CF – How GIZ promotes contract farming

How GIZ Promotes Contract Farming

To successfully promote rural economic development different types of inclusive business models can be applied, Contract Farming being one of them. If deemed suitable to the respective situation, properly planned and well managed, Contract Farming can turn out to be a very profitable approach.

GIZ’s approach to promoting Contract Farming as is an inclusive business model, practical and process oriented. It guides practitioners through sound planning, starting-up, consolidation and scaling-up of Contract Farming schemes.

The core element of the concept is the selection of an appropriate Contract Farming business model for the farm supply/firm procurement interface based on principles of fairness and transparency.

The GIZ handbook below provides guiding principles, tools and case studies for the development of viable Contract Farming business models, practicable contract farming management systems and mutually beneficial farming contracts as well as hints for facilitators interested to support Contract Farming development through process facilitation, technical and financial assistance.

The approach has been described in more detail in the SNRD newsletter of Nov/Dec 2016.

The principles of Contract Farming business models

The Contract Farming business model that GIZ promotes is based on the inclusiveness of smallholders, women and youth. For a successful integration certain principles need to be considered:

Open communication and trust between the contract partners, on the basis of fair give-and-take relationships
A scope of negotiation, where farmers are recognised as ‘partners in business’, i.e. having an equal voice in contract negotiations and conflict settlement, according to their capacities
Economic viability and incentives illustrating that contract farming schemes are clear-cut commercial agreements that can only be sustained if both contract parties are able to make profits
Adequate Contract Farming arrangements for sharing and minimizing risks of conjoint investments, according to the divergent capabilities of both contract partners

Taking into account existing roles

Based on a comprehensive analysis of the existing roles of women and potential roles of youth in Contract Farming and of the likely opportunities and constraints for their inclusion, women and youth can be integrated into contract farming schemes for the benefit of both contract parties (cf. Annex 1 of the handbook for respective recommendations).

To successfully integrate them due care has to be given to selected beneficiaries and capacity development measures have to be adapted to their specific needs. To identify opportunities for inclusion, the traditional roles of women should be taken into account, which may not be in production but are more often in marketing and at cottage level processing. Youth, in turn, may not even carry out any functions in the respective value chain. In some or even many cases, women and youth may be more meaningfully integrated into aggregating, grading and transporting produce, in providing close-to-production services or in first stage processing.