Closing the Living Income Gap of Smallholder Farmers of Cocoa in Côte d’Ivoire and Rubber in Indonesia
The impact of public and private interventions aimed at increasing the income of smallholder farmers in many countries in the South has been largely insufficient. Today, for example, cocoa farmers in Côte d’Ivoire and rubber farmers in the Kapuas Hulu district of Indonesia do not earn a decent standard of living. In research for GIZ, Aidenvironment provided guidance on which general strategies can be implemented to improve current farm incomes to a level needed for a decent living with a specific focus on the cocoa sector in Côte d’Ivoire and rubber in the Kapuas Hulu district of Indonesia.
The research findings identified six key pathways that, holistically, could close the living income gap of smallholder farmers:
- Viable farming systems
The basis of any living income strategy should be the promotion of viable farming systems in terms of profitability (e.g. intensification and rehabilitation) and resilience (e.g. crop diversification). A viable farm requires a viable farm size, which is promoted by agricultural policy and investment strategies.
- Integration with landscape management and community development
Landscape management (e.g. land use zoning, PES) and community development (e.g. education, healthcare, and infrastructure) can be important complementary strategies to create the enabling environment for farm performance.
- Effective service delivery models
Cost-efficient, economically-viable, and scalable service delivery models need to be developed and strengthened, whether through producer organizations, the public sector or specialized service providers. These models should consider farmers as clients and monitor their satisfaction. Services need to be tailored to a farmer’s need as well as be designed to look at the whole farming system and households needs in order to promote farmer resilience.
- Fair and inclusive value chains
Direct trading relationships enable farmers to capture more value through direct incentives by downstream companies for quality and sustainability. Stable trading relationships provide farmers with predictability that allows for farm investment and service provision by the supply chain. Fair trading relationships relates to transparency and fair pricing models that include minimum prices, flexible premiums and cost-plus pricing. This could be complemented with favorable terms like pre-finance, quick payments, and price insurance.
All of these strategies would benefit from fully traceable and exclusive supply chains, which disincentivizes overproduction and allows for direct premium payments.
- Market management and integrated development policies
Governments have a large toolbox they can use to influence markets, both directly and indirectly, while considering the short- and long-term effects on supply and the competitiveness of its sector. Supply management can entail a combination of land use planning, production or export quota, buffer stock management, price incentives, the promotion of crop diversification, dissemination of market intelligence, as well as promoting non-farm income opportunities. Alternatively, governments can support demand by, for example, promoting the creation of higher value processing industry.
It is important to integrate crop-specific policies in the wider agricultural and rural development policies, including regulation related to land tenure and employment creation. Policies will need to be complemented with investments in research and subsidized service provision. Therefore, governments will need to generate the revenues to re-invest in the sector.
- Sector coordination
Collaboration and alignment by different stakeholders are keys to success beyond the scope of individual supply chain projects. The creation of a sector platform with a dialogue framed around price and supply management, viable farm sizes, diversification, traceability, and social inclusion and land tenure could lead to a shared vision for transforming a sector and improving incomes to a living income in farming communities.
This research is a contribution to the Living Income Community of Practice that is co-hosted by GIZ, ISEAL Alliance, and the Sustainable Food Lab.
See for more information: https://www.living-income.com/webinars (webinar 19)