Webinar insights: Impact of outsourcing agricultural services on smallholder farmers

One of the emerging developments in agrifood systems worldwide is the rise of enterprises which provide farmers with “outsource” agricultural services. These services are emerging in various agricultural operations traditionally carried out by farmers themselves. But what has driven this growth? And how might they impact the future of farms?

In recent decades, the rise of micro-, small- and medium-sized enterprises (MSMEs) providing outsourced agricultural activities to farmers has become increasingly important across sub-Saharan Africa and Asia. By outsourcing some of their agricultural activities to these enterprises – from seed propagation and digging wells to hiring farm equipment – farmers can become more resilient and readily adapt to the changes needed to supply to a growing market, as well as enhance their livelihoods. 

Many of these outsourcing services from MSMEs have replaced labor-intensive farming activities with machines or specialized techniques. These services also introduce small farmers to new technologies that they otherwise might have been unaware of had they not been provided as part of a package by MSMEs. The advantages of outsourcing for farmers include cost savings, more efficient use of capital and equipment, and greater flexibility in services. 

In this context, service provision is increasingly being driven by the needs and demands of farmers. Such outsourcing services can transform food markets and the dynamics of agrifood supply chains across sub-Saharan Africa and Asia in innovative ways. Yet this phenomenon is still not well understood.

To explore this topic further, KISM - the Knowledge Platform for Inclusive and Sustainable Food Markets - hosted a virtual webinar on 23 January 2024 to share insights from a recent study from the CGIAR Rethinking Food Markets Research Initiative. Professor Thomas Reardon from Michigan State University shared key findings from the study, followed by practical reflections from Robert Bertram from the Bureau for Resilience and Food Security at USAID. 

The following key insights emerged from the webinar: 

• Outsourcing services can provide important support to small farms. Small farms in marginalised peri-urban and rural areas, as well as larger-sized farms, can benefit from outsource services. This seems to be the case given the wide diversity of outsourcing services that exist to address the challenges faced by different types and sizes of farms. In sub-Saharan Africa and Asia, the demand from small farms for outsourcing agricultural activities to third party MSMEs is on the rise. These can be fixed or mobile, meaning that these services can move across different villages, farms and even provinces. In such cases, the use of mobile technology can help to expand the reach of these outsourced services to widely dispersed small farmers. 
• Many MSMEs provide a “one-stop shop” of agricultural services for farmers. These services include preparing the soil, setting up irrigation, pruning and weeding, spraying chemicals, harvesting with a differentiation of quality grades, and marketing. Some outsource MSMEs also assist farmers in complying with low or no pesticide-use protocols and support them in adapting their operations to the demanding processes required for eco-labelling for major supermarket chains. As such, these outsourcing services have great added value in addressing the changing needs of farmers and helping them adapt to the requirements of global food markets.
• Many outsourcing services have emerged spontaneously without the support of governments or NGOs. The study found that many outsourcing services across sub-Saharan Africa and Asia developed as “spontaneous clusters” of actors, including farmers and operators in other segments of the agrifood value chain. Yet, in most cases the government played an important indirect role through the development of new market infrastructure, such as roads and wholesale markets, and more flexible market regulation. These interventions have aided these outsourcing service actors to adjust to the changing dynamics of the agrifood supply chain.
• Supporting the growth of MSMEs upstream and downstream from farms can play a key role in transforming the supply chain. By reducing unnecessary regulations and informal restrictions that often discourage MSME development, MSMEs can become more accessible to small farmers and support the creation of inclusive small farms.

Vi Nguyen is a Senior Coordinator for Innovations and Learning with ISEAL. 

To learn more about the emergence of outsourced agricultural services in sub-Saharan Africa and Asia and their impact on smallholders, explore the study that this webinar was based on from the CGIAR ‘Rethinking Food Markets’ Initiative.