By Francesca Larosa & Marco Vásquez
How are agricultural informal market systems working? What is the effect of the system on poor urban consumers? Are there inefficiencies along the value chain? Which policy interventions can enhance poverty reduction strategies?
Following our introductory blog on Value Chains for Nutrition (VCN) and our blog on related work in Kenya and Uganda, this blog is the third in a series on the work of the Linking Farmers to Markets (LFM) team in promoting sustainable food systems around the globe.
Introducing the project and its goals
Despite the crucial importance of family-scale and smallholder production, few studies have focused on informal markets across Central American countries. Funded by the FORD Foundation, CIAT’s VCN team is running a comparative study between Nicaragua and Honduras that is aimed towards closing this information gap. The research focuses on a basket of three representative foodstuffs: red beans, cheese and tomatoes, which represent core components of Central Americans’ diet. The project – named “Informal markets for poverty reduction and food security: Exploring policy options in Nicaragua and Honduras” – focuses on urban markets in both countries. In Nicaragua, the VCN team is currently collecting data in Managua, Matagalpa and Estelí, focal points of the national trade.
In the past few years, several international research and development organizations have been focused on linking rural communities to markets. This process involved Nicaragua and Honduras as well. Producers have created their own associations and have begun exporting their products and supplying through formal value chains, such as supermarkets. However, the great majority of farmers are still part of the informal system: they rely on a small-scale, traditional production and marketing approach. More than 90% of the smallholder farmers in Nicaragua and Honduras are excluded from investments in on-farm and organizational upgrading that are directed towards formal market channels. Consequently, they have limited access to capital and credit and are trapped in poverty, while facing unpredictable risks such as climate change.
This VCN project represents one of the first and more comprehensive field research projects on informal markets in Central America. Research in this area could help in two different, but complementary ways. First, by providing empirical evidence on how urban informal markets function. This means investigating the value chain actors and their roles, analyzing existing trading relationships, product flow and price/quantity dynamics along the value chain by focusing on the “invisible” middle, such as wholesalers and middlemen. Second, by designing policy options aimed at filling the gaps and improving the efficiency of small-scale businesses.
Methodology and methods
Thanks to the use of survey instruments targeted at different types of actors, the VCN team is collecting detailed information to build a strong evidence-based knowledge base on how business relationships along the value chain actually work. The project employs a mix of quantitative and qualitative approaches which will allow for a deeper understanding of informal agricultural markets and food systems, and for identifying opportunities to enhance their potential for poverty reduction. The first stage of the research project involves administering surveys to gather quantitative data among a randomly selected sample of value chain actors including traders, wholesalers, distributors and retailers. In particular, traders (or intermediaries) that connect rural communities to the urban environment are not always accessible and represent the most complex agent along the value chain.
The questionnaires focus on socioeconomic characteristics, purchasing/selling patterns and agreements, relations to other actors in the value chain, and motivations. The second, qualitative stage of this research is designed to provide a nuanced understanding of decision-making processes and of the sociocultural context thats explain the trends observed during the first research stage. Methods used during this stage are interviews and focus groups with keys actors.
Progress and outlook
In Nicaragua, the team has completed data collection in Managua and Matagalpa and is in the process of collecting data in Estelí. Using the free software OpenStreetMap, the team is also mapping the city markets of interest with the help of GPS technology. This represents a completely original contribution, as a huge portion of Nicaraguan land has not yet been mapped by any provider. Once collected and analyzed, the data will constitute the basis of a policy report that focuses on anti-poverty strategies which may help to reduce food insecurity among Nicaraguan and Honduran urban market traders. This report will be shared and disseminated through the engagement of key stakeholders and interaction with the international community.
Data collection in Matagalpa, Nicaragua. Photo credit: Francesca Larosa (CIAT)
Data collection in Choluteca, Honduras. Photo credit: Marco Vásquez (Swisscontact)
Similar work has been conducted in Honduras, where data collection in Tegucigalpa and Choluteca has almost finished. The subsequent analysis will shed light on the bottlenecks these markets have, losses along the value chain (mainly due to inefficient postharvest practices), gross margin profits generated by this kind of markets, the degree of inclusivity in exisiting trading relationships, profiles of types of sellers and other interesting information.