Value Chain Upgrading through Producer Organisations: Linking Smallholder Vegetable Farmers with Modern Retail Markets in Indonesia

Abstract

The study uses three elements of value chain analysis (VCA) – network structure, added value, and governance – to explore upgrading possibilities of value chains of producer organisations (PO)s in Indonesia in order to link smallholders to the modern retail market. Qualitative data are obtained through semi-structured interviews with PO members and other value chain actors. POs upgrade their value chains through linking smallholders with the modern retail market. Upgrading network structures is achieved by building collaboration between PO members and buyers. Upgrading added value is obtained by increasing the capability of farmers to meet quality requirements. Upgrading of governance structures in the chains is reached through contracts as vertical governance mechanisms and enhanced member services as horizontal arrangements.