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Pathways out of Poverty: Income diversification or specialisation? Empirical evidence from poverty-exiting households in rural Kenya


Research Institution:

Institute for African Studies, University of Leipzig (Germany)



The development of agricultural value chains is assumed to support pro-poor rural development, especially where smallholder farmers in developing countries are involved. Therefore, development agencies, governments and private sector have invested a lot of resources to prevent the exclusion of smallholders from global and local markets and to integrate them in agricultural value chains over the past decade. But what are the social and economic impacts of these development investments? Have rural households exited poverty due to value chain integration? And if so, have they succeeded to improve their living standards income specialisation or income diversification?

This research states that even though value chain integration of African smallholder farmers has been subject to a vivid debate in the agricultural research and among development practitioners, a comprehensive analysis of rural income development and related poverty impacts of commercial agricultural development is still hard to find. Consequently, the author discusses the reasons why poverty impact assessments are so difficult, why they are rarely undertaken and what could be done about it from a research as well as from a development practitioner’s perspective. Since welfare benefits from specific agricultural activities are often hard to analyse from quantitative data and statistics, an innovative methodology is proposed. The paper presents an approach that combines available poverty data with household panel data and monitoring data from value chain development projects, following the q-squared paradigm of combining quantitative with qualitative analysis. Thus, this research aims at closing part of the existing knowledge gap about household income effects and poverty impacts of agricultural value chain development projects, in particular the question whether value chain participation leads to income diversification or income specialisation.

Empirical evidence is provided by results from recent field research in rural Kenya. Out of a ten-year panel data set from 1275 rural households (Tegemeo Institute Data; 1997, 2000, 2004, 2007), half of all poverty exiting, agricultural households took part in in-depths qualitative follow-up interviews in March 2010. Analysing the narrated reasons for their upward trend in different sources of household incomes by intensive case-by-case analysis of crop, livestock and off-farm incomes, this research gives the unique opportunity to better understand poverty-exiting reasons and to attribute poverty dynamics to specific agricultural activities (hence to specific agricultural value chains).

First results indicate that against conventional wisdom, successful value chain participating households tend to have diversified their sources of incomes instead of specialising in one or few crop or livestock activities. Changing household needs over time, as well as the changing household resources, in particular family labour and social expenses, seem to play an equally important role than increases in crop and livestock productivity. Therefore, the author argues that even though value chain promotion can clearly support rural households in exiting poverty, household demography and related priority investments, such as payments for child education or health care, need to be taken into account for agricultural development cooperation in order to reach out to a larger target group and to deliver on the promise of pro-poor rural growth.

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