FinDev Blog

Sweeter Prospects for Cocoa Farmers

Formal land ownership improves the financial outlook for smallholders in Cote d’Ivoire
Two cocoa farmers holding up their document.

Cocoa is one of the world’s most prized foods, but the smallholder farmers who produce it are living in extreme poverty.  The entire supply chain in Cote d’Ivoire, where 45 percent of the world’s cocoa is sourced, receives only 6 percent of the revenue from chocolate. Our recent survey found that smallholder households live on less than 60 cents a day per capita -- well below the global poverty line of $2/day. 

Lack of land rights contributes to cocoa farmers’ poverty

Making matters worse, cocoa farmers often have a very precarious relationship with the land they depend on. Lack of formal land rights can affect local indigenous communities as well as the descendants of migrants from other regions or nearby countries. More broadly, land tenure and property rights are increasingly seen as critical for eliminating poverty, due to the role of land in enabling prosperity, food production and housing. Stronger property rights can strengthen farmers’ hold over their main asset and create opportunities for leveraging it through credit, improving their financial health and resilience. 

Environmental concerns add another dimension to the issue. In theory, farmers with stronger land rights should be more motivated to invest in sustainable farming practices, like planting shade trees, renovating their farms, and providing better care for their trees and soil. It can also mitigate deforestation, which is largely driven by cocoa production in Cote d’Ivoire.

Evaluating a global initiative to help local smallholders secure titles to their land

To address this issue, Meridia, a FINCA investee, established the Cote d’Ivoire Land Partnership (CLAP),  together with the Ivorian Rural Land Agency (AFOR), the German Cooperation implemented by GIZ, and a consortium of global chocolate companies including Hershey, Unilever, and Barry Callebaut Cocoa Horizons Foundation. Others such as Cargill, Ferrero, ETG and ECOM have joined CLAP since its inception. The partnership aims to help smallholder farmers secure formal documentation of their rights.

Commissioned by CLAP, FINCA’s Research and Data Science team is developing an evaluation and monitoring system to measure CLAP’s social impact. Working with Audace Institut Afrique, a local research firm, we recently completed a baseline survey of cocoa farmers within the CLAP target area and comparable districts. Even at this early stage, we found some encouraging signs that CLAP’s activities are starting to affect how farmers think about their land and their hopes for the future.

The theory of change – how access to land rights can help

The starting point of our impact assessment is a comprehensive theory of change for CLAP, which we derived from expert interviews and relevant publications (Figure 1). Because the ultimate outcomes, like improved farming practices, depend on future actions by the farmers themselves, we start by looking for signs that the land titling activities are producing positive attitudes that will lay the foundation for behavioral change over time. Among these are increased awareness of rights and boundaries, less incidence of (expected) disputes and illegal claims, less fear of being evicted, and improved (perceived) security. Any of these improvements in perception will strengthen the motivation to make longer-term investments and adopt better farming practices, eventually enhancing their families’ wellbeing. 

The current arrangement of informal land tenure is especially harmful for women, who are culturally regarded as farm laborers, with no property or inheritance rights of their own. Raising awareness and broadening women’s access to legally-backed land documentation has the potential to help them combat this form of oppression, which perpetuates gender inequality from one generation to the next.

Figure showing lists of benefits to land tenure

Figure 1. The short-to-medium term impact of sensitization and land tenure services on sustainability and wellbeing of cocoa farmers.

We also believe that land tenure will provide farmers with greater autonomy and decision-making power. Taking control of their land and farming decisions can increase their dignity and confidence in their future and their children’s heritage. The formalization of property rights also has the potential to improve social relations, with neighbors working peacefully on their lands regardless of origin.

Baseline data reveals the obstacles farmers face in investing in their land and their future

Our baseline survey covered 626 cocoa farmers in the early stage of CLAP’s program and a control group of 405 farmers from comparable areas. The results offer some interesting observations about the challenges they face and their hopes regarding the potential benefits of land security. The most prominent initial results relate to perceptions about their financial health.

Only 20 percent of the farmers we interviewed had sufficient resources for diversifying their crops or other sources of income to improve their livelihoods. For the vast majority, with no disposable income, credit is the only viable option to make investments in their land. Indeed, the overwhelming majority of those who were able to access loans in previous seasons considered that credit had been very helpful to their endeavors. However, only a very small percentage of farmers (16 percent) could qualify for loans. Knowing the obstacles, including the lack of formal land documentation, three-fourths of the farmers consider that their land would not serve as collateral for loans, and only one in five has a bank account. Farmers find themselves in an impossible situation: they don’t have the income or assets to qualify for a loan, which prevents them from making the very investments that could improve their situation.  

The data also reveals a promise of better financial health and hope for the future

In this context, we found that even the prospect of potentially qualifying for a loan can significantly raise hopes for a better future.   Using extended regression models (to control for both treatment and covariate endogeneity), we found that the first stage of land titling activities generated a profound impact in the expectation that formal land documentation will open future access to credit. The share of farmers who think land documents will help them access loans is 14 percentage points higher in the treatment group, which is directly attributable to CLAP’s activities. This outcome aligns well with another significant indicator: expected improvements in the family’s overall financial situation. The percentage of farmers stating a positive change in expectations regarding their financial situation is 13 percent higher in the treatment group – again, directly attributable to CLAP’s sensitization and mapping activities.

We observed other effects but with less statistical significance, such as reduced fear of being evicted from their plots, corroborated by other promising but not yet significant indicators, such as the formulation of future plans to fertilize, prune or apply pesticides. Other indicators are consistently and directionally positive, including improved processes for transferring land rights, increased value of the land itself, long-term planning, and overall family well-being. In the follow-up survey round, to take place in mid-2024, we hope to find that these impacts have increased after the formal land documents are delivered.

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