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Rural Institutions and Producer Organizations in Imperfect Markets: Experiences from Producer Marketing Groups in Semi-Arid Eastern Kenya.Socioeconomics and Policy Working Paper Series no. 23

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Title Rural Institutions and Producer Organizations in Imperfect Markets: Experiences from Producer Marketing Groups in Semi-Arid Eastern Kenya.Socioeconomics and Policy Working Paper Series no. 23
 
Creator Shiferaw, B
Obare, G
Muricho, G
 
Subject Agriculture-Farming, Production, Technology, Economics
 
Description 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.
 
Publisher International Crops Research Institute for the Semi-Arid Tropics
 
Date 2006
 
Type Monograph
NonPeerReviewed
 
Format application/pdf
 
Language en
 
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Identifier http://oar.icrisat.org/4064/1/452_06_WPS23_Rural_institutions.pdf
Shiferaw, B and Obare, G and Muricho, G (2006) Rural Institutions and Producer Organizations in Imperfect Markets: Experiences from Producer Marketing Groups in Semi-Arid Eastern Kenya.Socioeconomics and Policy Working Paper Series no. 23. Working Paper. International Crops Research Institute for the Semi-Arid Tropics , Patancheru, Andhra Pradesh, India.