IDEAS home Printed from https://ideas.repec.org/a/wly/natres/v32y2008i1p25-38.html
   My bibliography  Save this article

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

Author

Listed:
  • Bekele Shiferaw
  • Gideon Obare
  • Geoffrey Muricho

Abstract

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.

Suggested Citation

  • Bekele Shiferaw & Gideon Obare & Geoffrey Muricho, 2008. "Rural market imperfections and the role of institutions in collective action to improve markets for the poor," Natural Resources Forum, Blackwell Publishing, vol. 32(1), pages 25-38, February.
    • Handle: RePEc:wly:natres:v:32:y:2008:i:1:p:25-38
    DOI: 10.1111/j.1477-8947.2008.00167.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1477-8947.2008.00167.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1477-8947.2008.00167.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Kelly, Valerie & Adesina, Akinwumi A. & Gordon, Ann, 2003. "Expanding access to agricultural inputs in Africa: a review of recent market development experience," Food Policy, Elsevier, vol. 28(4), pages 379-404, August.
    2. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    3. Fafchamps, Marcel & Gabre-Madhin, Eleni Z., 2006. "Agricultural markets in Benin and Malawi," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 1(1), pages 1-28, November.
    4. Jonathan Kydd & Andrew Dorward, 2004. "Implications of market and coordination failures for rural development in least developed countries," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(7), pages 951-970.
    5. Place, Frank & Kariuki, Gatarwa & Wangila, Justine & Kristjanson, Patti & Makauki, Adolf & Ndubi, Jessica, 2002. "Assessing the factors underlying differences in group performance: methodological issues and empirical findings from the highlands of Central Kenya," CAPRi working papers 25, International Food Policy Research Institute (IFPRI).
    6. Jayne, T. S. & Govereh, J. & Mwanaumo, A. & Nyoro, J. K. & Chapoto, A., 2002. "False Promise or False Premise? The Experience of Food and Input Market Reform in Eastern and Southern Africa," World Development, Elsevier, vol. 30(11), pages 1967-1985, November.
    7. Winter-Nelson, Alex & Temu, Anna, 2002. "Institutional Adjustment and Transaction Costs: Product and Inputs Markets in the Tanzanian Coffee System," World Development, Elsevier, vol. 30(4), pages 561-574, April.
    8. Colin Kirkpatrick & Samuel Munzele Maimbo, 2002. "The Implications of the Evolving Microfinance Agenda for Regulatory and Supervisory Policy," Development Policy Review, Overseas Development Institute, vol. 20(3), pages 293-304, July.
    9. Bingen, Jim & Serrano, Alex & Howard, Julie, 2003. "Linking farmers to markets: different approaches to human capital development," Food Policy, Elsevier, vol. 28(4), pages 405-419, August.
    10. Marcel Fafchamps & Ruth Vargas Hill, 2005. "Selling at the Farmgate or Traveling to Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(3), pages 717-734.
    11. de Janvry, Alain & Fafchamps, Marcel & Sadoulet, Elisabeth, 1991. "Peasant Household Behaviour with Missing Markets: Some Paradoxes Explained," Economic Journal, Royal Economic Society, vol. 101(409), pages 1400-1417, November.
    12. Colin Poulton & Andrew Dorward & Jonathan Kydd, 1998. "The revival of smallholder cash crops in Africa: public and private roles in the provision of finance," Journal of International Development, John Wiley & Sons, Ltd., vol. 10(1), pages 85-103.
    13. de Janvry, Alain & Fafchamps, M. & Sadoulet, Elisabeth, 1991. "Peasant Household Behavior with Missing Markets: Some Paradoxes Explain," CUDARE Working Papers 198579, University of California, Berkeley, Department of Agricultural and Resource Economics.
    14. Mude, Andrew G., 2006. "Weaknesses in Institutional Organization: Explaining the Dismal Performance of Kenya's Coffee Cooperatives," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25306, International Association of Agricultural Economists.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rahi Jain & Prashant Narnaware, 2018. "Role of Local Context in the Success of Farmer Collectives: A Review," Millennial Asia, , vol. 9(3), pages 318-335, December.
