Contracting Out of Poverty

Access to markets is challenging for smallholders who may not be able to compete with larger operations that can provide firms with consistent quantities of high-quality products. This barrier to entry may be due to the smallholders’ limitations to exploit economies of scale, but it can also be due to their apprehension to sign contracts. IFPRI’s research project, Contracting Out Poverty: Experimental Approaches to Innovation in Agricultural Markets with Small Farmers, explored three innovative contract structures to solve this problem, focusing on markets for high-value crops in three diverse locations: Peru, Tanzania, and Viet Nam. Using randomized trials, innovative contract designs were developed with private companies in each country (a mango producer in Peru and milk processors in Viet Nam and Tanzania).