Value Chain Development and the Poor

This paper draws from the experiences of the SEEP Network members working on value chain development with the poor and presents lessons gleaned from the "Value Chain Working Group" on-line discussion from February through June 2006. The paper states that markets hold the power to create or combat poverty. International development initiatives are working to open existing markets to poor producers and consumers, so that they can avail of the benefits of well-functioning markets. The challenge for development practitioners is to promote economic growth strategies that improve the competitiveness of industries. Developing value chains within competitive industries has specific challenges for poor micro-and small enterprises (MSEs). Factors that constrain MSE performance include limited resources, high transaction costs, high risks, and limited knowledge of the market. Responses to these constraints include:

• Creating alliances;
• Finding formal and informal sources for financial products;
• Improving transparency and increasing market opportunities;
• Reducing the risk of MSE exploitation with training on pricing and standards;
• Strengthening MSE organizations to improve their negotiating power;
• Developing intermediaries which can deliver market information and interact with the producer and buyer.