value chain

The concept of value chain is explained in a working paper by the Swiss Agency for Development and Cooperation that highlights the most important issues that development agencies need to consider when they engage in value chain development in rural areas. The paper offers guiding principles for development practitioners and policy makers, and points to further useful material:
folder Donor Interventions in Value Chain Development (24 pp. PDF)

Value chain is a model based on the fact that a product is rarely directly consumed at the place of its production. It is transformed, combined with other products, transported, packaged, displayed etc. until it reaches the final consumer. In this process the raw materials, intermediate products and final products are owned by various actors who are linked by trade and services, and each add value to the product. Various types of public and private services, like business development services, electricity, transport, financial services, etc., are as important as favourable framework conditions, i.e. laws, regulations and their enforcement.

A Handbook for Value Chain Research (113 pp. PDF), prepared for the IDRC, provides a broad overview, defining value chains, introducing key concepts and discussing the contribution of value chain analysis as an analytical and policy tool in part 1 of the book. Part 2 is concerned with underlying theoretical constructs in value chain analysis. In Part 3 a layout of a methodology for undertaking value chain research is given.

Developing value chains that are within competitive industries has specific challenges when the majority of micro- and small enterprises are extremely poor. The paper Value Chain Development and the Poor (16 pp. PDF) draws from the experiences of SEEP members working on value chain development with the poor and presents lessons gleaned. Markets hold significant power to create or combat poverty. Increasingly, international development initiatives focused on economic growth and/or poverty alleviation are working to open existing markets to poor producers and consumers and make the benefits of well-functioning markets more widely accessible to the poor. The challenge for development practitioners is to promote economic growth strategies that improve the competitiveness of industries.