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Rural institutions and producer organizations in imperfect markets: experiences from producer marketing groups in semi-arid eastern Kenya

Author

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  • Shiferaw, Bekele
  • Obare, Gideon
  • Muricho, Geoffrey

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 disappointing. 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 while collective action – embodied in Producer Marketing Groups (PMGs) – is feasible and useful, external shocks and structural constraints that limit the volume of trade and access to capital and information require investments in complementary institutions and coordination mechanisms to exploit scale economies. The effectiveness of PMGs was determined by the level 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 PMG competitiveness 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 the PMGs." Author's Abstract

Suggested Citation

  • 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).
  • Handle: RePEc:fpr:worpps:60
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Pant, Dhruba, 2008. "Implications of bulk water transfer on local water management institutions: a case study of the Melamchi Water Supply Project in Nepal," IWMI Working Papers H041304, International Water Management Institute.
    2. Katengeza, Samson P. & Mangisoni, Julius H. & Okello, Julius Juma, 2010. "The Role of ICT-based Market Information Services in Spatial Food Market Integration: The Case of Malawi Agricultural Commodity Exchange," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 96170, African Association of Agricultural Economists (AAAE);Agricultural Economics Association of South Africa (AEASA).
    3. Xaba, Bongiwe G. & Masuku, Micah B., 2013. "An Analysis of the Vegetables Supply Chain in Swaziland," Sustainable Agriculture Research, Canadian Center of Science and Education, vol. 2(2).
    4. Ayuya, Oscar Ingasia, 2010. "Evaluation Of Willingness To Accept And Adopt Clean Development Mechanism Projects Among Smallscale Farmers In Njoro District, Kenya," Research Theses 117799, Collaborative Masters Program in Agricultural and Applied Economics.
    5. Camilla Andersson & Mintewab Bezabih & Andrea Mannberg, 2015. "The Ethiopian Commodity Exchange and spatial price dispersion," GRI Working Papers 204, Grantham Research Institute on Climate Change and the Environment.
    6. 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 AAAE Fifth International Conference, September 23-26, 2016, Addis Ababa, Ethiopia 246446, African Association of Agricultural Economists (AAAE).
    7. Andersson, Camilla & Bezabih, Mintewab & Mannberg, Andrea, 2015. "The Ethiopian Commodity Exchange and spatial price dispersion," Discussion Papers 209963, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.

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