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Abstract
This study assesses the performance of supply chains for two major export crops
produced in Nepal (ginger and large cardamom) from a smallholder perspective. It
aims to identify factors that constrain marketing choices available to smallholders,
limiting the chain’s robustness from their perspective. A qualitative case study
method was used to gather and analyse data on farmer-buyer dyads in the ginger and
cardamom chains. These case studies were informed by a conceptual model based on
Transaction Cost Economics. The analysis included a cross-case comparison to
identify the effects of exogenous chain attributes on the channels available to
smallholders. Informal market trading was the only form of smallholder engagement
observed in both chains. However, there was evidence that smallholders had
previously engaged in relational contracts in the ginger chain, and in ‘captive’
relational contracts in the cardamom chain. There was no evidence that smallholders
had ever engaged in either spot markets or conventional contracts in these chains.
Although the informal market channel continues to operate, the ginger and
cardamom chains are not robust from a smallholder perspective as producers are
unable to select channels that better match their risk-reward preferences. The
analysis suggests that access to other channels is constrained mainly by underinvestment
in value-adding assets. Government should give more attention to the
cooperative model that it supports to promote collective marketing. Traditional
cooperatives can and do help to resolve problems of asymmetric information and
high unit transaction costs, but more innovative cooperative models are required to
encourage the investment needed to finance value-adding assets and activities.