How Inclusive Is Inclusive? A Critical Analysis of an Agribusiness Initiative in Kenya

Abstract

Inclusive agribusiness considers social and environmental goals in global value chains in agribusiness. However, not all small-scale farmers may be able to benefit from such arrangements. To find out about possible reasons for exclusion, this study investigates an agribusiness initiative in coastal Kenya employing organic contract farming by applying a mixed-methods research design based on household sampling of the recruitment procedure, as well as interviews with the farmers and company representatives. The findings suggest that sustainability standards may impede small-scale farmers’ participation in agribusiness. Specifically, the implementation of organic certification, essential for the functionality of the company business models, contributes most to small-scale farmer exclusion. Companies, clients, and, most importantly, certifiers should be aware of this problem and look for appropriate measures to overcome this unwanted effect of standard-setting in inclusive businesses.

1. Introduction

Global value chains in agribusiness have become fundamental to satisfy the world’s demand for food and materials [1,2]. Related production already occupies 40 percent of the Earth’s land surface [3]. However, agribusiness is also known for its environmental and socioeconomic drawbacks, including pollution, environmental degradation, and greenhouse gas emissions [4], as well as an unfair distribution of costs and benefits among chain actors grounded in structural power asymmetries [5,6,7].

To address these drawbacks, inclusive agribusiness models have become a popular narrative among companies, development organizations, and governments [7,8,9]. Inclusive agribusiness promotes the fair participation of small-scale farmers in agricultural value chains and combines economic profitability with social and environmental values [8,10]. Accordingly, it is expected to act as an institutional solution to market failures, such as information asymmetries in insurance, input, and financial markets, and to reduce transaction costs [11]. Private companies, in particular small- and medium-sized enterprises, are the leading agent in inclusive agribusiness initiatives, due to their capacity in raising and applying capital and longstanding economic interests [12,13,14,15,16]. Social entrepreneurship in the private sector has triggered the emergence of initiatives seeking to improve livelihoods while strengthening the supply chain of businesses [17,18]. Non-chain actors such as NGOs, farmer associations, and local governments act as facilitators to ensure conditions that companies cannot create on their own [7,8,19,20,21].

In the global South, the concept of inclusive agribusiness is implemented mainly in the form of contract farming models [22,23,24] that foresee formal partnership agreements between a company and farmers, whereby the company provides inputs, technical advice, and a ready market to farmers who, in turn, supply produce [5,25]. While inclusive agribusiness initiatives in Europe, commonly referred to as social farming [26,27], have a stronger focus on the inclusion of disabled people, initiatives in the global South promote the integration of poor and disadvantaged small-scale farmers, including women and marginalized households, into agricultural value chains for primary production [17,28]. Scholarly discourses around inclusive agribusiness support the inclusion of the poor as producers as a means to generate socio-economic value and alleviate poverty while ensuring economic viability [29,30].

To secure access to attractive markets, inclusive agribusiness commonly operates under certification and product standards that monitor the quality of the products and their positive impacts on the participating farmers and environment, to guarantee access to related markets in economically developed countries [5,31,32,33]. Sustainability standards have gained importance in the agricultural production of many non-OECD countries in Africa, Latin America, and East Asia [34,35]. Particularly, sub-Saharan Africa (SSA) has experienced a rapid increase in organic certification [36,37].

The notion of inclusiveness is a central element of the approach [10,38]. The more a company involves local farmers, particularly the most marginalized, and the more of the value is shared with them, the greater the degree of inclusiveness [7,39]. In practice, however, it remains unclear to what degree this goal is achieved, as most studies on contract farming analyze the effects of participation on farmers by comparing participants with non-participants (see [40,41,42] for inclusion and [43,44,45] for exclusion), but insufficiently address the reasons for and against participation. Several studies indicate that not all initiatives sufficiently achieve the goal of inclusion, due to a bias of companies in selecting better-off farmers [20,46,47,48], to reduce transaction costs, to ensure economic success, and to comply with quality standards [38,49,50,51], exacerbated by the risk-averse and less informed acting of poorer farmers [5,48,52,53,54]. The practical significance of such reasons, however, remains obscure due to a lack of empirical studies in this regard [55,56,57,58,59]

To enable a high level of inclusion of future inclusive business initiatives, this study seeks to better understand possible reasons for the exclusion of small-scale farmers from inclusive business initiatives. We first invest in systematizing from the literature possible reasons for the lack of inclusion of small-scale farmers in contractual arrangements (Section 2). In a second step, we then elicit their practical significance by examining in-depth the case of a company working with contract farming for the production of organically certified moringa (Moringa Oleifera) in coastal Kenya (Section 3). Based on our findings (Section 4), we finally discuss how agribusiness can achieve a greater degree of inclusion (Section 5).