    2. Biggeri, Mario & Carraro, Alessandro & Ciani, Federico & Romano, Donato, 2022. "Disentangling the impact of a multiple-component project on SDG dimensions: The case of durum wheat value chain development in Oromia (Ethiopia)," World Development, Elsevier, vol. 153(C).
    3. Malvido Perez Carletti Agustina & Hanisch Markus & Rommel Jens & Fulton Murray, 2018. "Farm Gate Prices for Non-Varietal Wine in Argentina: A Multilevel Comparison of the Prices Paid by Cooperatives and Investor-Oriented Firms," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 16(1), pages 1-14, January.
    4. Manda, Julius & Khonje, Makaiko G. & Alene, Arega D. & Tufa, Adane H & Abdoulaye, Tahirou & Mutenje, Munyaradzi & Setimela, Peter & Manyong, Victor, 2020. "Does cooperative membership increase and accelerate agricultural technology adoption? Empirical evidence from Zambia," Technological Forecasting and Social Change, Elsevier, vol. 158(C).
    5. Maria Costanza Torri, 2012. "Innovative Farmer Institutions and Market Imperfections," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 21(1), pages 59-90, March.
    6. Abraham, Mathew & Verteramo Chiu, Leslie & Joshi, Ekta & Ali Ilahi, Muhammad & Pingali, Prabhu, 2022. "Aggregation models and small farm commercialization – A scoping review of the global literature," Food Policy, Elsevier, vol. 110(C).
    7. Kumar, Avinash & Kumra, Rajeev & Singh, Ramendra, 2022. "Base of the pyramid producers’ constraints: An integrated review and research agenda," Journal of Business Research, Elsevier, vol. 140(C), pages 115-129.
    8. Kampmann, Willi & Kirui, Oliver Kiptoo, 2021. "Role of Farmers’ Organizations in Agricultural Transformation in Africa: Overview of Continental, Regional, and Selected National Level Organizations," Working Papers 309358, University of Bonn, Center for Development Research (ZEF).
    9. Bernard, Tanguy & Dänzer, Pia Naima & Frölich, Markus & Landmann, Andreas & Viceisza, Angelino & Wouterse, Fleur, 2021. "Building trust in rural producer organizations: results from a randomized controlled trial," Agricultural and Resource Economics Review, Cambridge University Press, vol. 50(3), pages 465-484, December.
    10. Gazali Issahaku & Lukas Kornher & Abu Hayat Md. Saiful Islam & Awal Abdul-Rahaman, 2023. "Heterogeneous impacts of home-gardening on household food and nutrition security in Rwanda," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 15(3), pages 731-750, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shiferaw, Bekele & Obare, Gideon & Muricho, Geoffrey, 2006. "Rural institutions and producer organizations in imperfect markets: experiences from producer marketing groups in semi-arid eastern Kenya," CAPRi working papers 60, International Food Policy Research Institute (IFPRI).
    2. Kelly, Valerie A., 2005. "Farmers' Demand for Fertilizer in Sub-Saharan Africa," Staff Paper Series 11612, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    3. Poulton, Colin & Dorward, Andrew & Kydd, Jonathan, 2010. "The Future of Small Farms: New Directions for Services, Institutions, and Intermediation," World Development, Elsevier, vol. 38(10), pages 1413-1428, October.
    4. Lambrecht, Isabel Brigitte & Ragasa, Catherine, 2018. "Do development projects crowd-out private sector activities? Evidence from contract farming participation in Northern Ghana," Food Policy, Elsevier, vol. 74(C), pages 9-22.
    5. Momanyi, Denis & Lagat, Prof. Job K. & Ayuya, Dr. Oscar I., 2016. "Analysis of the Marketing Behaviour of African Indigenous Leafy Vegetables among Smallholder Farmers in Nyamira County, Kenya," MPRA Paper 69202, University Library of Munich, Germany, revised 27 Jan 2016.
    6. Mujawamariya, G. & Burger, K. & D’Haese, M., 2015. "Market-driven production with transaction costs outlook: Gum arabic collection systems in Senegal," Journal of Forest Economics, Elsevier, vol. 21(3), pages 111-130.
