Finding Missing Markets (and a Disturbing Epilogue) : Evidence from an Export Crop Adoption and Marketing Intervention in Kenya

Finding Missing Markets (and a Disturbing Epilogue) : Evidence from an Export Crop Adoption and Marketing Intervention in Kenya

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In much of the developing world, many farmers grow crops for local or personal consumption despite export options that appear to be more profitable. Thus many conjecture that one or several markets are missing. This paper reports on a randomized controlled trial conducted by DrumNet in Kenya that attempts to help farmers adopt and market export crops. DrumNet provides smallholder farmers with information about how to switch to export crops, makes in-kind loans for the purchase of the agricultural inputs, and provides marketing services by facilitating the transaction with exporters. The experimental evaluation design randomly assigns pre-existing farmer self-help groups to one of three groups: (1) a treatment group that receives all DrumNet services, (2) a treatment group that receives all DrumNet services except credit, or (3) a control group. After one year, DrumNet services led to an increase in production of export oriented crops and lower marketing costs; this translated into household income gains for new adopters. However, one year after the study ended, the exporter refused to continue buying the cash crops from the farmers because the conditions of the farms did not satisfy European export requirements. DrumNet collapsed in this region as farmers were forced to sell to middlemen and defaulted on their loans. The risk of such events may explain, at least partly, why many seemingly more profitable export crops are not adopted.

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Bibliographic Details
Main Authors: Ashraf, Nava, Giné, Xavier, Karlan, Dean
Format: Policy Research Working Paper biblioteca
Language:English
Published: World Bank, Washington, DC 2008-01
Subjects:ACCESS TO CREDIT, ADMINISTRATIVE DATA, AGRICULTURAL ECONOMICS, AGRICULTURAL EXTENSION, AGRICULTURAL INPUTS, AGRICULTURAL LABOR, AGRICULTURAL PRACTICES, AGRICULTURAL TECHNOLOGY, AGRICULTURAL TRADE, AGRICULTURE, ANIMALS, AUDITS, BANANAS, BASE YEAR, BEANS, BORROWING, BUSINESS PROFITABILITY, BUSINESS SCHOOL, BUYER, BUYERS, CASH CROPS, CERTIFICATION COSTS, CHECKS, COFFEE, COLLATERAL, COMMERCIAL BANK, COMMERCIAL BANKS, COMMERCIALIZATION, COMPETITIVE MARKETS, CONSUMERS, CONTRACT FARMING, CONTRIBUTION, COOPERATIVES, CORN, COST OF TRANSPORT, CREDIT GROUP, CREDIT GROUPS, CREDIT PROGRAM, CREDITS, CROP, CROP PRODUCTION, CROP VARIETIES, CROPS, CULTIVATION, DECISION MAKING, DEPOSIT, DEVELOPMENT ECONOMICS, ECONOMIC DEVELOPMENT, EXPECTED VALUE, EXPENDITURE, EXPENDITURES, EXPORT CROP, EXPORT CROPS, EXTENSION SERVICES, FAMILY MEMBERS, FAO, FARM, FARM ACTIVITIES, FARMER, FARMERS, FARMING, FARMS, FERTILIZER, FINANCIAL INSTITUTIONS, FISHERIES, FLOWERS, FOOD SAFETY, FORMAL BANK, FORMAL FINANCIAL INSTITUTIONS, GREEN REVOLUTION, HARVESTING, HORTICULTURAL CROPS, HORTICULTURAL EXPORTS, HORTICULTURAL MARKETS, HORTICULTURE, HORTICULTURE DEVELOPMENT, HORTICULTURE SECTOR, HOUSEHOLD INCOME, HOUSEHOLDS, HUMAN CAPITAL, IDS, IFPRI, INFORMED DECISION, INSURANCE, INTERNATIONAL BANK, INTERNATIONAL PRICE, LACK OF ACCESS, LATRINES, LINE OF CREDIT, LITERACY, LOAN, LOAN REPAYMENT, LOAN SIZE, LOTTERIES, LOW-INCOME, MAINTENANCE COSTS, MAIZE, MARKETING, MICRO-CREDIT, NET LOSS, OUTREACH, PENSION, PENSIONS, PERSONAL SAVINGS, PESTICIDE, PESTICIDE RESIDUE, PLANTATIONS, PLANTING, POLITICAL ECONOMY, POTATOES, POULTRY, PRICE FLUCTUATIONS, PRICE INDEX, PROBABILITY, PRODUCE, PRODUCTIVITY, PROFITABILITY, PUBLIC TRANSPORT, RECEIPTS, RECORD KEEPING, REMITTANCES, REPAYMENT, RESEARCH ASSISTANCE, RISK TOLERANCE, SALARIES, SALE, SAVINGS ACCOUNT, SAVINGS ACCOUNTS, SAVINGS SERVICES, SEEDS, SELF-EMPLOYMENT, SMALL FARMERS, SMALL FARMS, SMALL-SCALE FARMERS, SMALL-SCALE PRODUCERS, SMALLHOLDER, SMALLHOLDER FARMERS, SMALLHOLDERS, SOCIAL ASSISTANCE, SOCIAL NETWORKS, SOCIAL SERVICES, SOIL ANALYSIS, SOURCES OF INCOME, STATE UNIVERSITY, SUB-SAHARAN AFRICA, TAKE-UP RATES, TOMATOES, TOTAL COST, TOTAL SAVINGS, TRANSACTION, TRANSPORTATION SERVICES, VALUABLE, VEGETABLE TRADE, VEGETABLES, VILLAGE, VILLAGES, WAGES, YIELDS,
Online Access:http://documents.worldbank.org/curated/en/2008/01/8943644/finding-missing-markets-disturbing-epilogue-evidence-export-crop-adoption-marketing-intervention-kenya
http://hdl.handle.net/10986/6448
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Summary:In much of the developing world, many farmers grow crops for local or personal consumption despite export options that appear to be more profitable. Thus many conjecture that one or several markets are missing. This paper reports on a randomized controlled trial conducted by DrumNet in Kenya that attempts to help farmers adopt and market export crops. DrumNet provides smallholder farmers with information about how to switch to export crops, makes in-kind loans for the purchase of the agricultural inputs, and provides marketing services by facilitating the transaction with exporters. The experimental evaluation design randomly assigns pre-existing farmer self-help groups to one of three groups: (1) a treatment group that receives all DrumNet services, (2) a treatment group that receives all DrumNet services except credit, or (3) a control group. After one year, DrumNet services led to an increase in production of export oriented crops and lower marketing costs; this translated into household income gains for new adopters. However, one year after the study ended, the exporter refused to continue buying the cash crops from the farmers because the conditions of the farms did not satisfy European export requirements. DrumNet collapsed in this region as farmers were forced to sell to middlemen and defaulted on their loans. The risk of such events may explain, at least partly, why many seemingly more profitable export crops are not adopted.

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