smallholder quality penalty


An op-ed by Harsha de Silva, PhD, in Daily Star, Bangladesh focuses on the Smallholder Quality Penalty (SQP) in the jute supply chains. The SQP is the financial penalty on the market price imposed on the smallholder by the first-handler (generally a collector) due to uncertainty over produce quality. This allows the first-handler to offset potential losses due to the perception of lower quality when selling to the next handler downstream. The SQP exists in most transactions in the supply chain. LIRNEasia research on the jute supply chain conducted in 2011 revealed that the SQP is imposed upon smallholders in the Bangladeshi jute industry.
The smallholder quality penalty, defined below, is the key concept emerging out of the agriculture supply chains work conducted by LIRNEasia in 2010-12: The Smallholder Quality Penalty is the financial penalty on the market price imposed on the smallholder by the first-handler (mostly a collector) due to the uncertainty of produce quality. This allows the first-handler to offset potential losses due to the perception of lower quality when selling to the next handler downstream. Thus the SQP exists in most transactions in supply chains that involve smallholders. SQP is based on perception and maybe partly justified. Smallholders are often resource-constrained and are unable to make the investments necessary to ensure quality.
Theme: Can ICT benefit the small farmers? “Putting Farmers First” Chair: Mr. Vikas Nath, Associate Director, Future of the United Nations Project, Switzerland Speakers: Dr. Harsha de Silva, Member of Parliament, Consultant Lead Economist, LIRNEasia, Sri Lanka Can ICT benefit small farmers? Tackling Smallholder Quality Penalty  |Presentation | Ms.