Inclusive productive value chains, an overview of Indonesia’s cocoa industry

Abstract

Purpose The inclusiveness of smallholder cocoa farmers in the international cocoa value chain is addressed in the context of institutional voids through linkages with different business models in the region of Bali, West-Sumatra and West-Sulawesi. Being the third highest producer of cocoa, local farmers have a high dependency on cocoa cultivation; however, they lack policies that foster and reward sustainable high-quality cocoa according to international standards. The paper aims to discuss these issues. Design/methodology/approach An explanatory multiple-case study design assessed the relevance of partnerships in contributing to sustainable local development and inclusiveness for smallholder farmers. The selected business models, business supported, NGO supported and government supported, are evaluated through improved access to finance, training, technology, subsidized inputs and markets. Findings The paper found that a linkage with a business-supported model, here BT COCOA, achieves the best results in terms of improved yields, quality and farmer’s welfare, indicating improved inclusiveness via successful process upgrading. Yet, future cooperation between stakeholders should improve on access to information and finance. Research limitations/implications The research is a relative research, comparing three models of inclusiveness within one sector (cocoa) in predefined regions of Indonesia. Future research should test the proposed propositions in other agricultural sectors. Practical implications The paper showcases the effect of support model affiliation for smallholder farmer inclusiveness and the circumvention of institutional voids. It selects the business model as best suitable to achieve smallholder inclusiveness, as well a need to prioritize institutional voids. Originality/value The research is assessing three models addressing inclusiveness applying value chain assessment tools to measure inclusiveness.