2011-2013
Subtheme 2.3: Institutions and Infrastructure for Market Development (GRP 23)
Centers/ProgramsIFPRI
Target RegionsAsia, CWANA, LAC, SSA
Countries of Planned Research Potential Beneficiary Countries
 
Costa Rica, Ethiopia, Guatemala, Honduras, India, Nicaragua, Peru, Senegal, El Salvador, Tanzania, Uganda, Vietnam, Zambia
 
Costa Rica, Ethiopia, Guatemala, Honduras, India, Nicaragua, Peru, Senegal, El Salvador, Tanzania, Uganda, Vietnam, Zambia
CGIAR Priorities
3A - Increasing income from fruit and vegetables
3B - Income increases from livestock
3C - Enhancing income through increased productivity of fisheries and aquaculture
5B - Making international and domestic markets work for the poor
5C - Rural institutions and their governance
Development Activities - Development Activities
Stand-alone Training - Stand-alone Training
Financing Sources
Members: ADB, Australia, European Commission, FAO, Finland, Japan, Switzerland, United States, World Bank

Non Members: Agence Francaise de Development (AFD), Bill and Melinda Gates Foundation, Center for International Research and Economic Modelling, Coffey International Development, HarvestPlus/CP, Hewlett Foundation, Indian Center for Agricultural Research (ICAR), Institut Nationale de la Recherche Agronomique, Institute for Financial Management and Research (IFMR), Landbouw-Economish Instituut, Michigan State University, Others, Overseas Development Institute (ODI), S.E.VEN Fund Inc., University of Illinois, Unres+Other Sources, Weidemann Associates, World Food Program (WFP)
Project Overview and Rationale

Cultivation by smallholders is the hallmark of agriculture in much of Sub-Saharan Africa, Latin America, and South Asia, where the intensity and density of poverty remains high. In these regions, most of these smallholders practice either subsistence farming or operate largely in local markets due to lack of access to more lucrative markets at provincial, national, or global levels.* Thus, incentives remain weak, investments remain low, and the level of technology adoption and productivity is at a minimum, resulting in a low-level equilibrium poverty trap.

Two instruments appear critical to break this deadlock for the smallholders: one is physical infrastructure—information technology, roads, ports, and so on—which connects smallholders to markets; the other is the role of accompanying institutions that can reduce the marketing risk and transaction costs in the exchange process between producers and consumers. Due to their small production surpluses, smallholders are generally exposed to higher risks and transaction costs, so innovative institutions that link “farms to markets” thereby reducing their transaction costs and minimizing their risk will increase the incentive for smallholders to participate.

The exact nature of infrastructure and institutions that can enable smallholders to transcend subsistence farming and actively participate in provincial, national, and international markets vary across countries and even across regions within countries. This project attempts to develop a framework that captures this heterogeneity, and identify and prioritize the types of institutions and infrastructure that various types of smallholders require to improve market links. Appropriate policies of investment in infrastructure need to be combined with well-functioning market institutions to take advantage of market opportunities that will sustain increased agricultural output and raise rural incomes.

Goals and Objectives

This project provides strategic inputs to strengthen the institutional and infrastructure base necessary to respond to the heterogeneity among smallholders and to support their competitiveness in rural areas both in the production and in the marketing of their products. It also aims to improve knowledge on the impact of complementary investment in rural institutions that can reduce the marketing risk and transaction costs (such as land titling, credit markets, contract farming, vertically integrated schemes, market information systems, commercial rules and laws, commodity exchanges, warehouse receipt systems, and producer and trader associations on economic coordination) and infrastructure—in terms of capital-intensive infrastructure (roads, electricity, potable water and drainage, water for irrigation, and telecommunications) and post-harvest technologies (storage services, processing infrastructure, and so on)—on market development and poverty reduction.

The specific objectives of this project are:
(a) identifying the bottlenecks (physical or institutional) and constraints faced by small farmers in developing countries in their attempts to raise income through agricultural commercialization;
(b) analyzing alternative policies, regulations, investments (public, private or mixed), and institutional arrangements that alleviate the identified bottlenecks and constraints;
(c) improving the knowledge on impact of complementary investments in rural infrastructure and institutions that allow small farmers to participate in agricultural markets, particularly markets for high-value agricultural commodities; and
(d) strengthening the capacity of policymakers and researchers in targeted countries to undertake policy research concerning the role of marketing policies, institutions, and investments in raising the incomes of small farmers and other poor households.

