Contracts for Poverty Reduction and Agricultural Growth

Policy brief No. 2. The majority of the world’s poor are smallholder farmers in developing countries. These smallhol- ders face several obstacles that limit their produc- tivity and profits, such that their incomes remain low. Institutional changes in the agricultural value chains are required to reduce poverty rates among smallholder farmers, and to stimulate agricultural growth. Contract farming is an institutional arran- gement that can address these obstacles, genera- te benefits for farmers and companies, and hence contribute to poverty reduction and agricultural growth.