Contract Farming as a Last-resort Option to Finance Rice Cultivation in Senegal

Abstract

We investigate the role of contracts in farmers’ access to credit over time using the conceptual framework of livelihoods and the economics of rural organisations. We applied multi-component analysis to a dataset of 594 rice farms in the Senegal river valley, analysed changes in 72 producer organisations’ funding strategies over time, and conducted 85 semi-directed interviews. Results show that individual farmers’ participation in contract farming varies over time, mainly depending on the availability of their financing capital. While bank creditworthy farmers use tripartite marketing contracts to remain in the formal segment of the credit market, indebted farmers use production contracts as a last-resort credit option before they are excluded from the credit market. We discuss the positive contributions contracts make to farmers’ livelihoods as they correct failures on the credit market, but they can also trap farmers in less economically profitable relationships.

Keywords:

• Contract Farming
• Africa
• Livelihoods
• Rice
• Transaction Costs
• Finance

Acknowledgements

Data and codes used in this paper are available on request to the corresponding author. We thank SAED for support with data collection, and Annaelle and Elsa for their encouragements.

Disclosure statement

The authors declare they have not benefitted financially or otherwise from the direct applications of their research.

Supplemental data

Supplementary Materials are available for this article which can be accessed via the online version of this journal available at https://doi.org/10.1080/00220388.2021.2013466.

Notes

1. 1 euro = 655.957 FCFA.

Additional information

Funding

This work was supported by the Agropolis Fondation (ID 1403-033) through the ‘Investissements d’avenir’ programme (Labex Agro:ANR-10-LABX-0001-01). It also received support from the French Ministry of Research (through Montpellier University) and CIRAD.