Agricultural Markets in Benin and Malawi: The Operation and Performance of Traders

68 Pages Posted: 20 Apr 2016

See all articles by Marcel Fafchamps

Marcel Fafchamps

Stanford University - Freeman Spogli Institute for International Studies

Eleni Gabre-Madhin

International Food Policy Research Institute (IFPRI)

Date Written: December 2001

Abstract

Surveys of the operation of agricultural traders in two Sub-Saharan African countries suggest that their performance would benefit from policies aimed at increasing their asset base, reducing transaction risk, promoting more sophisticated business practices, and reducing physical marketing costs.

Drawing on original surveys of agricultural traders, Fafchamps and Gabre-Madhin examine how traders operate in two Sub-Saharan African countries, Benin and Malawi. They find the following: - The largest transaction costs for traders are search and transport. Search methods rely principally on personal visits by the trader, which raises search costs. And since enterprises are very small, transport represents a large share of marketing costs. - Brand recognition, grading, and quality certification are nonexistent. - Brokers and agents are not organized in commodity exchanges. - Quantities are not pooled for transport and storage so as to achieve returns to scale. - Interseasonal and interregional arbitrage is not feasible for most traders, who prefer to operate day to day in a small territory.

This information provides some important insights into how agricultural trade could be improved. It suggests possible policy interventions in four main areas: increasing traders' asset base, reducing transaction risk, promoting more sophisticated business practices, and reducing physical marketing costs.

This paper - a product of Rural Development, Development Research Group - is part of a larger effort in the group to understand the operation of commodity markets in rural areas. The study was funded by the Bank's Research Support Budget under the research project "Markets for Agricultural Inputs in Sub-Saharan Africa" (RPO 683-48). The authors may be contacted at marcel.fafchamps@economics.oxford.ac.uk or e.gabre-madhin@cgiar.org.

Suggested Citation

Fafchamps, Marcel and Gabre-Madhin, Eleni, Agricultural Markets in Benin and Malawi: The Operation and Performance of Traders (December 2001). World Bank Policy Research Working Paper No. 2734. Available at SSRN: https://ssrn.com/abstract=634458

Marcel Fafchamps (Contact Author)

Stanford University - Freeman Spogli Institute for International Studies ( email )

Stanford, CA 94305
United States

Eleni Gabre-Madhin

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

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