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Gum arabic production and marketing in Senegal: interlocked transactions and supply chain implications

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  • Mujawamariya, Gaudiose
  • D'Haese, Marijke F.C.

Abstract

Interlocked relationships are characterised by traders’ supply of inputs and cash to producers on credit, to be reimbursed at sale time based on pre-defined prices which are often lower than the prevailing market price. The study analyses determinants of choice for interlocking in the gum arabic sector in Senegal and the effect of interlocking on gum production and market participation; gum arabic is a natural exudates of Acacia Senegal trees that grow in the semi-arid lands of Africa. Data from 422 gum producers in Northern and Eastern regions of Senegal are used. About 45percent of respondents are involved into interlocking with village shop-owners or mobile traders. Interlocking has a negative effect on prices received by gum collectors. However, in the absence of effective credit markets, interlocking positively influences market participation and production as found through a two-step Heckman selection model by the provision of market assurance and safety for emergencies.

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Bibliographic Info

Paper provided by European Association of Agricultural Economists in its series 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland with number 114634.

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Date of creation: 02 Sep 2011
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Handle: RePEc:ags:eaae11:114634

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Keywords: interlocking; contracts; semi-arid lands; market participation; gum arabic; Agribusiness; Crop Production/Industries;

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  1. Heltberg, R. & Tarp, F., 2002. "Agricultural supply response and poverty in Mozambique," Food Policy, Elsevier, vol. 27(2), pages 103-124, April.
  2. Singh, Sukhpal, 2002. "Contracting Out Solutions: Political Economy of Contract Farming in the Indian Punjab," World Development, Elsevier, vol. 30(9), pages 1621-1638, September.
  3. Chakrabarty, Debajyoti & Chaudhuri, Ananish, 2001. "Formal and informal sector credit institutions and interlinkage," Journal of Economic Behavior & Organization, Elsevier, vol. 46(3), pages 313-325, November.
  4. Marc F. Bellemare & Christopher B. Barrett, 2006. "An Ordered Tobit Model of Market Participation: Evidence from Kenya and Ethiopia," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(2), pages 324-337.
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