Using Agriculture for Development: Supply- and demand-side approaches

For most poor countries of today, using agriculture for development is widely recognized as a promising strategy. Yet, in these countries, investment in agriculture has mostly been lagging relative to international norms and recommendations. Current wisdom on how to use agriculture
for development is that it requires asset building for smallholder farmers, productivity growth in staple foods, an agricultural transformation (diversification of farming systems toward high value crops), and a rural transformation (value addition through rural non-farm activities linked to
agriculture). This sequence has too often been hampered by extensive market and government failures. 

We outline a theory of change where the removal of market and government failures to use this Agriculture for Development strategy can be addressed through two contrasted and complementary approaches. One is from the “supply-side” where public and social agents (governments, international and bilateral development agencies, NGOs, donors) intervene to help farmers overcome the major constraints to adoption: liquidity, risk, information, and access to markets. The other is from the “demand-side” where private agents (entrepreneurs, producer organizations) create incentives for smallholder farmers to modernize through contracting and vertical coordination in value chains. We review the extensive literature that has explored ways of using Agriculture for Development through these two approaches. We conclude by noting that the supply-side approach has benefited from extensive research but met with limited success.

The demand-side approach has promise, but received insufficient attention and is in need of additional rigorous research which we outline.