Inclusive businesses in agriculture: Defining the concept and its complex and evolving partnership structures in the field

Abstract

Inclusive Businesses (IBs), signifying sustainable and equitable commercial operations linking low-income communities and smallholder farmers with agri-businesses in order to facilitate the former’s market integration, are considered to comprise an essential tool for raising smallholders, across the developing world, out of poverty and for stimulating overall rural development. Although often promoted based on anecdotal evidence, IBs are little analysed and understood from a conceptual perspective, nor are they scrutinised when implemented in the field. This paper aims to provide a more precise insight into IBs, from a conceptual perspective and from a more practical one when implemented. Based on extensive fieldwork and assessments of 14 IBs, this paper proposes a new, flexible typology for the institutional set-ups of IBs, which accommodates the complex structures observed in the field. These innovative and hybrid arrangements, explained by a holistic framework that combines aspects of Resource Dependence Theory, Transaction Costs Economics and Agency Theory, are presented as unique combinations of the standard instruments of collective organisation, equity, lease/management contracts, mentorships, and supply contracts. Results show that whereas multiple-instrument IBs do obtain improved inclusiveness of low-income communities and smallholder farmers in commercial value chains, issues related to corporate control over resources, lack of knowledge transfer and marginal benefits remain. The assessed IBs are dynamic in their set-up, however, and allow for adaptations to overcome these issues. The State, which plays an important role through establishing a stimulating policy framework and financial contributions, together with third party engagement, can counter the potential corporatisation under IBs – emphasising that IBs alone cannot constitute the expected panacea for agricultural transformation and rural development.