10. April 2022

Turning the living income vision into a reality

Living income is a complex, multi-sector issue that requires a complex, multi-sector solution. The contextual factors affecting households, and specifically incomes of households, are many (see figure 1). There are a multitude of development practitioners coming together to solve this challenge, and SCOPEinsight is helping these efforts with a predictive model for development professionals who work with agribusinesses. We are convinced that, through coordinated and sustained effort, farmers in emerging markets can achieve a living income.

Figure 1: Key contextual factors for living income interventions

The living income challenge

Current estimates indicate that one in ten people worldwide live on under $1.90 a day, the threshold for extreme poverty. Approximately 80% of these people live in rural areas. Since living income is region-specific, it is challenging to calculate global percentages. Still, it can be safely assumed that the proportion of people worldwide who earn less than a living income is significantly higher than one in ten. It can also be assumed that many smallholder farmers worldwide fall into this category.

It is imperative to increase global income levels for many reasons, including to reach the UN's Sustainable Development Goal (SDG) of No Poverty by 2030. Unfortunately, increasing the incomes of smallholder farmers sustainably is a complex issue. Many short-term solutions, such as simply increasing market prices for produce, will cause additional challenges in the long term. It is also vital to increase incomes in an environmentally sustainable way and not, for example, by increasing farm size and yields through deforestation.

The issue of living income in agriculture is not a problem that smallholder farmers can solve alone. It is also not sufficient to constrain efforts solely within the agricultural sector. Efforts to solve this challenge must also come from the development sector, the private sector, and governments. A true solution to the living income challenge will require coordinated, well-designed efforts from all stakeholders involved.

Figure 2: The living income gap

It takes a village

Agriculture can be an enormous driver of growth in a country and a way out of poverty for rural farmers. However, the path to realizing this potential is a long way off for many countries. It must involve a multitude of actors who work in complementary ways.

Similarly, to increase farmers' income, many interventions need to come together to solve systemic problems. No one action should be taken alone because this may have unintended consequences. For example, a price increase can unwittingly induce oversupply and indirectly cause harmful effects on the environment that may lead to companies changing their sourcing strategies. Price increases should therefore be combined with other measures if implemented at scale.

Of course, interventions need to be guided by evidence and research. A 2018 study conducted through the Farmer Income Lab by Dalberg & Wageningen University identified a few interventions that had high and medium impact on living income. Among these were: access to finance, contract farming, and productivity enhancement.

Figure 3: Examples of typical interventions to help commodity farmers attain a living income

Using data and machine learning to predict living income

After eleven years and nearly 6,000 agribusiness assessments – each with over 200 datapoints – SCOPEinsight wanted to see what evidence we had to predict living income for farmers. While we do not collect farmer level data, we do collect a significant amount of information about agribusiness members. To develop the Living Income Predictor, we worked with NewForesight Consulting to first develop a theory of assessment. We then took the SCOPE data through a machine learning process to validate the theory and develop the model.

Figure 4: The SCOPEinsight living income model

We have found that six of the eight dimensions from our SCOPE Basic Assessment significantly impact living income. These are: internal management, operations, sustainability, production base, market, and enabling environment. By analyzing specific data from these dimensions, our model assesses the likelihood that the assessed agribusiness can play a role in helping its members earn a living income. If the likelihood is low, it also provides insight into what efforts the agribusiness should take to reach that level.

While agribusiness professionalism on its own is not enough to ensure a living income, we believe it can play a role in pushing the needle further and increasing overall income. A professional agribusiness can ensure a higher net farm income, bringing farmers closer to an overall living income. The model's guidance on strengths and weaknesses will help capacity builders target the areas that need the most help. Currently, we are conducting a household study in Côte d’Ivoire to further validate this model.

We are interested in getting even more proof points. Do you have farmer-level data that we can cross reference? Contact us today to discuss co-development opportunities: info(at)scopeinsight.com

Figure 5: The impact of professionalization on the living income gap