In most developing countries, smallholder farming is important in terms of poverty reduction, food security and wider rural economic development. Their importance derives from their prevalence, their role in agricultural and economic development and the concentration of poverty in rural areas. Most smallholders are vulnerable to economic and climatic shocks and spread their risk by diversifying their sources of livelihood, often including significant off-farm income generating activities. The perceived risk of these future changes is a strong disincentive to investment in agriculture. Investments in alternative crops and entering new markets that may provide them with better prospects can be extremely difficult due to the need for economies of scale. Many countries have a agricultural policy and poverty reduction strategy that explicitly supports the inclusion of smallholders in markets.

In many countries, it is not the policy, as such, but the budgetary, technical and/or administrative implementation of the specific policy that falls short and needs to be adjusted to generate positive impact for smallholders. Policy instruments and institutional arrangements have to be designed and built in a technically feasible and effective way for the objective of poverty reduction and food security to be reached. And learning between countries on the pros and cons of these instruments is key in this innovation and policy design process.

ESFIM’s overall objective is to generate demand-driven action research supportive to the policy activities undertaken by FO’s within the IFAP network to strengthen the capacities of smallholder farmers in developing countries to generate remunerative cash income from markets by creating an enabling policy and regulatory environment as well as effective economic organizations and institutions.