BMZ: Working together for market access: Strengthening rural producer organizations in Sub-Saharan Africa

Smallholder agriculture in Sub-Saharan Africa is largely exposed to pervasive market failures, translating into missed opportunities and sub-optimal economic behavior. These failures are often rooted in the importance of economies of scale in procuring inputs and marketing produce. By engaging in such markets collectively, smallholders can therefore better access and benefit from them. This supposes, however, that all group members commit a sufficient amount of their resources such that the benefits from the derived economies of scale can overcome the costs of running the organization. This commitment in turn depends on one’s expectation of other members’ commitment.

Over the past decade, many governments and donor agencies have shown renewed interests in Rural Producers Organizations (RPOs) as a means to overcome these market failures for Sub-Saharan African farmers. Evidence shows, however, that many RPOs have so far had limited success. The objective of this project is to identify specific interventions that can improve RPOs’ capacities. Opportunity costs of time, gender, and the capacity to mobilize labor play a significant role in determining these. While recognizing other determinants of success, the project’s innovation is to examine ways to affect RPOs’ performance on input and output markets, through enhanced commitment of members. Broadly speaking, this is research on implementation of development actions, a much neglected area of research.

Specifically, member commitment will be enhanced by (i) improved coordination of members via institutionalization of better leadership capacity, and (ii) improved compliance of members via better incentive alignments reached through the provision of complementary activities such as insurance and/or credit. Final performance will be measured as the groups’ capacities to provide their members with better prices for inputs and outputs. It is also expected that the obtained increase in income will affect the relative prices of working in and out of the farm, resulting in dynamic local labor market effects. In each case, the project is also interested in the distribution of beneficiaries by income, gender, and other factors.  

Within this project, multi-agent system (MAS) models were applied in order to explore the functioning of rural producer organizations and find a ways of strengthening their capacities and improving their market performance. Computer simulations were used for the assessment of prospective development interventions and for the choice of the most beneficial ones. As a tool for simulation, the project uses MP-MAS, a software package being developed in Hohenheim. MP-MAS was previously applied in the “Integrating Governance and Modeling” Project of the CGIAR Challenge Program on Water and Food (see https://igm.uni-hohenheim.de). For this project MP-MAS has been upgraded with model components of collective decision-making and market adaptation.