Contract Farming as a Last-resort Option to Finance Rice Cultivation in Senegal

We investigate the role of contracts in farmers' access to credit over time using the conceptual framework of livelihoods and the economics of rural organisations. We applied multi-component analysis to a dataset of 594 rice farms in the Senegal river valley, analysed changes in 72 producer organisations' funding strategies over time, and conducted 85 semi-directed interviews. Results show that individual farmers' participation in contract farming varies over time, mainly depending on the availability of their financing capital. While bank creditworthy farmers use tripartite marketing contracts to remain in the formal segment of the credit market, indebted farmers use production contracts as a last-resort credit option before they are excluded from the credit market. We discuss the positive contributions contracts make to farmers' livelihoods as they correct failures on the credit market, but they can also trap farmers in less economically profitable relationships.

Automated summary

The study found that farmers' participation in contract farming varies over time depending on the availability of financing capital. While creditworthy farmers use tripartite marketing contracts to stay in the formal credit market, indebted farmers turn to production contracts as a last resort credit option.