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Smallholder farmers’ dissatisfaction with contract schemes in spite of economic benefits: Issues of mistrust and lack of transparency

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  • Ruml, Anette
  • Qaim, Matin

Abstract

Contract farming is typically seen as a useful mechanism to help smallholders. However, despite economic benefits, high dropout rates from contract schemes are commonplace. We use data from Ghana to show that smallholders benefit from a resource-providing contract in terms of higher yields and profits, but most of them still regret their decision to participate and would prefer to exit if they could. The main problem is insufficient information from the company. Farmers do not understand all contract details, which leads to mistrust. We argue that lack of transparency may explain high dropout rates in Ghana and other situations too.

Suggested Citation

  • Ruml, Anette & Qaim, Matin, 2020. "Smallholder farmers’ dissatisfaction with contract schemes in spite of economic benefits: Issues of mistrust and lack of transparency," GlobalFood Discussion Papers 301006, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    • Handle: RePEc:ags:gagfdp:301006
    DOI: 10.22004/ag.econ.301006
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    Cited by:

    1. Donkor, Emmanuel & Mbeche, Robert & Mithofer, Dagmar, 2021. "Relational contract decision of retailers in the grasshopper value chain in Uganda," 61st Annual Conference, Berlin, Germany, September 22-24, 2021 317078, German Association of Agricultural Economists (GEWISOLA).
    2. Ruml, Anette & Chrisendo, Daniel & Iddrisu, Abdul Malik & Karakara, Alhassan A. & Nuryartono, Nunung & Osabuohien, Evans & Lay, Jann, 2022. "Smallholders in agro-industrial production: Lessons for rural development from a comparative analysis of Ghana’s and Indonesia’s oil palm sectors," Land Use Policy, Elsevier, vol. 119(C).
    3. Angelo Frascarelli & Stefano Ciliberti & Gustavo Magalhães de Oliveira & Gabriele Chiodini & Gaetano Martino, 2021. "Production Contracts and Food Quality: A Transaction Cost Analysis for the Italian Durum Wheat Sector," Sustainability, MDPI, vol. 13(5), pages 1-12, March.
    4. Asante, Kofi Takyi, 2023. "The politics of policy failure in Ghana: The case of oil palm," World Development Perspectives, Elsevier, vol. 31(C).
    5. Donkor, Emmanuel & Mbeche, Robert & Mithöfer, Dagmar, 2021. "Purchasing Behaviour and Relational Contract Decisions of Retailers in Grasshopper Value Chains in Uganda," 2021 Conference, August 17-31, 2021, Virtual 315105, International Association of Agricultural Economists.
    6. Ruml, Anette & Chrisendo, Daniel & Osabuohien, Evans & Karakara, Alhassan & Iddrisu, Abdul Malik & Lay, Jann, 2021. "Smallholders in Agro-Industrial Production: Lessons from Rural Development at New Frontiers from a Comparative Analysis of Ghana’s and Indonesia’s Oil Palm Sectors," 2021 Conference, August 17-31, 2021, Virtual 315162, International Association of Agricultural Economists.

    More about this item

    Keywords

    Agribusiness; Agricultural and Food Policy; Community/Rural/Urban Development; Risk and Uncertainty;
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