ABSTRACT
Agriculture is of critical importance to the livelihoods of millions of poor people in rural areas. Poverty-alleviating growth, therefore, depends to a large extent on access to lucrative consumer markets for poor producers. Historically, research has emphasized the resource and asset constraints faced by smallholder farmers as impediments to agricultural growth (e.g. Nelson 1956). Over the last two decades, this has been complemented with insights on the relevance of institutions for economic and agricultural development (North 1990; Harriss et al. 1995; Dorward et al. 2003). Access to assets is a necessary but not sufficient condition for escaping poverty, if smallholder farmers additionally face institutional constraints that prevent them from taking advantage of market opportunities (De Janvry and Sadulet 2001). A lack of information on prices and technologies, few or no connections to market actors, underdeveloped financial markets and scale diseconomies make it difficult for smallholders to reach out to international markets or to emerging domestic ones. Thus, new institutional arrangements are needed to fill the gap between current local practices or institutions and the institutions required to enable farmers to participate in value chains.