2. Literature Review on Determinants of Participation

The reasons for establishing or not establishing a partnership in contract farming essentially result from the selection criteria and the preferences of the two central actors involved, the company and the farmers [54], and their capacity and willingness to comply with these. Thus, the company only offers contracts to those farmers that meet its selection criteria (qualification) [5,51], which in turn are shaped by the company’s motivation, attributes, and geographic location [60,61]. For their part, farmers may or may not be willing to participate in such a contract. Their willingness depends on weighing up the subjectively perceived costs and benefits (economic, environmental, and social) associated with the contract offered and compared with existing alternatives. The characteristics of the farmer and the farm influence this assessment. From the confrontation between the decisions of the company and the farmers, four options emerge (Figure 1): (1) the conclusion of a contract, in the case that the farmer is offered a contract (qualified) and wants it (willing); and three options for not forming a partnership: (2) the farmer wants a contract but does not receive an offer (willing but non-qualified), (3) the farmer receives an offer but does not want a contract (qualified but not willing); and (4) the farmer is not offered a contract but would not have accepted anyhow (neither qualified nor willing).

2.1. Company Choice

Companies committed to inclusive business follow the idea of corporate social responsibility and aim to enhance the economic and social conditions in the farming communities in which it operates [19,62], and to find methods for more environmentally friendly production [5,6,33,63]. However, also for such companies, the possibility to generate profits guides and constrains their action. Accordingly, consideration of environmental and social objectives must not compromise the companies’ economic objectives [7].

The specific motivations of a company and its criteria for the selection of farmers may vary with the commodity under production, its size, whether it is a start-up or settled, the available financial and human resources, and its corporate culture and identity [61,64]. Nevertheless, there are some key criteria. Most importantly, companies typically source farmers from areas with agro-ecological [5,65,66,67] and infrastructural conditions [5,54,61,66] suitable to produce the desired quantities in the needed qualities. Thus, farmers living in remote areas with unfavorable conditions are less likely to be offered contracts [5]. Companies also favor contracts with farmers with larger properties [61,68,69,70,71]. Additionally, the availability of equipment and machinery, and access to irrigation play a role [41,51,72,73]. Companies prefer contracting farmers with higher levels of education, technical abilities, and more experience [5], also because such farmers more easily tap into relevant social networks [5]. Accordingly, companies may ignore farmers that lack the resources to finance fertilizers, seeds, and pesticides [5,50,51]. There are also indications that the companies discriminate against women households [74].

Certification, due to its importance for inclusive agribusiness initiatives engaged in food export [5,75], influences the company’s choice of local farmers. Organic certification schemes targeting European and North American markets have witnessed considerable growth, particularly in sub-Saharan Africa [36,76]. Certification may have ambivalent effects concerning inclusion. Certification may stimulate companies to include economically weaker or marginalized producers [33,37] and to support these farmers to upgrade their farming system [34,35,77]. However, certification may also imply discrimination against disadvantaged farmers less equipped to comply with the standard [34,38,78]. This is particularly relevant for organic food safety standards [79,80,81].

2.2. Farmer Choice

The motivation of farmers to participate in inclusive business partnerships relates to the subjectively perceived costs and benefits of the offered contract [25,47,72,73,74]. Expected utility theory [5,57,82] suggests that the farmer compares the utility values of the expected outcomes of a decision in favor of a contract with those of existing alternatives, essentially referring to a business-as-usual scenario [83]. Accordingly, a farmer is interested in participating if the perceived net benefit of involvement is higher compared to not getting involved [5]. This subjective assessment includes economic, environmental, and social aspects.

