Rural market imperfections and the role of institutions in collective action to improve markets for the poor

By B. Shiferaw, G. Obare, G. Muricho. 2008

125 citations recorded by the source corpus.

Many countries in sub-Saharan Africa have liberalized markets to improve efficiency and enhance market linkages for smallholder farmers. The expected positive response by the private sector in areas with limited market infrastructure has however been very limited. The functioning of markets is constrained by high transaction costs and coordination problems along the production-to-consumption value chain. New kinds of institutional arrangements are needed to reduce these costs and fill the vacuum left when governments withdrew from markets in the era of structural adjustments. One of these institutional innovations has been the strengthening of producer organizations and formation of collective marketing groups as instruments to remedy pervasive market failures in rural economies. The analysis presented here with a case study from eastern Kenya has shown that marketing groups pay 20-25% higher prices than other buyers to farmers while participation was also positively correlated with adoption of improved dryland legume varieties, crops not targeted by the formal extension system. However the effectiveness of marketing groups is undermined by external shocks and structural constraints that limit the volume of trade and access to capital and information, and require investments in complementary institutions and coordination mechanisms to exploit scale economies. Successful groups have shown high levels of collective action in the form of increased participatory decision making, member contributions and initial start-up capital. Failure to pay on delivery, resulting from lack of capital credit, is a major constraint that stifles competitiveness of marketing groups relative to other buyers. These findings call for interventions that improve governance and participation; mechanisms for improving access to operating capital; and effective strategies for risk management and enhancing the business skills of farmer marketing groups.

Subfields: Economics and Econometrics, General Agricultural and Biological Sciences, Soil Science

View Paper: https://www.semanticscholar.org/paper/a0224b7d0d8efde768708c5f5bfbc6cfafeedb90

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. A. Alene
2. J. Manda
3. M. Khonje
4. M. Mutenje
5. J. Hellin
6. Mekbib G. Haile
7. V. Manyong
8. T. Abdoulaye

In General Agricultural and Biological Sciences

1. B. Shiferaw
2. A. Alene
3. J. Manda
4. Mekbib G. Haile
5. M. Khonje
6. T. Abdoulaye
7. T. Wossen
8. M. Mutenje

In Soil Science

1. A. Alene
2. J. Manda
3. B. Shiferaw
4. Mekbib G. Haile
5. T. Abdoulaye
6. T. Wossen
7. J. Hellin
8. M. Khonje

Citations in the corpus

• Technical efficiency in resource use: Evidence from smallholder Irish potato farmers in Nyandarua North District, Kenya. (2010, background): “…be explained by the fact that farmers’ associations have the potential to shorten the marketing chain by directly connecting small producers to markets; better coordinate production and marketing activities and facilitate farmer access to production inputs at fair prices (Shiferaw et al., 2008).”
• Impacts of extension access and cooperative membership on technology adoption and household welfare (2017, background): “Major identified causes of lowadoption rates include supplyside constraints such as imperfect information and credit markets (Shiferaw et al., 2008; Suri, 2011; Wossen et al., 2015).”
• Improving market access and agricultural productivity growth in Africa: what role for producer organizations and collective action institutions? (2011, background): “The legal and regulatory framework should not, however, lead to over-regulation that could stifle growth and development of producer organizations (Shiferaw et al. 2008).”
• Does cooperative membership increase and accelerate agricultural technology adoption? Empirical evidence from Zambia (2020, background): “…identified several factors that affect the participation of households in cooperatives (e.g. Abebaw and Haile, 2013; Fischer and Qaim, 2012; Ma et al., 2018a; Ma and Abdulai, 2016; Mojo et al., 2017; Shiferaw et al., 2008; Sitko and Jayne, 2014; Verhofstadt and Maertens, 2015; Wossen et al., 2017).”