Growing Agribusiness Small and Medium Enterprises (SMEs) through Linkages with Lead Firms

Data analytics reveal best practices in linking SMEs and lead firms to serve global value chains.

Context

Dexis was commissioned to draw out best practices and lessons learned from various models used by public and private sector programs for stimulating the growth of agro-processing SMEs through linkages to larger firms in developing countries. The study considered the unique barriers that SMEs face and the market-driven approaches spurring SME growth by facilitating linkages to lead firms in challenging development contexts. Dexis presented approaches to successful, sustainable program design for public and private-sector-led initiatives to expand the opportunities for agro-processing and to attract lead firms to partner with smaller ones.

Approach

Using a three-pronged approach to data collection, analysis, and synthesis, Dexis conducted a literature review to identify results and outcomes of the recently implemented lead firm–SME linkage programs and identified examples of initiatives focused on linking lead firms and agro-processing SMEs in 66 countries throughout Africa, Asia, Eastern Europe, and Latin America. Dexis examined data from these projects in a meta-analysis to refine the literature review findings. Finally, Dexis selected six linkage initiatives with a broad range of projects in numerous locations for in-depth analysis as case studies.

Achievements

Dexis’ study revealed interesting trends in the differences between publicly and privately driven approaches:

• Private-sector lead firms tend to prefer smaller, tighter supplier bases, cultivating relationships with fewer yet stronger supplier networks. This approach tends to keep the number of SMEs reached (and consequently the number of farmers reached) lower for private interventions than for public ones.
• Private sector linkage projects are primarily focused on SMEs as processors and aggregators.
• Public initiatives are often regional and more inclined toward farmer outcomes, resulting in more farmers reached.

The full study can be found here.