Evaluation of a loan system under tobacco contract Farming, a case study of Tanzania leaf tobacco company of Morogoro, Tanzania.
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Date
2007
Authors
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Publisher
Sokoine University of Agriculture
Abstract
In Tanzania, tobacco is one of the largest export and exchange earner crop (BOT, 2003).
Tobacco farming industry is a contract farming business involving farmers in primary
cooperative societies located in eight production regions. TLTC as one of the company
dealing with tobacco business do enter into contracts with primary cooperative societies.
According to the company records since 2001 the current debt recovery has improved
compared to previous years, however this improvement had not been beneficial to both
the company and farmers because after debts recovery from PCS sales, farmers fail to
repay themselves efficiently to realize their intended profit margins. Farmer’s payments
among themselves after debts recovery since 2002-2004 had been 61.41, 69.51 and 59.75
percents to some PCS. This indicates inefficiency in the production-marketing system
and revenues reduction to both sides. This study has evaluated the loan system under
tobacco contract farming in Tabora and Urambo production regions and revealed some
points in the functioning of the entire contract farming arrangements and also calculated
the average profitability of tobacco farming to average farmers which is 40% in view to
repay the loan. The study concluded that the ability of the farmers to repay the loan is
within coverable ability, however other weaknesses have been identified and noted to
contribute to poor repayments, thus a need of more role efforts to industry stakeholders
are recommended on more education to PCS leaders, improved tobacco buying system,
implementation of lawful enforcements and stakeholder role analysis.
Description
Masters Dissertation
Keywords
loan system, tobacco contract, Farming, leaf tobacco, Tanzania.