Wanted: More evidence on the impact of value chain projects

This blog entry was cross-posted from Agrilinks, where it was posted on July 10, 2013 as part of the "It's All About M&E" blog series.

Between 1998 and 2010, USAID spent almost $5 billion on 240 agribusiness and agricultural value chain projects. These projects typically aim to organize small-scale farmers to create economies of scale, and link them to input suppliers, buyers and service providers. They also address key weaknesses in agricultural market systems, such as policy constraints, inadequate financing and lack of storage and processing capacity—as well as less tangible factors, including risk aversion and mistrust. But how effective are these projects in reducing poverty and increasing food security?

With the current data available, that question is hard to answer with confidence. Certainly there are value chain projects delivering impressive results in terms of increased farm yields, incomes and employment. Some of these projects achieve significant scale—reaching hundreds of thousands of beneficiaries. However, there are very few rigorous, objective evaluations of value chain projects and fewer yet that measure impact on poverty.

Recommendations are emerging concerning how to improve outreach to the very poor who often lack the time, resources and confidence to engage in value chain projects. And tools are being developed to strengthen improvements in household nutrition resulting from these projects. But additional research is needed to understand exactly how value chain projects can benefit the poor in their various capacities as farmers, wage laborers, service providers and consumers. This research should include the relative importance of income diversification outside of agricultural value chains, and the role of links to investments in human capital development, such as health and education.

Many value chain projects are innovating with promising new institutional arrangements to facilitate access to finance and reduce the risk inherent in agricultural investments. Such innovations need to be further tested and evaluated as they are scaled up and rolled out in multiple countries.

Value chain interventions to date have largely focused on working with small-scale farmers. The evidence suggests that greater impact on poverty reduction may be achieved by interventions at key leverage points in the market system to drive broad change—for example, by working with crop buyers and input suppliers to promote improved production technologies and marketing arrangements, or by focusing on policies that create disincentives for investment in agriculture. The effectiveness of intervening at these different leverage points warrants additional research.

Finally, despite the difficulties of evaluating the poverty-reducing effects of value chain interventions in complex and dynamic market systems, the limited data we have suggest that this is a worthy endeavor. A stronger evidence base of what works and what does not, will enable more effective investments of development funds in projects that sustainably reduce poverty and hunger.

This blog post is part of a six-part series of literature reviews, annotated bibliographies, and blog posts on the six themes of the Feed the Future Learning Agenda. These literature reviews, completed by external experts, summarize available evidence and gaps for future evaluations to fill on key evaluation questions identified under each of the six Learning Agenda themes. As a part of Feed the Future’s commitment to build the evidence base for what works in food security programs, findings from the literature reviews will inform the design and implementation of dozens of Feed the Future impact and performance evaluations, ensuring the evaluations are well-conceived, build on existing evidence, and fill critical evidence gaps. This blog and literature review focus on Theme III: “Expanded Markets, Value Chains and Increased Investment” and is written by Ruth Campbell of ACDI/VOCA.