Alleviating Poverty by Linking Smallholders with Agribusiness: Roles of Social Capital and Common Property

Abstract

"Recent decades have witnessed a marked acceleration of agro- industrialisation processes in much of the developing world. This is opening up new opportunities for smallholders, even in isolated areas, to escape poverty by trading in the resulting new markets. There is, however, increasing recognition of the constraints faced by poor smallholders in becoming competitive within such markets. There has also been deepening awareness of the knowledge gaps impeding the design of institutional arrangements capable of surmounting these constraints. The concept of 'social capital' has found itself at the centre of efforts to address these knowledge gaps.

"The focus in this paper is on examining what is known about: the challenges of ensuring that the poor share equitably in the benefits of market liberalisation; the extent to which these challenges involve social capital issues; and how such social capital issues might be addressed most effectively. Included in the review is a summary of findings relevant to these issues from recent research in Indonesia - concerned with contract farming and micro-finance delivery, respectively - involving two of the present authors. A proposal for further research involving all four authors is also presented. The research aim is to evaluate the role that social capital plays in Bali and Lombok (eastern Indonesia) in reducing rural poverty by helping smallholders access market opportunities arising from trade liberalisation. A particular focus would be on understanding of the conditions under which social capital in the form of common property institutions helps smallholders to access such opportunities."