Economic resilience and value chains of tea smallholders in Nuwara Eliya District, Sri Lanka

Thesis Abstract

This study investigates the economic resilience and value chain integration of tea smallholders in the Nuwara Eliya District of Sri Lanka, addressing how local producers withstand exogenous shocks (price volatility, weather variability, and labor shortages) and leverage value chain relationships to sustain income and productivity. The aim is to elucidate the determinants of resilience and to map the functioning and leverage points within tea value chains that influence smallholder outcomes. Specific objectives are (1) to identify exposure and adaptive responses of smallholders to price and climate shocks; (2) to quantify the role of diversification, savings, access to credit, and risk-sharing arrangements in resilience; (3) to examine the structure, governance, and power dynamics within the tea value chain and their impact on smallholders’ market access and pricing; (4) to assess institutional support, extension services, and certification mechanisms influencing resilience; and (5) to propose a framework for enhancing value-chain efficiency and smallholder livelihoods. The study adopts a multi-stage explanatory mixed-methods design underpinned by the resilience and value chain theories, including the Sustainable Livelihoods Approach and the Porterian value chain framework, supplemented by the theory of risk and insurance and transaction cost economics to interpret governance and coordination issues. The population comprises tea smallholders within the Nuwara Eliya District, with a target sample of 400 households for quantitative analysis and 40 in-depth interviews for qualitative insights. A stratified random sampling approach ensures representation across estate-adjacent and independent smallholders, plot sizes, and altitude bands. Data collection combines structured surveys, semi-structured interviews, and focus group discussions, complemented by secondary data from district agricultural offices, price series from the Sri Lanka Tea Board, and weather data from the Department of Meteorology. Validity and reliability are established through pilot testing (n=40), Cronbach’s alpha for multi-item scales, and triangulation across data sources. Quantitative analysis employs descriptive statistics, multiple regression, and logistic regression to identify determinants of resilience outcomes (income stability, yield variability, and asset accumulation), while structural equation modeling (SEM) tests the hypothesized relationships among governance, value-chain participation, and resilience indicators. Qualitative analysis utilizes thematic analysis to extract patterns relating to power asymmetries, bargaining power with buyers, certification impacts, and access to finance; results are integrated with quantitative findings through a convergent design. Anticipated findings indicate that diversification of income sources, access to microcredit, and participation in certified supply chains significantly enhance resilience, while high transaction costs and weak bargaining power dampen benefits for smallholders. It is expected that robust producer–processor linkages, effective information flows, and targeted extension services will correlate with improved price realization and risk-caring mechanisms, whereas weather-induced yield shocks combined with price volatility exacerbate vulnerability in less diversified holdings. The study contributes to knowledge by offering an empirically grounded, district-specific framework that integrates resilience determinants with value-chain governance, illustrating how power differentials and institutional arrangements shape smallholder outcomes in a tropical tea economy. It also provides policy and practical implications for strengthening access to credit, risk mitigation instruments, farmer organizations, and certification-driven market access, as well as guidance for enhancing extension services and domain-specific data collection. The main conclusion is that resilient outcomes arise from a coherent alignment of diversified livelihood strategies, inclusive governance within value chains, and targeted institutional support; recommendations include establishing district-level resilience funds, scalable microfinance schemes linked to yield risk insurance, producer organizations with enhanced bargaining power, and capacity-building programs for sustainable certification compliance to improve market access and price stability for tea smallholders in Nuwara Eliya.