____________
* In South Asia, out of 125 million farm holdings, more than 80 percent have an average size of 0.6 hectare, and farmers with less than 2 hectares account for 40 percent of total foodgrain production according to IFPRI findings. In Sub-Saharan Africa, more than two-thirds of the holdings have an average size of less than one hectare and account for over 90 percent of agricultural output. In Latin America, the FAO estimated that the largest 7 percent of landholdings in the region (those above 100 hectares) accounted for 77 percent of the land, while the smallest 60 percent had only 4 percent of the land.

Project Outputs
Output Title
1: Improve understanding of the heterogeneous demands of smallholders for infrastructure and institutions, and the importance of their complementarities in the development of rural markets (three years).
Output Description
The exact nature of infrastructure and institutions that can enable the smallholders transcend from subsistence farming of a village economy to actively participate in provincial, national and international markets, would vary from country to country and even from region to region within a country. This research project tries to develop a framework that can capture this heterogeneity and therefore identify and prioritize the types of institutions and infrastructure that each different type of smallholder requires to better link to the markets. The objective is therefore to collect geo-referenced data for geographic areas at the most disaggregated scale possible in the developing countries we will be working. This data will consist of indicators on geography, poverty and inequality, production, access to infrastructure, access to markets, nearness to regional urban centers, off-farm employment opportunities, population density and presence of institutions. This information will be analyzed using factor, cluster, and regression analysis, and stochastic production frontier techniques to develop a typology of rural areas and rural households that captures the heterogeneity of smallholders.
CGIAR Priorities
5B, 5C, 5D
Countries of Planned Research
Costa Rica, Guatemala, Honduras, Nicaragua, Peru, El Salvador, Tanzania
Intended Users
Governments at the national and the local level, researchers, donor organizations, development planners, and policymakers.
Outcome
Governments, policymakers and development agencies pay greater attention to the heterogeneity of demands for infrastructure and their complementarities; researchers use results on heterogeneity and complementarities in infrastructure investments to guide future research.
Impact
Increased research and policy focus on heterogeneity of demand of infrastructure and institutions to increase the economic benefits from investment in infrastructure. Increased research and policy focus on the importance of coordination in investments and institutions in order to maximize the impact of investments in public infrastructure and institutions leading to better linkages between smallholders and poor households to markets and the subsequent poverty reduction. "

Output Target
Year Target Type Target Description
2010
Practices
Conceptual framework developed for learning lessons of study countries (Tanzania and Peru) and comparison with other countries undertaken.
2010
Practices
Development of the methodology as an international public good to capture the heterogeneity of smallholder’s infrastructure and institutional needs in Tanzania.
2011
Practices
A scaling up framework developed to capture the heterogeneity of smallholder’s institutional and infrastructural needs for Andean Countries and 2 Sub-Saharan African countries.
2012
Practices
A scaling up framework developed to capture the heterogeneity of smallholder’s institutional and infrastructural needs for 2 additional Sub-Saharan Africa countries.

Output Title
2: Improved understanding of the complexity and diversity of institutional arrangements for facilitating market exchange necessary to improve the competitiveness of small farmers through better links with markets of exchange; examples include land titling and the enforcement of property rights; contract farming, vertically integrated schemes, market information systems, commercial rules and laws, commodity exchanges, and producer and trade associations on economic coordination (three years).
Output Description
Institutions play five potential roles in strengthening markets for commodities produced, bought, and sold by smallholders: reducing transaction costs; managing risk; building social capital; enabling collective action; and redressing missing markets. This output concentrates in three institutional designs: (i) property rights through land titling; (ii) vertical coordination, specifically contract farming; and (iii) horizontal coordination by strengthening the rural produce associations. Therefore, we will concentrate in identifying which are the main bottlenecks in the micro regions under study and if these problems are or could be solved through any of the market institutions previously described.
CGIAR Priorities
5B, 5C, 5D
Countries of Planned Research
Peru, Senegal, Tanzania, Uganda, Vietnam, Zambia
Intended Users
Researchers, international organizations, and policymakers involved in rural development strategies.
Outcome
Policymakers and development agencies recognize potential and the need to facilitate to smallholders market exchange through economic coordination and enforcement of property rights.
Impact
More appropriate use of institutional arrangements for economic coordination and enforcement of property rights for facilitating market exchange of smallholders better linking them to markets and the subsequent poverty reduction."

