The impact of poverty, risk aversion and time preference on maize marketing channel choice decisions: the case of Zvimba and Makonde districts of Zimbabwe

Michael Kamoyo and Albert Makochekanwa

Agrekon, 2018, vol. 57, issue 3-4, 233-250

Abstract: The study deployed the experimental and behavioural economics toolkit to determine how risk aversion attitude, time preference and poverty status influenced farmers’ marketing channel preferences between the state-owned Grain Marketing Board (GMB) and the private buyer market. Following maize market deregulation and subsequent entry of private buyers in the Zimbabwean grain sector, marginalised poor farmers remained confined to the low return private buyer market that offered very low prices, as they avoided GMB whose payment plan was uncertain and delayed. The question therefore was: To what extent did farmers’ risk aversion attitude and time preference explain the poor farmers’ choice for low return private buyer market at the expense of the high return GMB market? Using survey data obtained from 433 maize farmers in Makonde and Zvimba districts, an instrumental variable probit regression model was estimated. The results confirmed that risk aversion attitude and time preferences (as measured by farmers’ discount rate) reduced the likelihood of a farmer participating in a high return state-owned GMB market. Poor farmers were found to be more risk averse and impatient than non-poor farmers in marketing channel selection. Their high risk aversion attitude and impatience constituted the greatest market impediments that restricted them to the low return private buyer market. To make agricultural markets work for poverty reduction the study recommended that policies that promote the development of risk transfer markets and futures markets for maturity transformation of farmers’ payments are critical in guaranteeing effective participation of poor households in high return markets.

Date: 2018
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DOI: 10.1080/03031853.2018.1523016

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