Contract farming for potato: An attempt to include poor farmers in the value chain
The microfinance and livelihoods institution, BASIX, became involved with financing the potato value chain in Jharkhand, India in 2005. BASIX helped negotiate contracts between PepsiCo and small-scale potato farmers to supply agreed quantities of potatoes of a specified quality and price to PepsiCo's chip-making factory in Kolkata. Although in the first years the contract resulted in increased yields and higher incomes for the farmers, in later years farmers broke the contract as they found their potatoes were rejected at the factory, and they found they could achieve better prices in the open market. More was needed than finance only – stronger farmers’ organizations are necessary to make sure that contracts operate fairly.