Output Target
Year Target Type Target Description
2010
Practices
Results from testing and validating three innovative contract structures to solve the major bottlenecks faced by smallholders to be included in contract farming arrangements (Peru, Tanzania, Vietnam).The contracts will be applied in several rural communities selected through a typology of micro regions that will serve as a scaling up device of the results of the project.
2011
Capacity
Identify specific interventions that can improve Rural Producer Organizations' (RPOs) capacities by examining ways to affect RPOs’ performance on input and output markets, through enhanced commitment of members by (i) improved coordination of members via institutionalization of better leadership capacity, and (ii) improved compliance of members via better incentive alignments reached through the provision of complementary activities such as insurance and/or credit. We will implement this initially in Senegal, Uganda, and Zambia.
2012
Capacity
Synthesis and guidelines of interventions that can improve Rural Producer Organizations (RPOs’) capacities by examining ways to affect RPOs’ performance on input and output markets.

Output Title
3: Identification of best practices in the provision of rural infrastructure and institutions to better link smallholders to markets (three years).
Output Description
This output will develop a detailed analysis, review, and testing of what we consider to be the best practices in the provision of rural infrastructure and institutions. After reviewing several experiences in developing countries, those cases that are considered the most successful in linking smallholders to markets in a sustainable manner will be selected and clearly documented with its respective impact evaluation. An important fact that has been found is that not all recipes are suitable for all countries and the potential best practice to a large extent depends on the institutional framework existing in each country. Countries with sound regulatory institutions and legal frameworks can adopt some solutions that will be out of reach for countries with weak institutions. However, there could be institutional designs that could be adequate to reduce the access gap of infrastructure and institutions while simultaneously developing the legal and regulatory framework needed to advance different strategies.
CGIAR Priorities
5B, 5C, 5D
Countries of Planned Research
Costa Rica, Ethiopia, Guatemala, Honduras, India, Nicaragua, Peru, El Salvador, Tanzania
Intended Users
Policymakers, local governments, and development practitioners.
Outcome
Development practitioners and policymakers use results to design better solutions to solve their specific bottlenecks in rural infrastructure and institutions such as alternative institutional design to provide telephones, electricity, roads, and water in poor rural areas.
Impact
More appropriate access to infrastructure and institutions allows improved linkages to markets for smallholders and the poor households with the subsequent reduction of poverty."

Output Target
Year Target Type Target Description
2010
Other kinds of knowledge
New knowledge generated describing the design and implementation of pilot projects that test existing best practices and new solutions in the provision of rural infrastructure and institutions to better link smallholders to markets in Peru, Ethiopia, and Tanzania.
2010
Practices
Web-based toolbox, a systematic database, of national and international best practices developed.
2011
Policy strategies
Impact evaluation framework developed and an impact evaluation laboratory implemented for interventions in infrastructure and institutions.
2012
Practices
Impact evaluation manual developed for interventions in infrastructure and institutions.

Output Title
4: Design strategies of rural development to foster institutional innovations, enhance infrastructure investments, and provide institutional arrangements that enhance property rights and enforce economic coordination to override the bottlenecks facing smallholders in linking to markets (three years).
Output Description

This output will integrate the results from Outputs 1-3 into a strategy with the major aim of improving bottom-up policies to foster institutional innovations to enhance infrastructure investments, economic coordination (contract farming, farmer associations, and vertical integration arrangements) and enhance property rights to address bottlenecks facing smallholders to better link them to markets and the subsequent poverty reduction. This strategy will incorporate three dimensions in linking smallholders to markets:

  • the heterogeneity of small farmers and therefore their specific bottlenecks in connecting to markets,
  • the complementarities of investment in rural institutions and infrastructure (capital-intensive and post-harvest technologies) may have in market development and in reducing poverty, and
  • the level of market accessibility.
CGIAR Priorities
5B, 5C, 5D
Countries of Planned Research
Costa Rica, Guatemala, Honduras, Nicaragua, Peru, El Salvador, Tanzania
Intended Users
Policymakers, researchers, and practitioners in Peru, Ecuador, one Central American country, and Tanzania.
Outcome
Researchers and policymakers have access to an integrated strategy to implement the new validated solutions to bottlenecks identified for connecting smallholders and poor households to markets.
Impact
Coordinated rural development strategies that respond to the specific needs of smallholders capturing their heterogeneity and fostering institutional innovations and infrastructure access to better link smallholders to markets and the subsequent poverty reduction."

