Effect of Social Capital on Performance of Smallholder Producer Organizations: The Case of Groundnut Growers in Western Kenya

Abstract

Development literature has recently promoted the use of producer organization in linking farmers to better-paying commodity markets. However, empirical studies find mixed performance of such organizations. This study examines the producer organization’s internal factors that may explain the differences in the performance of producer organizations. It specifically analyzes the role of social capital in a producer organization on the performance of such organization using quantitative techniques. As hypothesized, this study finds that social capital positively affects the performance of producer organizations. The implication of these findings is that development strategies that target commercialization of smallholder agriculture through producer organizations must pay attention to the internal factors within such organizations.