Storage of Maize in Mozambique Under Dualistic Credit Markets: A spatial and Temporal Analysis

The paper examines marketing patterns when interest and storage loss rates are greater in rural zones, representing informal sector storage usually on-farm, than in urban zones, representing formal sector storage off-farm. Empirical results indicate that divergences in interest and storage loss rates across space have significant impacts on marketing patterns. Reductions in rural rates improve welfare, and these welfare gains tend to accrue primarily to rural inhabitants-- a group that is poor. These results suggest that efforts to improve the efficiency of rural storage should be given priority as opposed to the creation of large, formal sector grain collection centers. The benefits of formal sector grain collection centers tend to be offset in large part by the transport costs necessary to deliver grain to the centers plus accrued interest on these transport costs. This aspect is particularly costly if interest differentials are sufficiently large to generate incentives to transport to grain storage sites after harvest and then back to productive rural zones later on for consumption.