    7. Ahmed, Mohamed M. & Balie, Jean, 2016. "Why is it important to measure the Market Development Gap? An application to the agricultural sector of Uganda," 2016 Fifth International Conference, September 23-26, 2016, Addis Ababa, Ethiopia 246446, African Association of Agricultural Economists (AAAE).
    8. Imai, Katsushi S. & Gaiha, Raghav & Thapa, Ganesh, 2011. "Supply response to changes in agricultural commodity prices in Asian countries," Journal of Asian Economics, Elsevier, vol. 22(1), pages 61-75, February.
    9. Kyeong Ho Lee & Marc F. Bellemare, 2013. "Look Who's Talking: The Impacts of the Intrahousehold Allocation of Mobile Phones on Agricultural Prices," Journal of Development Studies, Taylor & Francis Journals, vol. 49(5), pages 624-640, May.
    10. Conning, Jonathan & Udry, Christopher, 2007. "Rural Financial Markets in Developing Countries," Handbook of Agricultural Economics, in: Robert Evenson & Prabhu Pingali (ed.), Handbook of Agricultural Economics, edition 1, volume 3, chapter 56, pages 2857-2908, Elsevier.
    11. Markelova, Helen & Meinzen-Dick, Ruth & Hellin, Jon & Dohrn, Stephan, 2009. "Collective action for smallholder market access," Food Policy, Elsevier, vol. 34(1), pages 1-7, February.
    12. Leonardo, Wilson & van de Ven, Gerrie W.J. & Kanellopoulos, Argyris & Giller, Ken E., 2018. "Can farming provide a way out of poverty for smallholder farmers in central Mozambique?," Agricultural Systems, Elsevier, vol. 165(C), pages 240-251.
    13. Montalbano, P. & Pietrelli, R. & Salvatici, L., 2018. "Participation in the market chain and food security: The case of the Ugandan maize farmers," Food Policy, Elsevier, vol. 76(C), pages 81-98.
    14. Hagos, Fitsum & Makombe, Godswill & Namara, Regassa & Awulachew, Seleshi Bekele, 2008. "Does access to small scale irrigation promote market oriented production in Ethiopia?," IWMI Conference Proceedings 246403, International Water Management Institute.
    15. Giacomo Zanello & Chittur S. Srinivasan & Bhavani Shankar, 2014. "Transaction Costs, Information Technologies, and the Choice of Marketplace among Farmers in Northern Ghana," Journal of Development Studies, Taylor & Francis Journals, vol. 50(9), pages 1226-1239, September.
    16. Okello, Julius J. & Kirui, Oliver K. & Gitonga, Zachary M. & Njiraini, Georgina W. & Nzuma, Jonathan M., 2014. "Determinants of Awareness and Use ICT-based Market Information Services in Developing-Country Agriculture: The Case of Smallholder Farmers in Kenya," Quarterly Journal of International Agriculture, Humboldt-Universitaat zu Berlin, vol. 53(3), pages 1-20, August.
    17. Kelly, Valerie & Adesina, Akinwumi A. & Gordon, Ann, 2003. "Expanding access to agricultural inputs in Africa: a review of recent market development experience," Food Policy, Elsevier, vol. 28(4), pages 379-404, August.
    18. Diwakar KC & Tek Maraseni & Chubamenla Jamir & Ritendra Thapa Magar & Florencia Tuladhar, 2020. "Effectiveness of Gravity Goods Ropeways in market participation of smallholder farmers in uplands," Transportation, Springer, vol. 47(3), pages 1393-1414, June.
    19. Key, Nigel & Runsten, David, 1999. "Contract Farming, Smallholders, and Rural Development in Latin America: The Organization of Agroprocessing Firms and the Scale of Outgrower Production," World Development, Elsevier, vol. 27(2), pages 381-401, February.
    20. Reyes, Byron & Donovan, Cynthia & Bernsten, Richard H. & Maredia, Mywish K., 2012. "Market participation and sale of potatoes by smallholder farmers in the central highlands of Angola: A Double Hurdle approach," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126655, International Association of Agricultural Economists.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:natres:v:32:y:2008:i:1:p:25-38. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1111/(ISSN)1477-8947 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.