2.1.

Theoretical Review

2.1.1. Overview about Smallholder Farming

About 2.5 billion people live directly on agricultural production systems, either as full- or part
time farmers, or as members of farming households that support farming activities (FAO, 2008).
Smallholders make up 85 percent of the world’s farmers and farms but own an average of just
two hectares of land (IFC, 2013). There is no cross cut definition for smallholder farm
household. According to Chamberlin (2008), the smallholder farmers are those with limited land
availability, poor-resource endowments, subsistence-oriented and highly vulnerable to risk.
Smallholder farm households are those who live in many countries significantly less than 2
hectares of land (FAO, 2015). For instance, average size of a smallholder farm in Bangladesh
and Viet Nam is 0.24 and 0.32 hectares respectively and it is 0.47 hectares in Kenya and 0.9
hectares in Ethiopia. Smallholders account for 60 percent of agricultural land in Africa, while
they lacks access to advice, varieties, inputs, and finance and depends on insecure or volatile
markets, making them vulnerable to food insecurity (IFC,2013). According to United Nations
food and agricultural organization repot, the smallholder produces a wide range of developing
World food grains, often wider than larger and commercialized farms (FAO, 2015). The
smallholder farming produces a major share of food grain in developing countries and in many
instances their contribution is growing (Koohafkan, 2011). The food production share of
smallholder in Africa estimated to be 70% and 80% of food consumed in Asia and sub-Saharan
Africa (IAASTD 2009, IFAD 2011). The average farmer in sub-Saharan Africa produces only
one ton of cereal per hectare – less than half of what an Indian farmer produces, less than a
fourth of a Chinese farmer’s production, and less than a fifth of an American farmer’s production
(World Bank, 2007). However, Smallholder agriculture continues to play a significant role in
African economy. In East African economies; smallholder based agriculture play a pivotal role in
employment opportunity creation and overall economic growth. For instance, in Ethiopia and
Tanzania it contributes 47% and 43% of GDP, respectively (Salami et al, 2010). Accordingly,
smallholder agriculture accounts for about 75 percent of the labor force in four East African
countries, i.e. Uganda, Ethiopia, Kenya and Tanzania, heightening the importance of the sector
in job creation and poverty reduction across countries. The Share of Smallholder farming in
Production accounts 75% in three East African countries namely Uganda, Kenya and Tanzania
and 87.4% in Ethiopia (Salami et al, 2010). The international finance corporation (IFC) report
states that the quality and productivity of smallholder farmers varies widely depending on their
ability to invest in production (IFC, 2013). For instance, smallholder may own the productive
assets as basic as a hand hoe in one corner or as expensive as a tractor in the other; farmers may
have no knowledge of postharvest processing in one part, or they may be capable of highly
detailed grading and processing in the other. In practical example, fertilizer consumption is near
zero in some African countries, while it exceeds 500 kg per hectare in China and Egypt (IFC,
2013). “Selling just a small part of their production contributes towards smallholders‟
livelihoods, but significantly less than most people think” (FAO, 2015). This report reveals that
most small farmers in developing country sell only small part of their production in market due
to marginalized accessibility of local market. For instance, in Kenya and Ethiopia, the
smallholder farmer market participation in agricultural product market is only less than a quarter
of their production and it is about 38%, 23% and only 12% in Vietnam; Bangladesh and Nepal
respectively (FAO, 2015).

Overview of Agriculture in Ethiopia

The agricultural sector, as a backbone of Ethiopia’s economy, has been dominated by
smallholder farmers who are producing 97 percent of total crop production available in the
country, directly supporting 80percent of the total population through employment creation and
source of livelihood, contributing about 46.4percent of the Gross Domestic Product, generates
more than 90percent of export earnings and supplies more than 65percent of raw materials
required for Agro-Based Domestic Manufacturing Industries. Therefore, enhancement of the
millennium development goal of Ethiopia mainly get hold of through promoting productivity and
output growth in the agricultural sector, particularly from smallholder producers which dominate
the sector. This is the fact that Smallholder farmers are desirable, not only because they provide
equitable distribution of income as well as an effective demand structure for other sectors of the
economy through forward and backward linkages (Bekele, 2013)

