Title page for ETD etd-06162011-064112


Document Type Doctoral Thesis
Author Jagwe, John Nkalubo
URN etd-06162011-064112
Document Title The impact of transaction costs on the participation of smallholder farmers and intermediaries in the banana markets of Burundi, Democratic Republic of Congo and Rwanda
Degree PhD
Department Agricultural Economics, Extension and Rural Development
Supervisor
Advisor Name Title
Prof C L Machethe Supervisor
Keywords
  • bananas
  • smallholder farmers
  • market participation
  • transaction costs
  • middlemen
Date 2011-04-14
Availability unrestricted
Abstract
Agriculture is considered a critical sector in attaining economic growth for most economies in Africa. However, for the sector to play its role, it needs to be commercialised to enable smallholder farmers to participate in markets and, hence, improve their incomes and livelihoods. In most developing economies, smallholder farmers find it difficult to participate in markets because of the numerous constraints and barriers mostly reflected in the transaction costs that make access to input and output markets difficult. When analysing the effects of transaction costs on market participation, much attention has been accorded to farmers while ignoring middlemen/traders who are also part of the marketing system. Furthermore, studies on the effect of transaction costs on market participation tend to focus on grains and cereals while ignoring agrocommodities that are more perishable. The purpose of this study was to holistically examine the effects of transaction costs on participation of smallholder farmers and middlemen in banana markets of the Great Lakes region in central Africa.

The study adopted a non-separable household model which incorporated fixed and proportional transaction costs in the function of maximising utility subject to resource constraints. The Heckman procedure was used to determine the factors affecting the discrete choice of smallholder farmers on whether to sell and quantities to sell while catering for selection biases. Probit analysis was used to determine the farmersí choice of selling point while the ordinary least squares method was used to analyse the extent of participation of traders. Variables capturing transaction costs in regards to information gathering, negotiating, contracting, monitoring and enforcing of contracts were used in the analyses. The empirical analyses were based on secondary data availed for 2666 farming households and 494 traders located in Burundi, Democratic Republic of Congo and Rwanda.

The results of the study indicate that fixed and proportional transaction costs distinctly affect the participation of smallholder farmers in markets. Belonging to farmer groups facilitates information exchange which reduces fixed transaction costs and, hence, increases the likelihood of farmers to participate in markets. The size of a household, distance to markets and ownership of transport means, which is linked to proportional transaction costs, influence the extent of farmer participation in markets. The choice of selling point was significantly influenced by household size, the gender of the household head, off farm revenue, access to price information and the extent of remoteness of household. The effects of transaction costs on market participation of smallholder farmers were more evident in the analyses for bananas than in the one for beans. The participation of traders was significantly influenced by gender, trading experience and supply distance which relate to the bargaining prowess, business networks and per unit transport cost, respectively.

Interventions geared towards supporting associations for farmers may facilitate information exchange and enhance bargaining and contracting skills which subsequently reduce transaction costs. Policies aimed at supporting investment in rural infrastructure, in terms of feeder road networks and market places, can lead to reduction in transaction costs and thereby enhance participation of farmers and traders in markets.

© 2011 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria.

Please cite as follows:

Jagwe, JN 2011, The impact of transaction costs on the participation of smallholder farmers and intermediaries in the banana markets of Burundi, Democratic Republic of Congo and Rwanda, PhD thesis, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-06162011-064112/ >

D11/398/ag

Files
  Filename       Size       Approximate Download Time (Hours:Minutes:Seconds) 
 
 28.8 Modem   56K Modem   ISDN (64 Kb)   ISDN (128 Kb)   Higher-speed Access 
  thesis.pdf 702.35 Kb 00:03:15 00:01:40 00:01:27 00:00:43 00:00:03

Browse All Available ETDs by ( Author | Department )

If you have more questions or technical problems, please Contact UPeTD.