Making Markets Work for the Poor: Reducing Information Gaps at the Origin of the Supply Chain

Research Team: Akshai Abraham, Prabu Raja
LEAD Centre: Centre for Development Finance (CDF)
Focus Area:
Project Geography: India
Partner:
Status:

Background:

This project seeks to investigate the role of information, specifically information about output prices, on farmer decision-making and competition at the bottom of the supply chain by designing and evaluating an intervention that provides price and market information to farmers and small traders in rural India through mobile phones.

An overwhelming majority of the world’s poor rely on agriculture for subsistence. The most vulnerable of these – the small farmers and small traders at the origin of the supply chain – face a host of difficult investment decisions with significant individual and economy-wide consequences. Farmers’ choices about which crops to sow, when to sow them, whether to invest in high-yield seed or fertilizer, when to harvest, and when and where to sell the output can mean the difference between subsistence or profitability. Small agricultural traders who buy produce directly from smaller farmers to bring to wholesale markets face similar difficulties: having aggregated produce from small farmers, they must then determine where to sell the lot and arrange transport and storage to support this strategy. Their ability to command the best price and access infrastructure in turn affects the price that they can offer farmers.

These inefficiencies at the origin of the supply chain also affect overall agricultural productivity. The recent increase in commodities prices presents both challenges and opportunities for developing countries: food prices have escalated, but on the other hand, farmers could potentially earn more. Realizing the opportunity, however, depends on markets functioning well and, in turn, on individuals making efficient decisions about planting, harvesting, and selling their crops. More efficient production and distribution would have the double benefit of increasing incomes for those who depend on agriculture for their livelihoods, while reducing wastage and increasing output and potentially ameliorating some of volatility of and general increases in food prices. This project, joint with Shawn Cole of Harvard Business School, seeks to investigate the role of information, specifically information about output prices, on farmer decision-making and competition at the bottom of the supply chain by designing and evaluating an intervention that provides price and market information to farmers and small traders in rural India through mobile phones. This is a three year project. There are four academic papers, and five policy briefs planned to be written throughout the length of the project.