As the population growth increases, farmers must produce even more food than before as they
are producing to meet the need for food demand. With the population increases today, people are
being pushed to new lands and many into marginal lands to keep their day-to-day survival. But
land is a limited resource relative to their need. One of the best alternatives in increasing food to
feed the growing population is through raising productivity and efficiency in the agricultural
sector is highly demanded. Moreover, Ethiopia’s rapid population growth has bettered the
nation’s capacity to grow food annually keeping the rainy season alone. As to Melinda
&Timothy (2010), creation of new technical opportunities for smallholder farmers a cutting-edge
science in advanced research institutions will need to be redirected toward the practical problems
of poor farming communities especially those supported by development intervention
programmes/projects. Therefore, to meet the objective of 2025, that is achieving middle income
status and making substantial inroads against food insecurity will requires concentrated and
strategic choices in agriculture sector (Bill & Melinda Gates Foundation, 2010).

Ethiopia’s high population growth requires increased agricultural production to ensure food
security (AGP, 2010) since the recent registered economic growth is more of value than physical
output growth. Agriculture which is dominated by smallholder and fundamentally subsistence
farming with low productivity on fragmented and highly degraded lands requires especial
attention on factors accounting low productivity and inefficiency to provide the desired intent.
Leading the sector to higher productivity and increased commercialization is necessary but not
sufficient condition to poverty reduction and food security rather identifying the source of
development challenges grass root level can improve the manager ability of the farmers
(Mohammed, 2011). Overcoming the problem of productivity gap among smallholder famers
would give substantial gain for both economic growth and food security.

As to Schultz (1964), farm families in developing countries were “efficient but poor”. Being
Ethiopia is one among developing countries were mode farming was traditional one, raising
farmer efficiency will be great opportunity for enhancing food production through identification
of their source of inefficiency and resource management practices. Because if they are given
enough time to learn from their production process, they will identify their source of inefficiency
and maintain the optimal level of input and output combinations. But they are poor since their
resources are very limited and their knowledge would not permit them to produce the same
output with fewer resources or a larger output from the same resources. Knowing their level of
efficiency will be highly demanded.
Reference
Agricultural Growth Program, (2010), Global Agriculture and Food Security Programme
Request for Funding Public Sector Window. Summary of Agriculture and Food Security
Strategy and Post Compact Policy and Investment Framework.
Bill & Melinda Gates Foundation (2010) Accelerating Ethiopian Agriculture Development for
Growth, Food Security, and Equity.
Mohammed Adem, (2011), Comparative Analysis of Technical Efficiency between Extension
Participant and Non-Participant Farm Households Evidence from Northern Ethiopia,
Tigray: Stochastic Frontier Approach, Graduate thesis.
Bekele Alemayehu, (2013), Technical Efficiency variation for smallholder Irrigated maize
producers. Case study of Tibila surface water irrigation scheme. Ethiopia, Tigray:
Stochastic Frontier Approach, Graduate thesis.
Schultz, T., (1964). Transforming Traditional Agriculture, University of Chicago Press.

Reference

FAO. (2015). the economic lives of smallholder farmers an analysis based on household data
from nine countries. Rome: FAO.
Chamberlin, J. (2008). It’s a Small World After All: Defining Smallholder Agriculture in
Ghana:IFPRI Discussion paper No.00823, Nov. 2008. IFPRI.
FAO. (2014). Understanding smallholder farmer attitudes to commercialization; the case of
Maize in Kenya. FAO.
IAASTD. (2009). Agriculture at a crossroads: Sub-Saharan Africa (SSA) report. International
Assessment of Agricultural Knowledge, Science and Technology for Development. :
Island Press. Washington, DC: IAASTD.
IFC. (2013). Working with Smallholders A Handbook for Firms Building Sustainable Supply
Chains; world Bank Group. World Bank.
Salami, A., Kamara, A. B., & Brixiova, Z. (2010). Smallholder Agriculture in East Africa:
Trends, Constraints and Opportunities, Working Papers Series N° 105 . Tunis, Tunisia:
African Development Bank.