Transforming developing country agriculture: Removing adoption constraints and promoting inclusive value chain development

For most poor countries of today, investing in agriculture and the associated sectoral linkages is the most promising strategy for sustained growth and poverty reduction. Yet, in these countries, investment in agriculture has generally been lagging relative to international norms and recommendations. We start from the premise that this has been due to lack of success in modernizing the operations of smallholder farmers (SHF) that typically constitute the core of the farm population. These farmers are linked to consumers through value chains that range from the most elementary (local spot markets) to the most advanced (contract farming and out-grower schemes). Current wisdom with cases of successful modernization of smallholder farming is that it requires asset building, productivity growth in staple foods (Green Revolution), agricultural transformation (diversification of farming systems toward high value crops), and rural transformation (value addition through rural non-farm activities linked to agriculture). This modernization 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 achieve modernization can be approached through two contrasted and complementary initiatives. One is a “constraint removal” approach where development agents (governments, international and bilateral development agencies, NGOs, donors) facilitate overcoming the major constraints to adoption: liquidity, risk, information, and access to markets. The other is an “inclusive value chain development” approach where agents in value chains (entrepreneurs, coordinating agencies, producer organizations) create incentives to smallholder modernization through contracting and vertical coordination. We review the extensive literature that has explored ways of inducing modernization through these two approaches, noting a number of success stories, and propose a research agenda to further explore and enhance their potential.