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their own budgets, which are more often deployed toward creating and strengthening local markets; and some urban
and middle-class consumers show growing interest in local products distinguished by geographical and cultural features.
Rather than making traditional approaches obsolete, sometimes ‘modernising’ forces have the opposite effect.
In short, globalisation and modernisation are not replacing older economic patterns, but are spreading in parallel with
vibrant informal and local economies. In farmer communities, rather than the ‘traditional’ being converted to the ‘modern’,
these modes coexist, interact and sometimes clash. Economic changes and inclusive business models, then, are best seen as
offering small-scale producers ways to further diversify their income sources and risks.
3.1 Economic
transformation and the informal market
Even in emerging economies where food systems and retail landscapes are changing rapidly, modernisation in the form
of value-chain organisation is not reaching the countryside as fast as some would have us believe. The irst links in many
‘modern’ food supply chains involve informal transactions — small producers selling to small traders — with modernised,
formal arrangements introduced only later in the chain. Thus, to small-scale producers, the system of marketing relationships
at the farm gate often looks little changed. These farmers’ agency translates into participation in different markets
through traditional social networks than can work locally as well as internationally.
And while informal markets have important limitations in areas such as traceability and food safety, they also have
much to offer in development terms: ‘Traditional informal markets have clearly provided an effective, functional
link between farmers and consumers which responds to consumer demand: they should not be regarded as market
failures. Moreover, such markets are generally those most often serving the needs of small-scale farmers and resource-
poor consumers. The analysis has also demonstrated the large and positive employment implications of such markets’
Staal et al. 2006.
3.1.1 Informal markets are growing
By some measures, informality has been expanding all over the world, including in developed countries Table 3.1.
Table 3.1 Size of the informal economy by per cent of GDP
Region 1990 2000
Increase of informality
Africa 33.9
41.2 7.3
Central and South America
34.2 41.5
7.3
Asia
20.9 26.3
5.4
Transition countries
31.5 37.9
6.4
‘Highly developed’ OECD countries
13.2 16.8
3.6
Based on OECD 2009. Data draws on statistics of 24 countries in Africa, 17 in Central and South America, 25 in Asia, 23 transition
countries and 21 OECD countries.
Traditional market structures supporting informal trade are dynamic and dominant in many parts of Africa, Asia and
Latin America, including countries undergoing rapid economic transformation:
l In Indian cities, the number of informal street vendors
and ‘hawkers’ has been growing — swelled both by migrants from the countryside and by workers who
have lost formal jobs, for example with the closing of textile mills in Mumbai. In a 1999 survey from the
National Alliance of Street Vendors of India, 65 per cent of Mumbai’s workforce was engaged in the informal
sector. Of the city’s 200,000 hawkers, some 20 per cent had formerly had permanent jobs in organised industries
Bhowmik 1999.
l In the Learning Network, Arya and Asthana reported
that the vast majority of farmers surveyed in the northeastern Indian states of Bihar 95 per cent and
Uttar Pradesh 88 per cent are still selling their surplus to village traders, as they always have.
22
l According to the study of rural change in China for this
Knowledge Programme, in the greater Beijing area in 2004, farmers sold 2 per cent of their horticultural goods
to specialised suppliers and 2 per cent to processing irms. That is, just 4 per cent of horticultural products
were procured by irms that could be described as part of the modern supply chain Huang et al. 2012.
Informality can also thrive in cross-border markets, even where new trade policies have been designed to enable
formal imports and exports. In East Africa, for example, the Learning Network discussed new regional trade agreements
that seek to encourage the movement of products between neighbouring countries’ formal markets — and to reduce
informal trade lows. Instead, data from Uganda show that the country’s informal exports grew from 2006-2010,
and much of this trade was in agricultural products. Three quarters of the maize sold to Kenya in 2008, for instance,
was never recorded by a customs agent Box 3.1. Despite the regional agreement to open borders and stimulate formal
cross-border trade, the incentives and constraints for small farmers are still driving informal trade.
3.1.2 Modern markets with their feet
