Developing market linkages for smallholder farmers: The Tanzanian dairy industry

Pim Quaedackers

Student thesis: Master thesis

Abstract

Agriculture in developing countries has a large potential to contribute to poverty reduction and economic development. Three out of four people in developing countries live in rural areas and depend on agriculture for their livelihoods. However, for agriculture to become a tool for economic development, a revolution in smallholder productivity is necessary. With improved resources, farmers can link up with new markets and engage in value-adding activities. Experience taught us that smallholders have difficulties facilitating their own development. Therefore, this thesis aims to investigate how smallholders can be supported in their efforts to create new market opportunities and develop their resources. The Tanzanian dairy industry will serve as a case study for this investigation because it can be characterized by its large number of smallholder farmers. Inspired by global value chain literature, there is evidence that there are several actors ,‟chain integrators‟, in the dairy industry who are currently trying to organize the farmers, develop their resources and create new market opportunities. Because these chain integrators represent different types of value chain actors, they each take a different approach to their development intervention. Consequently, this research aims to answer the following research question: How do chain integrators develop market linkages for smallholder farmers in the Tanzanian dairy industry? In order to answer this question, there are two variables that need to be defined, i.e. the different types of chain integrators and the instruments that chain integrators use to construct their development intervention. These two variables will make up the analytical framework along which the findings of the field research will be analyzed. This thesis concludes that each approach to develop market linkages for smallholders has its own strengths and weaknesses. Three different types of chain integrators were identified, i.e. buyer-driven, intermediary-driven and producer-driven. In addition, the instruments of chain integrators aim to contribute to three generic purposes that enhance the development of market linkages for smallholders, i.e. reducing transaction costs, creating production networks and developing the resources of the firm. The way that the chain integrators consequently configure the instruments that contribute to these purposes determines the success of the intervention and the sustainability of the market linkage for the smallholders.

EducationsMSc in Business, Language and Culture, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2010
Number of pages154