Output Target
Year Target Type Target Description
2010
Policy strategies
Assessment completed for replicability of the rural strategy developed for Peru, Ecuador, one Central American country and Tanzania and for other developing countries.
2011
Policy strategies
A scaling up framework for rural strategy developed above for Andean countries and 2 Sub-Saharan African countries.
2012
Policy strategies
A scaling up framework for rural strategy developed above for 2 additional Sub-Saharan Africa countries.

Note: Financial Tables, Target Regions, CGIAR Priorities and Financing Sources show aggregated data for more than one MTP project and in particular for: - Subtheme 2.1: Globalization and Markets (GRP 2) - Subtheme 2.2: Participation in High-Value Agricultural Markets (GRP 27) - Subtheme 2.3: Institutions and Infrastructure for Market Development (GRP 23)


Allocation of Member, Non-Member Grants and other sources to projects, 2009-2011
in $millions

Project Member Actual
2009
Estimated
2010
Proposal
2011
Project Total
4.879
5.773
5.657
Theme 2: Globalization, Trade and MarketsMemberADB
0.380
0.385
0.000
Australia
0.210
0.136
1.138
European Commission
0.596
0.000
0.000
FAO
0.000
0.025
0.000
Finland
0.000
0.000
0.282
Japan
0.045
0.000
0.000
Switzerland
0.047
0.140
0.000
United States
0.187
0.733
0.822
World Bank
0.127
0.273
0.009
Non MemberAgence Francaise de Development (AFD)
0.000
0.111
0.000
Bill and Melinda Gates Foundation
0.040
0.633
0.000
Center for International Research and Economic Modelling
0.018
0.079
0.000
Coffey International Development
0.010
0.020
0.000
HarvestPlus/CP
0.000
0.118
0.268
Hewlett Foundation
0.494
0.273
0.000
Indian Center for Agricultural Research (ICAR)
0.012
0.128
0.000
Institut Nationale de la Recherche Agronomique
0.120
0.060
0.371
Institute for Financial Management and Research (IFMR)
0.000
0.080
0.104
Landbouw-Economish Instituut
0.055
0.209
0.341
Michigan State University
0.073
0.162
0.124
Others
0.036
0.219
0.224
Overseas Development Institute (ODI)
0.008
0.000
0.000
S.E.VEN Fund Inc.
0.045
0.011
0.000
University of Illinois
0.018
0.000
0.000
Weidemann Associates
0.063
0.000
0.000
World Food Program (WFP)
0.006
0.000
0.000
Unres+Other SourcesUnres+Other Sources
2.289
1.978
1.974


Allocation of Project Costs to CGIAR Priorities, 2009-2013
in $millions

Project Actual
2009
Estimated
2010
Proposal
2011
Plan 1
2012
Plan 2
2013
Priorities
Theme 2: Globalization, Trade and Markets
Project Total
4.879
5.773
5.657
5.883
6.119
3A
0.917
1.085
1.064
1.106
1.150
3B
0.917
1.085
1.063
1.106
1.150
3C
0.459
0.543
0.532
0.553
0.575
5B
1.769
2.094
2.050
2.133
2.219
5C
0.622
0.735
0.721
0.750
0.780
Development Activities
0.049
0.058
0.057
0.059
0.061
Stand-alone Training
0.146
0.173
0.170
0.176
0.184


Project investment by developing Region, 2009-2013
in $millions

Project Target Regions Actual
2009
Estimated
2010
Proposal
2011
Plan 1
2012
Plan 2
2013
Project Total
4.879
5.773
5.657
5.883
6.119
Theme 2: Globalization, Trade and MarketsAsia
2.428
2.948
3.130
3.255
3.386
CWANA
0.479
0.495
0.253
0.264
0.274
LAC
0.528
0.619
0.587
0.610
0.635
SSA
1.444
1.711
1.687
1.754
1.824