The Impact of Alternative Marketing Institutional Arrangements on the Participation and Welfare of Export French bean Smallholders in Kirinyaga County

Abstract

Smallholders have been actively involved in the sub-sector through linkages with private sector actors. However, the introduction of international food safety standards in export destinations has been hypothesised to make the participation of smallholders in the sector problematic due to increased transaction costs. The future of their continued participation in this sector depends on their ability to form and engage in institutional arrangements that help to reduce these costs. Their participation is also expected to be beneficial to them by improving their living standards. The purpose of this study therefore was to establish the impact of alternative institutional arrangements on smallholder participation and welfare in Kirinyaga County. The specific objectives were to establish the types and nature of the institutional arrangements farmers use to market their French beans, to determine the factors associated with participation within the identified arrangements and lastly to establish whether there are any significant welfare outcomes for those who participated in the export horticulture. A field survey was carried out in the four districts of Kirinyaga County with a sample size of 361 respondents selected using the stratified random sampling procedure. Data collection was carried out using questionnaires, focus group discussions and key informant interviews. Descriptive statistics were generated to describe the nature and operations of institutional arrangements. A multinomial logistic regression was used to establish factors associated with participation in the identified arrangements. Chi-square test of significance was used to determine whether there were significant differences in welfare outcomes between growers and non-growers. Eight institutional arrangements were identified, where farmers worked with four buyers, namely exporters, exporter agents, brokers from within the area and brokers from outside the area. Farmers engaged with these buyers either as individuals or as part of a group. The group-exporter was the most dominant as well as the most preferred channel. However, this channel exhibited the most exclusionary tendencies as farmers with fewer years of education and small landholdings were least likely to participate. Contrary to theoretical expectations, the individual-broker arrangement was the second most dominant arrangement. Challenges faced by farmers with contractual arrangements made this a preferred channel for some producers. A major finding of this study was that the problematic nature of contracting between buyers and producers. The buyers enjoyed disproportionate market power and suffered little consequence when they reneged on their agreements. In terms of welfare, the significant differences between growers and non-growers were in regard to the type of school attended their children attended and self-sufficiency in production of potato, a staple crop in Kirinyaga. More grower children than non-grower attended private schools and more growers than non-growers were self-sufficient in the production of potato. In addition, growers were able to collectively leverage their earnings to acquire education and health services. It was established that the potential of export French bean production to deliver significant welfare benefits had diminished because of the problem of contracting and the declining prices. The study concludes that although the participation in French bean farming had the potential to improve rural living standards, the political economy issues in the sub-sector threatened this potential. Finally, the study recommends a greater role for government in creating an enabling institutional environment through the creation of stronger enforcement mechanisms to deal with cases of breach of contract, ensuring greater transparency and accountability within the value chain and building capacities for farmers to leverage collective action to increase their bargaining power.