Regarding the economic dimension, the aspects of profit maximization [5,57,82,84,85,86] and risk reduction [5,57,82,85,86] especially play a role. It is generally assumed that farmers benefit from contract farming not only because of income effects but also due to better access to production inputs, markets, and technical assistance [5,25,87,88]. Farmers also benefit from efficiency gains resulting from cooperation with other farmers and the companies’ logistical capacity [89]. However, contract farming is also associated with costs for the farmers [57,90]. Most importantly, companies may abuse monopsony power and renege on the terms of the contract that may result in underpayment, delayed payments, and the possibility for contractual adjustments at the expense of the farmers [6,57,90]. Additionally, the need to comply with enhanced quality and sanitary requirements may involve costly adjustments to the original production modes [90]. Moreover, the reduction of autonomy and flexibility may deter farmers from participating [82]. Particularly, the implementation of sustainability standards involves high labor costs and productivity loss, especially during the transition period [91], and requires major changes from the farmer who especially dislike bans from fertilizers and pesticides [34,35,36,78,84,92]. On the other hand, compliance with environmental standards can trigger management improvement with positive effects on yields, soil fertility, and the occurrence of weeds [35], which motivate farmers [36,92,93,94]. Additionally, better hygiene and health conditions could play a positive role [34].

Concerning the social dimension of contract farming, farmer’s motivations are particularly affected by the need and possibility to more intensively cooperate with their peers [93,95]. In general terms, farmers validate cooperation with their peers as a way to receive social recognition and to strengthen their information network [96]. Additionally, the self-satisfaction and pride that farmers derive from growing crops for export and the associated higher status achieved in their community can increase their willingness to participate [97]. However, farmers may be also concerned about losing social recognition, because of the cooperation with outsiders [66,81]. Higher levels of social capital may increase the likelihood of participation [91,98], as well as confidence in the company [5,85,98]. The latter can be seriously affected by delayed payments or reneging on contracts [5,57,98]. Farmers may wait and see how an initiative develops before committing [5], but observing the success of social peers may quickly increase their willingness to join [99,100].

3. Materials and Methods

3.1. The Studied Initiative

To better understand the phenomenon of inclusiveness in the context of inclusive agribusiness, we studied the contract farming model of a company (60 employees and 140 outgrowers) that recruits small-scale farmers across Kwale County in coastal Kenya (Figure 2) to produce organically certified moringa powder for tea or as food additives. The studied initiative can be considered a medium-sized social entrepreneurship that envisions significantly contributing to poverty alleviation by integrating poor small-scale farmers into their value chain in commercially viable ways. It seeks to produce healthy Moringa products for export and local consumption. Moringa (Moringa oleifera) is a fast-growing, multi-purpose vegetal species in the tropics known for its high nutritional values and excellent capacities as a nutrient carrier [101,102]. Fruits can be harvested in the early stages weekly. The county shows good natural conditions for moringa production and has experienced a rapid increase in agricultural land under organic production and agroforestry systems, partly responding to national policies to achieve 10% tree cover in agricultural landscapes [103]. Kwale is further divided into four sub-counties, wards, locations, sub-locations, and villages, with the ward representing the smallest administrative unit. Agricultural productivity varies greatly across the county with the highest productivity levels for fruit and vegetable crops in the sub-counties Msambwueni and Matuga.

More than 50,000 small-scale farmers live in the county, belonging to a multiplicity of ethnic groups (e.g., Digo, Durumas, Kamba, and Kikuju) due to a century-long process of immigration [105]. Most small-scale farmers own less than 2 ha of land, and grow subsistence crops, with one or two cash crops for local markets (maize, sugar, cassava), based on intercropping or in mixed systems possibly including livestock. Farmers apply a combination of organic manure and chemical fertilizers and use simple equipment such as hoes, machetes, and, in some cases, plows. Farm labor relies on family members, occasionally complemented by one or two temporarily hired laborers. Agricultural extension services are common to the region but haveincreasingly shifted from the government to the private sector due to a shortage of funds faced by county governments.

Ultimately, the company envisages contracting up to 500 farmers to produce on 2000 acres. Since the start of the initiative in June 2018, 140 farmers have already been recruited mainly from the sub-counties Matuga and Msambwueni. Contracts are offered to farmers based on household visits. Each day, the company’s outgrower manager randomly selects five to ten households in places that show favorable production conditions. In a standardized procedure, the households are provided with information on moringa production and the various benefits of a contractual arrangement such as the provision of a ready market, price security, the supply of high-quality seeds, the provision of transportation, and harvesting services. Additionally, a calculation of the revenue is illustrated. The outgrower manager also asks a range of questions particularly referring to soil conditions and other farm attributes. Finally, a soil sample is taken for later analysis. Additionally, farmers who express interest during community meetings organized by the companies are visited at their farms. If the visited farmer fulfills all selection criteria, a contract is offered.

