In his 20-year career as a social worker, Krishna Thapa had never seen farmers as happy as the small group of farmers in Dailekh. All of them were on their way back home from a nearby vegetable collection centre, where they had just sold different types of vegetables produced on their own farm.

Why were they so happy? We know that timely and stable access to a well-functioning agricultural market is necessary for an efficient and profitable agricultural production system. Lack of access to markets means it is costlier, less reliable and much more time-consuming to transport goods to the market.

Access to markets and market information is key to agricultural development and rural poverty reduction.

Reduced transaction costs can lead to higher farm revenue and encourage small-scale farmers to invest in growing high-value horticultural crops, such as fruits and vegetables, which otherwise might be too risky, given how perishable they are. Yet, it is unclear exactly how the reduction in transaction costs affects agricultural prices and sales. It is also unclear if and how value-chain interventions in difficult geographies, such as remote or mountainous areas, can lead to an increase in agricultural – and, therefore, household – incomes of small-scale farmers.

Lack of market access is one of the major bottlenecks for small-scale farmers in the remote and rugged Karnali region of Nepal.

Breathtaking hills and gorges mean traveling from one village to another on foot can take a full day, if not more; reaching regional markets can take much longer. The region has the poorest road network in the country, with more than 80 per cent of the population living farther than 2 km from the nearest road.

Agriculture remains a lowkey sector due to lack of inputs, credits and technical services.

Low agricultural productivity and lack of market access have contributed to extreme poverty, chronic food insecurity and malnutrition.

Farmers are reluctant to expand production as transaction costs are high and the terrain extremely difficult, despite the potential for high-value crops due to favourable agro-climatic conditions.

The farmers like Krishna Thapa ran into all faced these issues.

In 2011, the government, with support from the International Fund for Agricultural Development (IFAD) and SNV Netherlands Development Organisation, launched a 7-yearlong high-value agricultural project. The $18 million project supported more than 1 lakh farmers and about 500 producer organisations in seven districts.

Considering the difficulty in transporting goods to markets on time and lack of cold storages, the project supported high-value agricultural commodities with considerable post-harvest life – apple, ginger, turmeric, timur, vegetable seeds, off-season vegetables, and meat goats. The most innovative feature of the project was to connect rural farmers directly with regional and national traders as well as with financial institutions and technical experts from the district agricultural offices.

The project also supported formalisation of producer groups and cooperatives that provided multiple services, including collection of farm produce and microfinance.

Rapport-building between the rural farmers and different actors along the value-chain worked wonders. For example, despite no formal binding contracts, the project-induced personal connection between the farmers and traders kept growing over time.

A recent study conducted by researchers from IFAD, International Water Management Institute (IWMI) and University of Notre Dame shows that the project increased household incomes by 33 per cent(Rs12,500 per person per year) and most of the increase in household income came from a 51 per cent increase in agricultural revenue. Compared to the farmers who did not receive project support, beneficiary farmers sold 36 per cent higher amount of farm produce at slightly lower prices. Higher supply of project commodities at a slightly lower prices not only increased agricultural revenue but also improved food security.

The study found a 10 per cent decrease in household food insecurity due to the project. In essence, lower prices of project-supported commodities did not hurt the project farmers, as they could sell more and earn more, and it also benefitted the general population by bringing down local prices and making high-value food items more affordable to local consumers. Considering caste, ethnicity and gender related vulnerabilities in the region, the project had specifically targeted women and ethnic minority farmers – dalit, janajati and other marginalised groups. The study found that both women and ethnic minority farmers significantly benefitted, with 23 per cent(Rs7,800 per person per year) and 19 per cent(Rs6,400 per person per year) higher incomes for minority and female farmers respectively.

The rise in agricultural income was the highest for minority farmers. Both ethnic minority and women farmers also saw a significant decrease in household food insecurity.

Based on the findings, the authors of the study argue that agricultural value-chain development programmes may be more effective if farmers are connected directly with traders and other actors along the value chain. Also, rather than focusing on cereals and other grains grown traditionally, shifting towards high-value commodities with considerable postharvest shelf life can help farmers deal with lack of reliable access to the market.

Furthermore, a specifically targeted intervention can benefit the most vulnerable farmers if combined with personal connection with different actors along the value chain.

Kafle is an economist at IWMI based in Colombo, Sri Lanka and Songsermsawas is an economist at IFAD based in Rome, Italy

A version of this article appears in the print on July 30 2021, of The Himalayan Times.