ABSTRACT
Malawi’s agricultural sector contributes 30% to the GDP and provides employment to more than 85% of the total rural population. The sector is dominated by smallholder farmers who are challenged with lack of access to reliable markets and poor infrastructure. To address this, the Malawian government has encouraged formation of Farmer-Based Organisations in its national development framework. Although Farmer-Based Organisations have been in existence in the country since 1978, access to agribusiness development services by smallholder farmers producing pigeon peas still remains a challenge. Therefore, this study focused on the effect of participation in Farmer-Based Organisations on profitability of pigeon pea enterprise in Mulanje district, Malawi with the objectives being to compare the socio-economic characteristics of members and non-members of Farmer-Based Organisations, to determine the perceptions of farmers towards services provided by Farmer-Based organisations and the effect of farmer participation in Farmer-Based Organisations on the gross margin of pigeon peas. Primary data was collected using a semi-structured questionnaire from 200 members and 200 non-members of Farmer-Based Organisations that were selected using systematic random sampling. To achieve the study objectives, descriptive statistics, gross margin analysis and propensity score matching model were used for data analysis. The members of Farmer-Based Organisations had an average age of 44 years of age and 7 years of schooling, older and more educated than non-members with a mean of 39 years of age and 5 years of schooling. Furthermore, members travelled 65.13 kilometres to market and had a mean gross margin of MK47, 093.12 different from non- members who travelled 12.84 kilometres to market and had a mean gross margin of MK10,129.65. The results also indicate that source of inputs, credit, extension services, training and new agricultural technologies were different between members and non-members at 1 percent level. On perception towards agribusiness service delivery, both members and non- members agreed that FBOs improve access to production, marketing, advisory and financial services required to promote pigeon pea enterprise. Lastly, members of FBOs obtained higher gross margin for pigeon pea enterprise than non-members and the difference was MK25, 621.45 per hectare. