Effects of Transaction Costs on Choice of Selling Point: A Case of Smallholder Banana Growers in the Great Lakes Region of Central Africa

Abstract

This article examines the effects of transaction costs on the choice of marketing channel by smallholder banana producers (i.e. travel to the market to sell their produce versus selling at the farmgate). A probit analysis is used to identify the factors which determine the choice of a selling point. Variables capturing transaction costs are used in the analysis and these relate to searching for a trading partner, gathering information about the transaction, contracting, negotiating, monitoring and enforcing of contracts. The findings reveal that collective action, gender of household head, degree of dependence on the crop, geographical location and access to price information significantly affect the choice of selling point. This suggests that policies aimed at establishing market information systems, promotion of collective action among smallholder farmers, increased investment in rural infrastructure and achieving gender balance in trade are important.

Selling on Farm or on the Market: What Kind of Arbitrage for Smallholders’ Farmers in South-Kivu, Democratic Republic of Congo?

“…The same result is in Jagwe and Machethe (2011). This result is contrary to our expectation and with Bardhan et al (2012); Komarek (2010); Osebeyo and Aye (2014).…”

“…This result makes more precise the decision about the place of sale when a crop is perishable. It shows that farmers have better benefits if selling on the market where they can try to negotiate good prices rather than being price takers as suggested by Jagwe and Machethe (2011).…”

“…Studies on the market participation of rural households already existed several decades ago. Many authors (Bellemare and Barrett, 2006;Boughton et al, 2007;Goetz, 1992;Jagwe and Machethe, 2011;Kandiero and Randa, 2004;Lapar et al, 2003;Mather et al, 2011;Obare et al, 2003;Oduro and Osei-Akoto, 2008) have tackled this question with various methods and, sometimes, with divergent results according to the location and/or the type of products.…”

Human–social capital and market access factors influencing agro-processing participation by small-scale agripreneurs: The moderating effects of transaction costs

“…Future studies could be more fine grained and investigate how the human capital dimensions are complemented by social capital, particularly as social capital is one of the most significant sources of knowledge for entrepreneurs. Future studies may also benefit by focusing on variables not included in the study, especially as institutional support (Jagwe & Machethe 2011) and the implementation of massive government rural capital infrastructure projects have been highlighted as ways to change the negative influences of transaction costs faced by agripreneurs.…”

Effects of transaction costs on mushroom producers’ choice of marketing channels: implications for agricultural market access in Swaziland

“…Despite the difficulty of measuring transaction costs, some attempts have been made previously to study their influence on the choice of marketing channels for African producers of various agricultural commodities such as beef (Shiimi et al, 2012), bananas (Woldie & Nuppenau, 2011;Jagwe & Machete, 2011) and coffee (Fafchamps & Hill, 2005), among others. Nonetheless, no attention has been accorded to study the marketing of non-conventional HighValue Agricultural Commodities (HVACs) like mushrooms, a gap that this study attempts to address.…”