Transaction costs and smallholder farmers’ participation in banana markets in the Great Lakes Region of Burundi, Rwanda and the Democratic Republic of Congo

John Jagwe, Charles Machethe and Emily Ouma

African Journal of Agricultural and Resource Economics, 2010, vol. 05, issue 2, 16

Abstract: In this study, the Heckman procedure was used to analyze the way transaction costs affect smallholder farming households’ participation in banana markets in the Great Lakes region of central Africa. The results reaffirm that fixed transaction costs largely determine a farmer’s decision to participate in the market, and that the extent of participation is affected mainly by proportional transaction costs. Access to market information, whether directly or through formal or informal institutional arrangements, is critical for market participation. The size of the household and ownership of means of transport are critical in determining the intensity of market participation. The geographical location of the household affects market participation, since some locations have better infrastructure and hence are more commercialized. Policies aimed at encouraging market information access, investments in rural infrastructure and collective action by farmers may help to lower transaction costs and thus enhance market participation.

Keywords: Agricultural Finance; Crop Production/Industries; Financial Economics (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:afjare:156668

DOI: 10.22004/ag.econ.156668

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