ability to expand and intensify livelihood activities and thus benefit from links with more demanding markets. The poorest smallholders often have too few assets to effectively participate in projects that work to improve market access. But these insights have not yet been incorporated into the design and assessment of interventions for linking smallholders to higher-value markets. For a deeper and more accurate insight into how smallholders benefit from linkages to higher-value markets, a livelihoods perspective, with special emphasis on households’ assets, must be adopted.
This research undertook such an analysis, studying how variations in households’ assets result into differences in market participation and in outcomes. Specific questions addressed include: Which households are more able to build their asset bases? How are assets built up over time? Which households are best able to invest in new or more intensive market linkages? How did initial asset endowments and subsequent household changes determine smallholders’ participation in high-value export markets? Did access to certified-coffee markets help the poorest?
Asset-building was analysed, for the four-year period between 2005–2006 and 2008–2009, for smallholders in north-central Nicaragua who were linked to certified fair-trade and organic coffee markets through their cooperative Soppexcca. A total of 292 households were studied.
It was found that participation in certified-coffee markets improves access to favourable prices, builds a sustainable and more competitive value chain, and more viable cooperatives. Most households built their asset base and increased their resilience to future shocks. However, it also showed that those with better initial asset endowments gained the most from the interventions and new opportunities accessed through Soppexcca, indicating that those who fall below a certain initial asset endowment may not really benefit from these projects.
This research makes an important contribution to existing literature by exploring:
- how households benefit from new links to markets
- the differences in household participation based on variations in livelihood strategies and initial asset endowments
- and the role of cooperatives and development interventions in creating important linkages between producers and international markets.
Donovan J, Poole N. 2014. Changing asset endowments and smallholder participation in higher value markets: Evidence from certified coffee producers in Nicaragua. Food Policy 44:1-13
Smallholder production systems and markets; boosting the productivity and sustainability of forestry and agroforestry; and increasing incomes in forested areas are all key focuses of the CGIAR Collaborative Research Programme on Trees, Forests and Agroforestry of which the World Agroforestry Centre is a key partner.