Transaction cost factors affecting the economic life of smallholder paddy farmers in Tanzania

Abstract

Smallholder farmers (SHFs) constitute more than half of the world’s undernourished people and the majority of people living in absolute poverty. Due to high transaction costs, lack of access to financial services, inaccessibility to more remunerative markets, and immediate cash needs, many sell their harvest when prices are low, then buy when prices are high for lack of household stock. Though numerous studies exist on the effects of transaction costs on smallholder farmers, many do not focus on how these affect smallholder paddy farmers. The objective of this study was to enumerate market factors affecting smallholder farmers and investigate those that influence the transaction costs of smallholder farmers. The study used multi-stage sampling techniques consisting of purposive sampling based on paddy productivity, knowledge of market, etc. and simple random sampling of balloting to select the five key informants and 315 smallholder paddy farmers with an average of nine persons per group thereby constituting about 30% of the total  1021 population. The study observed the market participation requirements of respondents and found that 82.5% stated that it is difficult while only 19% see the market size as large. Further, 72.4% have their customers as small quantity buyers, and 62.2% reportedly rated market prices as poor. The results show that most of the customers are small quantity buyers, which buttresses the fact that inadequate access to markets for smallholder farmers is one of the key factors affecting reduction of transaction cost, a challenge currently prevailing in the sub-Saharan African agricultural sector.

Keywords: Smallholder Farmers, Transaction Cost, Market Factors, Paddy Productivity