The contract specifies what the company expects from the farmer and what the farmer will receive from the company [106]. The farmer is offered a fixed price of 0.16 USD/kg (18 khs/kg) for the crop before planting. The company further provides seeds against a fixed cost recovery upon delivery of harvest. Farmers receive training in organic farming and other good agricultural practices. Finally, the company also helps the farmers in harvesting, drying, pre-processing, and the transport of the perishable moringa leaves to guarantee compliance with strict export quality criteria. Every week, the produced powder is collected at the farm gate and brought to the company’s plant situated in Ukunda, where it is packed. From there, the bulk production is transported to Mombasa, where containers with organic value-added agricultural products are shipped to the USA and Europe. The contract has a term of 10 years and can be extended under mutually agreed conditions. Payments are made at harvest at the farm gate. The contract guarantees the purchase of the harvest but prohibits sale to third parties.

To tap into the potential of profitable markets for organically produced moringa, LWW applied for certification for organic farming from Ecocert [107], and sustainable agriculture from Rainforest Alliance [108]. Ecocert is an inspection and certification body that has become a global benchmark for organic certification. The standard includes farming principles such as the prohibition of synthetic chemical inputs, and the obligation to attend training. Certification by Ecocert involves yearly inspection visits by third parties. Rainforest Alliance sustainable agriculture certification follows a broader approach and applies to the whole farm, not just to the certified crop. It includes conservation measures such as the planting of indigenous tree species and measures for water conservation and foresees training about sustainable agricultural practices organized by own staff. Inspection visits of outgrower farms also take place once per year.

3.2. Methods

3.2.1. Case Selection

The case study has been carefully targeted based on representativeness for inclusive agribusiness initiatives in size, business model, and company vision. The business model criteria included the application of sustainability certification, organic contract farming, social entrepreneurship, and small-scale farmer value chain integration. The criteria for the company vision comprised the aim for poverty alleviation through female and male small-scale farmer inclusion as well as the provision of healthy and affordable products for the poor. In addition, we purposefully selected an initiative that is in the process of recruiting new farmers to study the problem of selection under randomized conditions.

3.2.2. Data Collection and Analysis

Data were gathered during 3 months in 2019 in five steps. As a first step, we invested in generating a general understanding of the case study context by carrying out expert interviews with company officials, officers from the agricultural department of Kwale County, and other agribusiness initiatives in coastal Kenya, as well as by studying available maps, reports, and statistics on the region. To learn about the specific conditions in the county and the company’s actions, we then accompanied the company’s outgrower manager in household visits and visited households across all wards from which the company sources farmers. In the third step, we directly asked company managers about their criteria for the selection of farmers and the motivations behind them. We then confronted the identified selection criteria with the principles of the two applied certification schemes to assess the possible practical relevance of the latter. In the fourth step, we randomly selected 33 households when accompanying the outgrower manager during the recruitment process, as well as households participating in the community workshops, to quantitatively assess the proportions of concluded contracts (willing and qualified) and the three groups in which no partnership was established (not willing but qualified; willing but not qualified; neither qualified nor willing). Households were selected from all wards of the company’s sourcing region and classified into the four possible categories. For each household, we documented farm and farmer attributes possibly relevant for selection. We considered land size, land ownership, agricultural technology, and accessibility as farm attributes, whereas age, gender, level of education, access to credit, and financial resources were classified as attributes of the farmer. Finally, in the fifth step, we selected from the company’s farmer database five farmers from each of these four categories for in-depth interviews to better understand their motivations and preferences for and against a partnership with the company. In each group, we considered farmers from all wards in which the company operated. For each category, we recruited households until saturation and variety of motivations and preferences were reached. The interview included a standardized survey as well as open questions about the aspects outlined in the conceptual framework (Figure 1) and questions about preferences for contractual attribute alternatives.

After each interview, the statements of the farmers were qualitatively assessed and scored between 1 to 10 concerning each determinant of (non-) participation. The gathered household data were organized in EXCEL and in cross analytical tables to calculate total proportions and compare values between participants and non-participants, and the four sub-categories willing and qualified; qualified but not willing; willing but not qualified; and neither qualified and nor willing.

4. Results

Our study revealed that only a third of the farmer households had the chance and the willingness to participate in the studied initiative and that the vast majority of the households did not participate. Nearly half of the farm households did not meet the requirements for cooperation, and many other households lacked the interest for entering into such a partnership (Figure 3).

4.1. Company Choice

Our analysis showed that the establishment of a partnership was determined more by the company than it was a decision of the farmers. The company had a comprehensive list of selection criteria to assess the eligibility of a farm (not so much the farmer) for cooperation, most of them related to the company’s strategic desire to access markets for certified organic products (

Table 1. Company’s selection criteria and their relevance to the Ecocert Organic Farming Standard and Rainforest Alliance Sustainable Agriculture Standard principles and criteria.

Company’s Selection Criteria	Ecocert	Rainforest Alliance
Prior use of inorganic fertilizers over the past three years	1	2
Compost manure application through cow dung heaping <3 months	1	2
Lack of landownership		1
Partial organic production on cascading farmland	1
On-farm charcoal burning	1
Buffer zone to conventional farms <15 m to conventional farmland	1	-
Unsuitable bio-physical farm conditions	-	-
Land availability <1 acre	-	-
Access to roads	-	-
Proximity to the processing plant for organic moringa leaf powder	-	-

1: indispensable to obtain certification; 2: can be fulfilled over six years from initial certification.

).

Six out of the ten company selection criteria are directly associated with criteria from sustainability standards, predominantly coming from the Ecocert Standard for organic farming. The company took into consideration one out of the four principles of organic production—the strict limitation of chemically synthesized inputs—as well as the production rule, which requires a minimum conversion period of three years before the first harvest of organic products. These aspects directly translate into the first company selection criteria listed in Table 1—the prohibition of prior use of inorganic fertilizers over the past three years. The company selection criteria, including the prohibition of partial organic production on cascading farmland and the requirement of a minimum buffer zone of 15 m to conventional farmland, are based on the combination of the Ecocert general farm production rule on crop mixity and minimum control rules. Thereby, not all units of a holding may be used for organic production as long as precautionary measures are taken to reduce the risk of contamination by unauthorized products. The company criteria on the application of cowdung for farm manure was mostly grounded in the plant and livestock production rules. These rules declare that the fertility and biological activity of the soil shall be maintained and increased by the application of composted livestock manure or organic material from organic production. The prohibition of on-farm charcoal burning relied mostly on the plant production rule on soil management and fertilization, which states that all plant production techniques used shall prevent or minimize any contribution to the contamination of the environment. Notably, all Ecocert principles and rules considered by the company were indispensable to obtain certification.

The overlap with the Rainforest Alliance Sustainable Agriculture Standard was less accentuated. Most importantly, the principle on improved livelihoods and human wellbeing added land ownership as a critical criterion. All other principles affecting company selection criteria 1 and 2 contained continuous improvement criteria, which can be fulfilled over six years from initial certification, but did not result in exclusion during the contract formation stage.

Only the four selection criteria of the company that addressed cost and productivity concerns had no equivalent in the certification standards. This suggests a great influence of certification standards on the inclusion of small-scale farmers.

The company’s selection criteria in our case study had a high relevance in the selection process, as the company did not offer contracts to many willingly cooperative farmers that did not meet these requirements. In most cases, households were disqualified for at least two of the reasons listed in

Table 2. Company’s selection criteria and related proportion of disregarded households (N = 33) due to specific farm attributes.

Farm Attributes	Disregarded Households (%)
Prior use of chemical fertilizers during the last three years	46
Partial organic production on cascading farmland	30
Land availability <1 acre	20
Compost manure application through cow dung heaping <3 months	13
Lack of land ownership	13
Unsuitable bio-physical farm conditions	7
On-farm charcoal burning	0
Buffer zone to conventional farmland <15 m	0
Lack of accessibility	0
Proximity to the processing plant for organic moringa powder	0

.

More specifically, almost half of the households were not considered for cooperation due to the prior use of chemical fertilizers during the last three years. Ironically, many of those households did not apply agrochemicals themselves or used chemical fertilizers only on smaller parts of their land. However, due to the hilly topography and the farmers’ habit of cultivating higher situated land first, the company did not want to risk chemical spill-overs from uphill conventionally treated land or neighboring farms, even though most households would have been able to establish a 15 m buffer zone. Some households were also disregarded because of not meeting the on-farm composting method requirement established in the organic farming standard. These households were unfamiliar with scientific organic farming practices, and composted manure for less than three months, a minimum period set by the company to ensure the deterioration of potential inorganic substances resulting from processed animal food. Together, the non-compliance with those organic farming requirements was by far the most important reason for the lack of consideration.

The certification implies that many contractual conditions are associated with compliance with the standard principles. This translates to several requirements and responsibilities for out-growers. To ensure profitability, the company realizes economies of scale by requiring a minimum production of one acre and a relatively small spacing of the moringa trees (44 cm). Partly related to this, a fifth of the farming households were disregarded because they could not guarantee at least one acre of land for the cultivation of moringa trees as required by the company. This was particularly relevant for smaller farms but occasionally also affected larger farms that, due to limited capital or family workforce, were not able to intensively manage such a large area. In the study area, half of the farms were larger than five acres, but on average, households cultivated only 30 percent of their land. On the contrary, the lack of land ownership was not a major reason for exclusion, as almost all households had formal rights to land and resources, whether communal or private. This criterion applied only to those few farmers that acted as caretakers for landowners not living in the area. Additionally, bio-physical conditions did not play a role in the analyzed case, because in all farms water availability and soil fertility were sufficient for the cultivation of the envisaged crop. Additionally, the other selection criteria were met by all households and thus did not play a role in our case study.

4.2. Farmers Choice

As a result of the company’s selection, some farmers were offered a contract and others not. In both cases, farmers could have been either willing or not willing to participate. Our analysis revealed that two-thirds of all farmers were interested to participate in the initiative, mostly for economic reasons. Those farmers willing to participate mentioned at least one or two motivations. Almost all of them (90%) indicated expectations of higher income as the first and most important reason. A total of 70% also mentioned health benefits due to the tree’s medicinal and nutritional values. Other social benefits perceived by farmers included the acquisition of knowledge associated with the provision of technical assistance and the possibility to access new social networks. Roughly a third of the farmers explicitly highlighted that the initiative would provide them with the possibility to meet and interact with other farmers. Less frequently, the farmers named environmental benefits associated with organic farming practices such as expectations of reduced soil degradation and increasing soil fertility as indicated by the concern of a cooperating farmer: “…Fertilizers disable the function of the bacteria. They have a kind of burning effect on the soil. The pH rises so high after some time…I don’t know why…”.

We also asked the farmers about which of the features in the offered contract met their expectations and preferences (

Table 3. Compatibility of contract attributes with the farmer’s preferences.

Contract Attribute	Proportions of Farmers for Whom the Feature Was:
	Decisive	Desirable
Harvesting arrangement: Provision of harvesting service by company	100%	100%
Market access: Guaranteed access to international markets	100%	100%
Input arrangement: Certified seed supply by the company	100%	100%
Technical assistance: Provided by the company	80%	100%
Transportation: Pick up at farm gate	80%	80%
Contract form: Written	80%	70%
Mode of payment: Fixed price	30%	40%
Contract duration: 10 years	0%	30%
Compliance with the organic farming standard *	5%	30%

* no use of chemical fertilizers and no cow dung heaping below three months.

).

Some features of the contract were a prerequisite for nearly all farmers to sign the contract. This included particularly the provision of logistics, a ready market, production inputs, technical assistance, and the existence of a written contract. Additionally, the delivery of harvesting services, guaranteed market access, and the provision of organically certified seeds and technical assistance were considered as particularly important. Less relevant were the mode of payment and the duration of the contract. However, most farmers would have preferred variable prices and shorter contract duration. Aspects of organic farming played a role in contract acceptance only for a minority. However, one-third of the respondents expressed a preference for organic farming due to concerns with depleting soil fertility. Nevertheless, they had also accepted a contract that provided for the use of chemical fertilizers.

Only a third of the interviewed households were not interested to cooperate with the company. Almost half of these farmers were afraid of the possibility of non-performance or termination of the contract from the company’s side because they had already had negative experiences with other companies in this respect. Of the rejecting farmers, 40% either did not understand the information provided by LWW or felt insufficiently informed, particularly about the input costs of the suggested organic farming scheme. One farmer not selected by LWW stated: “…The people who came, did not give me any clear information. I want somebody to explain well what exactly and how much I am going to earn. The advantages, the disadvantages…”. Such a critique was expressed more often by farmers with a higher formal educational level. More than a third of the farmers who were not interested in co-operating with LWW understood that conventional mixed production of cash crops and subsistence crops was more attractive, so they were reluctant to invest their limited financial resources and labor in the proposed resource-intensive arrangement for organic farming. One-third of the not interested farmers had concerns with organic farming because of the need to give up their conventional farming practices as a consequence of limited space and to avoid chemical spillovers. One farmer who was not considered by LWW said “…Many people have planted trees in their gardens, as it is common for this area, and people have small farms, so they don’t have space. Moringa needs a lot of space and you cannot intercrop…”.

Our interviews also showed that farmers validate such important decisions with their peers to guarantee social recognition. In our case study, this practice influenced the farmers’ decisions differently. One-third of farmers not interested in cooperating with LWW changed their initially positive attitude after having discussed the issue with family members. It became also clear that local authorities had a strong influence on the farmer’s decision making. More than 20% of the farmers reported that they accepted the contract blindly because the chairman told them to sign on. Another 20% indicated to first want to see the success of others before entering into a contract.

4.3. Biases

Our analysis showed that the group of farmers selected by the company had particular characteristics in terms of income, gender, and education. On average, the participating farmers earned nearly ten times the average monthly income compared to the not selected yet interested farmers, with one exception. Only 10% of the selected farms were headed by a woman, compared to non-participating households, of which one-third were headed by women. Usually, women acted as the head of the household only when the husband had died. These women refused to participate because they were concerned about the recognition of such a decision by their children. In contrast, male heads of the household stated that they did not need to discuss their decisions with the rest of the family. There were no cases in which women who were not the household head were confirmed to participate in the absence of the husband. Finally, a strong influence was found of the level of education on the possibility and the interest to participate in cooperation arrangements. Almost all farmers who were interested yet not eligible for the cooperation only attended primary school, whereas the participating farmers all had attained secondary or even tertiary education. Accordingly, formal education positively influenced eligibility. However, the interest of farmers in participating was also influenced by the level of their education, mainly because the farmers with less formal education had difficulties understanding the content of the contract. Illiteracy among the farmers made the communication of contractual conditions difficult, and the fact that the contract was written in English and not translated into Swahili further exacerbated misunderstanding. Farmers that did not understand the income and cost ramifications of the contractual agreements preferred their way of crop production, which they perceived as more certain with regard to productivity. Farmers with a lower formal education level were also more likely to be poor, which may also make them risk-averse to new modes of production.

5. Discussion

The presented empirical findings rely on a single case study and a limited sample size. However, the studied situation was carefully selected and could be considered representative for many other inclusive business initiatives that apply contract farming arrangements to integrate local farmers in sub-Saharan Africa and elsewhere to global markets for certified food products. Accordingly, it can be assumed that the presented insights show typical challenges of such initiatives to comply with the goal of inclusiveness, particularly the limited agency of the farmers and the impact of certification. Furthermore, we acknowledge that a company’s choice of procurement location is a strategic decision, whereby farmers are sourced based on agro-ecological suitability and transaction costs. The studied sample only contains farmers from the company’s sourcing region. Consequently, certain farm attributes may be correlated with specific regional characteristics. The inclusion of farmers within and outside of the company’s region would account for possible selection bias.

The findings confirm that inclusive agribusiness does not include the entire range of small-scale farmers [7,20,46,47,48,59]. More than half of the farmers willing to participate were ignored by the company as they did not comply with their selection criteria. The less critical assessment of this aspect by other studies could be due to their different analytical lens on productivity and livelihood effects [40,41,42,88,109,110] or farmer’s motivations [57,82,85,97].

In our case study, the company’s need to meet the requirements of certification standards had a strong influence on the selection of the farmers, because its business model relied on attracting the sustainable organic food market [34]. This observation contradicts the common expectation that certification facilitates inclusiveness [33,37,111]. On the contrary, our study confirmed the concern that certification may imply the discrimination of poorly resourced farmers who are less equipped to comply with the quality requirements [78,79,80,112]. Following the observations of Handschuch et al. (2013), in our study, the farmers that were invited by the company to become a partner were on average wealthier, better educated, and, more often, headed by men, compared to the non-participating households. The interviews also showed that the selected better-off farmers were more open to adopting organic farming practices. Many of the poor and disadvantaged households, including those headed by woman, had been more risk-averse, and unable or unwilling to abandon their conventional mixed production of cash and subsistence crops, and use of chemical fertilizers. This was mainly for two reasons: first, because they require larger but unavailable labor input, and second, because their farms are too small to establish large enough buffer zones around their organically managed fields.

