Exploring the role of farmer-managed milk societies for dairy farmers' livelihood outcomes in Sri Lanka: Applying sustainable livelihoods approaches : A thesis submitted in partial fulfilment of the requirements for the Degree of Doctor of Philosophy at Lincoln University

Abstract

Dairy farming plays a significant role in strengthening the rural economy in Sri Lanka, contributing to household income, food security and poverty alleviation. However, Sri Lanka’s dairy industry has long struggled with low domestic milk production and high dependency on imports. The multifaceted nature of constraints faced by smallholder dairy farmers has created significant challenges to the dairy industry, and presently, it lags in fulfilling the current milk demand. Furthermore, despite various development efforts, farmers continue to experience unsatisfactory livelihood outcomes. In this complex setting, locally organised Farmer-Managed Societies (FMS) have emerged as grassroots-level institutions that assist in market access, technical training, and community-level coordination. Given this context, there is a need for a holistic understanding of farmers' livelihoods, organisational structures, and the potential role of FMS in enabling the development of livelihood outcomes for dairy farmers in Sri Lanka. Moreover, combining the Sustainable Livelihood Framework (SLF) with the principles of social entrepreneurship remains largely unexplored in the Sri Lankan dairy context. This study explores factors influencing the livelihoods of smallholder dairy farmers in Sri Lanka through the lens of the SLF, determines the importance of these factors to livelihood outcomes, and suggests strategies for accelerating smallholder farmers’ livelihood outcomes. This study also analyses the role of FMS as an important grassroots institution as a form of social enterprise. The study uses a mixed-methods approach. Data were collected using semi-structured interviews with dairy farmers and selected subject matter experts and surveys with smallholder dairy farmers. A thematic analysis and Structural Equation Modelling (SEM) were used to examine the five capitals of the SLF and their influence on livelihood outcomes. SEM was used to test the hypothesised relationships quantitatively, while thematic analysis of the interview data provided broad insights into the role of the five capitals, livelihood strategies, and vulnerabilities the farmers face. The findings reveal that social and financial capital were the most significant determinants of livelihood outcomes, while natural capital shows limited direct influence. Furthermore, five distinct farmer categories were identified based on their livelihood outcomes and access to these five capitals: successful, becoming successful, less successful due to external and internal factors, and unsuccessful. These farmers’ livelihood outcomes were mainly shaped by capital endowment, decision-making, cultural beliefs, integration with institutions, and political changes. The study identifies two broader perspectives of FMS, investment-oriented and subsidy-oriented, and two farmer categories, investment-seeking and risk-averse. The interactions between the perspectives and farmer categories lead to diverse livelihood outcomes. The moderating effect of farmers’ satisfaction on FMS’s operations and the relationship between assets and livelihood outcomes further revealed the complexity of institutional influence. Importantly, the study uncovers the pivotal but dissimilar contributions of FMS as social enterprises in facilitating capital formation and enhancing livelihood outcomes among farmers. The research offers both theoretical and practical contributions by integrating SLF with social enterprise concepts, modelling SLF and FMS in SEM, and proposing different strategies for farmer development. The study also contributes to the growing literature on rural livelihoods, social capital, and how FMS, as a form of social enterprise, can influence the livelihood outcomes of the smallholder dairy farmers. The study recommends strengthening the capacity of FMS as a grassroots-level institution, enhancing capacity building for farmers, including training and financial services, and promoting participation of youth and women in the development of livelihood outcomes for smallholder dairy farmers. These findings offer practical guidance for policymakers, development practitioners, and researchers aiming to develop Sri Lanka’s dairy sector.