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Tuesday, 19 August 2014

Value chains and diversified livelihoods

By Bob Aston
Value chain analysis and development can be a significant tool for poverty reduction, particularly for smallholder farmers. It offers an opportunity to expand the financing opportunities for agriculture, improve efficiency and repayments in financing, and consolidate value chain linkages among participants in the chain. This provides a great opportunity for smallholder farmers to improve their livelihood.
In a global economy, livelihoods are no longer simply dependent upon what one produces, but also how that production fits with competitive chains in the market system.
Farmers planting
Diversification of activities among multiple chains is noted as important to both farmers, agro-processors and traders to reduce not only product and market risks but also to level seasonality requirements for labour, equipment and capital.
The potential for smallholders to effectively par­ticipate in high-value markets for agricultural and forest products and strengthen their overall live­lihood resilience depends heavily on access to the right combination of assets, in sufficient quantities, at the right time.
Similarly, local enterprises that have direct business relations with smallholders require a minimum level of asset endowments to evolve into viable operations and respond to the demands of buyers and raw material suppliers.
The value chain approach can be instrumentalised to promote inclusive economic growth as it allows the identification of specific leverage points along a chain, reducing the average cost per unit by increasing the number of units produced,
High diversity provides potential for economies of scope through diversified but interlinked activities. This will increase cost efficiency by producing two or more different products together rather than separately.
Value chain development and its financing can be integrated into a comprehensive livelihood model. For smallholder farmers this can be an important aspect in ensuring sustainable and profitable farming.
Diversification puts producers in a more sustainable position by reducing market and production risks.  It also permits them to maximize resources and activities on a year-a-round basis, thus incrementing their income, reducing fixed costs and providing continuous employment.
Overdependence on a particular chain can be detrimental if not hedged or diversified adequately.
Farmer admiring her crops
In the case of Laikipia County a lot of emphasis has been laid on maize and dairy value chain. Though this is a good approach as most farmers are growing maize, it has also seen the neglect of tomato and cabbage value chain. Farmers particularly from Wangwaci area of Sipili Division are not reaping maximum benefits from their tomatoes and cabbages. This indicates that there is need to diversify into tomato and cabbage value chain.
In order to improve livelihood of smallholder farmers various value chain players need to address various interventions that include; crop risk mitigation, post harvest handling, warehouse receipts linked to loans, local value addition, linkages to markets, aggregation and value chain linkages.
The diversity of activities and services used in one value chain are often applied to multiple chains within a farm in order to reduce overdependence on one chain.
Poor households normally tend to integrate their production patterns into value chains either by diversifying into new commercial agricultural activities or by specializing and intensifying their production and gaining more agricultural income.
It is clear that different measures are needed in each stage of value chain finance to achieve poverty reduction among the most vulnerable.
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