Rapid globalisation of agricultural trade is increasingly forcing small-scale producers to compete with large enterprises that have better access to business services and a greater ability to meet international quality standards. Collective action among producers in producer organisations is a key strategy for small-scale producers who want to access, compete in and increase their bargaining power in the market.

A book from Oxfam GB draws on experience in nine countries to provide guidance primarily for the staff of development non-governmental organisations (NGOs) working to develop the capacity of producers’ organisations (POs).

Since the 1980s, market liberalisation has resulted in the reduction of support services provided by the state and put an end to guaranteed markets. Most farmers now have to market their produce without access to reliable or affordable inputs, or financial and transport services. Those who are able to access markets are often vulnerable to buyers who can take advantage of small-scale producers’ weak bargaining position. Local and global markets are often uncompetitive, driven by the interests of buyers who are able to influence prices, impose demanding standards and force small-scale producers to take more and more risks.

After a long period of decline in the total value of aid to agriculture, rural development planners are recognising the need to link small-scale producers to markets, rather than just promoting agricultural production. Agricultural development and promoting POs has again become a ‘fashionable’ economic development strategy. The author warns, however, against unrealistic expectations that POs can fill all the gaps caused by state withdrawal:

• Some fundamental problems in the market cannot be overcome by POs alone, no matter how well-organised they are.
• POs usually reflect the social context in which they operate, and may exclude women or other marginalised groups from participating or from positions of power – POs are therefore no simple solution to rural development problems.
• Unless basic legal and political constraints to economic development are addressed by the state, there may be little point in investing significant resources to support POs.

The author argues that POs that are formed primarily in response to external agencies rather than producers’ own initiative will often struggle to develop into sustainable businesses. Development NGOs should therefore be cautious about creating new POs and keep in mind the following:

• If laws do not provide a suitable framework for POs to operate, it may be better to invest resources to help producers advocate for legal change.
• If POs are to succeed, the business cannot be led by social objectives; economic considerations should be the first priority.
• Wherever possible, POs should try to raise some of their capital from members’ contributions, in order to increase their ownership and commitment to the business.
• Promoting equal participation of women in POs requires attention to how underlying gender attitudes and the division of labour within the home and on the farm affect women’s opportunities and confidence.

Drawing on the nine case studies, the guide provides practical guidance to development NGOs working with POs. For example, processing can enable POs to add value to their product and access higher value markets. Adding value usually requires investments in processing equipment but POs frequently struggle to access affordable loans for investments. However, financing processing equipment through grants has disadvantages that development NGOs need to consider carefully.

Source(s):
‘Producer Organisations: A Guide to Developing Collective Rural Enterprises’, Oxfam Great Britain, by Chris Penrose-Buckley, 2007 (PDF) Full document.

Funded by: Oxfam GB

id21 Research Highlight: 25 February 2008

Further Information:
Chris Penrose-Buckley

Contact the contributor: cpenrosebuckley@yahoo.co.uk

Twin and Twin Trading Ltd, UK

Oxfam Publishing
Oxfam House
John Smith Drive
Cowley, Oxford, OX4 2JY
UK

Tel: +44 (0)1865 472255
Fax: +44 (0)1865 472393
Contact the contributor: publish@oxfam.org.uk

Oxfam Publishing, UK

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‘Helping rural businesses work for the poor’

‘Can small farms still play a role in reducing poverty?’

‘Supporting local innovation in Nepal’

‘High transaction costs obstruct smallholder access to better markets’