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Promoting the Kenyan Potato Value Chain: Can Contract Farming Help Build Trust and Reduce Transaction Risks?

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  • Hoeffler, Heike

Abstract

African economies are increasingly confronted with changing food and commodity markets, due to globalisation, economic liberalisation and urbanisation. Subsequently, consumer preferences change. This poses new opportunities but also challenges to small-scale producers, traders and processors along agricultural value chains. The value chain is increasingly seen as an important development framework, with contract farming being viewed as an instrument for improving value chain performance by reducing transaction costs and risks and by building trust in vertical cooperation. This paper uses the case study of the potato value chain in Kenya to examine these assumptions. It is shown that contract farming can be used to reduce transaction costs and risks, and to improve the organisation and governance of value chains by creating stable business relationships. Nevertheless, it is constrained by a number of market and institutional failures.

Suggested Citation

  • Hoeffler, Heike, 2006. "Promoting the Kenyan Potato Value Chain: Can Contract Farming Help Build Trust and Reduce Transaction Risks?," 99th Seminar, February 8-10, 2006, Bonn, Germany 7726, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae99:7726
    DOI: 10.22004/ag.econ.7726
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    References listed on IDEAS

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    1. Muyanga, Milu & Jayne, Thom S. & Argwings-Kodhek, Gem & Ariga, Joshua, 2005. "Staple Food Consumption Patterns in Urban Kenya: Trends and Policy Implications," Working Papers 202624, Egerton University, Tegemeo Institute of Agricultural Policy and Development.
    2. Ayieko, Miltone W. & Tschirley, David L. & Mathenge, Mary K., 2005. "Fresh Fruit and Vegetable Consumption Patterns and Supply Chain Systems in Urban Kenya: Implications for Policy and Investment Priorities," Working Papers 202627, Egerton University, Tegemeo Institute of Agricultural Policy and Development.
    3. Muendo, Kavoi Mutuku & Tschirley, David L., 2004. "Improving Kenya's Domestic Horticultural Production and Marketing System: Current Competitiveness, Forces of Change, and Challenges for the Future (Volume I: Horticultural Production)," Food Security Collaborative Working Papers 55155, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    4. Ayieko, Miltone W. & Tschirley, David L. & Mathenge, Mary K., 2005. "Fresh Fruit and Vegetable Consumption and Trade in Urban Kenya: Implications For Policy and Investment Priorities," Food Security Collaborative Working Papers 55164, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    5. Muendo, Kavoi Mutuku & Tschirley, David L., 2004. "Improving Kenya's Domestic Horticultural Production and Marketing System: Current Competitiveness, Forces of Change, and Challenges for the Future Volume I: Horticultural Production," Working Papers 202672, Egerton University, Tegemeo Institute of Agricultural Policy and Development.
    6. Muendo, Kavoi Mutuku & Tschirley, David L., 2004. "Improving Kenya's Domestic Horticultural Production and Marketing System: Current Competitiveness, Forces of Change, and Challenges for the Future (Volume III: Horticultural Research and Seed Sector R," Food Security Collaborative Working Papers 55157, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    7. Goldsmith, Arthur, 1985. "The private sector and rural development: Can agribusiness help the small farmer?," World Development, Elsevier, vol. 13(10-11), pages 1125-1138.
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    Cited by:

    1. Mailu, Stephen & Will, Margret & Mwanza, Rosemary & Nkanata, Kinyua & Mbugua, David, 2014. "Milk supply contracts and default incidence in Kenya," MPRA Paper 57381, University Library of Munich, Germany, revised 10 Apr 2014.
    2. Oluoch-Kosura, Willis, 2010. "Institutional innovations for smallholder farmers’ competitiveness in Africa," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 5(1), pages 1-16, September.

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