Risk management and finance along value chains of Small Island Developing States. Evidence from the Caribbean and the Pacific

Abstract

The paper analyses agricultural risks and risk management in selected Small Island Developing States which are part of the African Caribbean Pacific country group. Focus is on the value chains of fruits, vegetables and spices. A survey was conducted in Grenada, Jamaica, Fiji and Vanuatu, aimed at identifying sources of risk which are most important to value chain stakeholders; the nature and quality of existing and potential risk management mechanisms; and the possibility of enhancing them in view of improving the functioning of the value chains. The sample included farmers, processors, traders, retailers, extension agents, Government officials and private services providers. Results reveal limited ability to handle price and production variability, due to lack of both horizontal and vertical co-ordination along value chains, reduced use of support services, notably credit and underinvestment in equipment. In addition, lack of demand contributes to make insurance markets incomplete and characterised by undersupply or lack of customised products. Promoting light forms of vertical and horizontal co-ordination, such as production contracts and producers' associations, as well as value chain-based credit and finance may address some of the issues highlighted.