The Effectiveness of Contract Farming for Raising Income of Smallholder Farmers in Low- and Middle-Income Countries: a Systematic Review

Abstract

Contract farming is used by an increasing number of firms as a preferred modality to source products from smallholder farmers in low and middle-income countries. Quality requirements of consumers, economies of scale in production or land ownership rights are common incentives for firms to offer contractual arrangements to farmers. Prices and access to key technology, key inputs or support services are the main incentives for farmers to enter into these contracts. There is great heterogeneity in contract farming, with differences in contracts, farmers, products, buyers, and institutional environments. The last decade shows a rapid increase in studies that use quasi-experimental research designs to assess the effects of specific empirical instances of contract farming on smallholders. The objective of this systematic review was to distill generalised inferences from this rapidly growing body of evidence. The review synthesised the studies in order to answer two questions: 1: What is known about the effect size of contract farming on income and food security of smallholder farmers in low- and middle-income countries? 2: Under which enabling or limiting conditions are contract farming arrangements effective for improving income and food security of smallholders.