Financing agricultural marketing in Tanzania: a case of rice and Maize traders in Kyela, Mbozi and Dar es salaam
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Date
2008
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Publisher
Sokoine University of Agriculture
Abstract
This study analyzed the financing of agricultural marketing for rice and maize. Data
for the study were collected by administering a questionnaire to retailers, wholesalers
and village assemblers and supplemented by interviews with actors in credit markets.
Both descriptive and econometric procedures were used for data analysis. The results
show that most traders’ source of capital was own saving, very few used grants/gifts
and credits. Credit for business start-up was mainly from informal sources as many
formal sources don’t lend to start-up businesses. It was found that grain marketing in
Tanzania is fragmented and unreliable due to poor information, mainly on prices.
During the survey, this was evident with maize trade in Mbozi district. Various credit
sources exist ranging from informal to formal financial institutions (FFI). Access to
these credit facilities is limited by lack of collateral and bureaucratic/lengthy
procedures for loan application. Further, loan demand by traders is hampered by
demographic and socio-economic factors in varying ways. Regression results on
formal loan demand showed that interest rate, trader location, marital status and
stock holding duration were inversely related to loan demand, while traders’
experience in business, gender, education and age were positively related.
For
informal sources, results show that majority borrowed from friends and relatives, few
from moneylenders, millers and small unregistered groups. Informal lenders charge
higher interest rates than formal institutions due to lack of regulation from
government and due to risk factors associated with their lending. However, informal
lenders are few, unreliable and offer small amounts for very short durations due to
lack of capital. To improve credit accessibility, it is suggested that:- formal-informal
linkage be initiated and strengthened, engagement in group lending, avoidance of
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Keywords
FINANCING AGRICULTURAL, MARKETING