Our study indicates that the level of discrimination may differ between certification standards. In our case study, the Ecocert organic farming standard had a stronger influence than the Rainforest Alliance standard. The differential effects of certification standards were also observed by Chiputwa et al. (2015), who found that UTZ and organic certification had a less positive effect on local livelihoods compared to the Fair Trade standard. However, the degree of exclusion of local farmers due to organic farming standards can vary greatly depending on the context. The strong effect of certification found in our study may partly result from the hilly topography, which abets chemical spillovers. Nevertheless, the trend to shift technical assistance from the government to the private sector [50] in combination with the increasing importance of organic certification [36,76] may inevitably lead to a greater exclusion of poorer farmers.

Nonetheless, hard business criteria was not the only factor that contributed to the level of exclusion identified. Our findings confirmed that trust is also a critical issue and an important premise for the building of partnerships [47,98,113]. Almost half of the non-participating farmers were unwilling to enter into a partnership with the company due to the perceived risk of non-performance or abrupt termination of the contract by the company, a phenomenon frequently observed in challenging production and business contexts [114].

6. Conclusions

The study indicates that inclusive agribusiness is not necessarily inclusive. The implementation of strict organic certification may impede access to the poorest farmer households. Due to rigid production rules as well as larger requirements for land and labor, organic certification can result in the selection of wealthier, better educated, and men-headed households, who are less risk-averse compared to poorly resourced women-headed households. On the other hand, organic certification is the basis for many agribusiness incentives as it guarantees access to the attractive markets needed for a successful long-term engagement of the company to generate the desired livelihood and environmental effects at the local level. However, economic needs should not obscure the fact that fair and full involvement of local farmers is essential if the goals of the inclusive business are taken seriously.

Possibilities for Action and Future Research

The potential of organic certification in inclusive business to achieve a broader level of inclusion will depend on the interest of the upstream value chain actors, including the consumers. However, studies on consumer preferences indicate that they are more willing to pay a higher price for guaranteed health and environmental sustainability than for social inclusion [115]. This seriously limits the possibilities even for those companies targeting specifically the poorer producers.

In this situation, certification standards have a key role to play. They need to systematically explore possibilities to adapt the standards to the reality of poor farmers to balance the burden between producers and consumers. For example, compared to rigid organic farming standards, the Rainforest Alliance Standard considers the possibility for continuous improvement, which allows for and recognizes gradual fulfillment of criteria over time [108], and enables farmers with disadvantageous abilities and conditions to be included over time.

Collaboration and partnership between chain and non-chain actors could eventually address existing barriers to enter into certification. Doherty and Kittipanya-Ngam (2021) emphasize the need for hybrid organizing through governance structures that blend practices from private, public, and non-profit sector actors to create inclusive business conditions that companies cannot create on their own [104]. Additionally, the creation and strengthening of farmer associations may allow for an economy of scale that may also enable farmers with few assets to engage in organic farming. More collective marketing schemes could also help companies to reduce risks associated with the increased consideration of poorer households. However, all this requires the involvement of NGOs or other external facilitators that, in turn, provoke additional costs. This also shows how important access to adequate funding is. Multi-stakeholder forums can serve as a starting point to bring relevant actors together. However, much work is needed to better understand how such forums can be designed to become more effective in meeting their potential and purposes.

In the scenario that no collaboration with actors beyond the chain is taking place, organic contract farming may not be the best tool to achieve greater inclusiveness. Companies engaged in high-value tree crop farming may consider alternative production options that are less restrictive for small-scale farmers. An example could be found in agro-forestry systems, which present a more flexible and environmentally friendly production option that allows intercropping and thus puts small-scale farmers under less pressure to forgo alternative crop production.

Companies could respond to the diversity of farmer attributes and associated various levels of resources and assets by designing more distinct contracts for various farmer types. Measures to reduce exclusion could include improving the accessibility and clarity of existing contract language to make contract content more understandable to a greater breadth of farmers. To increase the level of trust, companies should ensure a farmer-friendly legal framework through clauses of insurance in case of contract reneging. Clear communication on input costs would also strengthen a sense of transparency and trust.

Larger empirical studies are needed to better understand the relationship between organic certification and the level of inclusion of farmers, as well as to elaborate well-defined technical and economic indices needed for finance. Meanwhile, inclusive businesses and non-chain actors, including certifiers, NGOs, and farmer associations, should find pragmatic solutions to the issue of exclusion. Considering the boom of such initiatives, there is no time to lose.