Impact Statement:
This study examines the effectiveness of contract farming in addressing the struggles of Kenyan smallholder banana farmers. The study finds that participating in contract farming leads to increased farm productivity and income for these farmers. These findings highlight the potential of contract farming to revitalize rural economies. To maximize these benefits, the research recommends policy changes, such as increased government support and improved infrastructure, to create a sustainable and mutually beneficial system for both farmers and food companies in Kenya.
Smallholder banana farmers in Kenya grapple with declining farm productivity and low market prices in a fragmented, broker-dominated market. To address these challenges, the Kenya National Banana Development Strategy advocates for the adoption of contract farming. This research utilizes Difference-in-Differences (DID) regression analysis to assess the impacts of smallholder participation in banana contract farming on farm productivity and income. The empirical results reveal positive impacts, emphasizing the potential of contract farming to enhance productivity, increase incomes for smallholder farmers, and invigorate rural economies. These findings provide valuable insights into the efficacy of contract farming as a strategy for addressing challenges in banana farming. To maximize this potential, the study recommends policy interventions, including increased government support, improvements in infrastructure and market accessibility, reinforced institutional backing, and the promotion of sustainable practices. These measures aim to secure enduring benefits for both farmers and food marketing firms in Kenya.
