Challenges for chain based finance in the Romanian dairy chain

This paper investigates the different types of vertical coordination mechanism and the spread institutional arrangements (i.e. contracting) as well as identifies opportunities to expand innovative solutions that help to create and maintain the linkages among the famers and downstream businesses for dairy in Romania. In particular, we address the various modes of access to production factors, such as capital, specific inputs and know-how, as reasons for the varied development of Romanian dairy supply chains and its respective actors (farmers, processors). The paper draws on results from a recent study supported by the World Bank. The findings are based on semi-structured telephone and face-to-face interviews conducted in January-March 2009. The interviews indicate that large and prosperous dairy chains have better access to all production factors, which allows the strengthening of their relationships, especially in the upstream stages (farmers), and supports their competitive advantages in the domestic market. Many barriers exist in the domestic market, particularly for small and medium-sized dairy chains, which hampers their potential exploitation of particular stages in the chain. In the same way the findings indicate that virtually only large companies and farms benefit from public support regarding access to capital (EU-funding, governmental programs) and know-how (extension service).