Analysing The Performance Of Two Export-Oriented Spice Chains In Nepal: Taking The Smallholder Perspective

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.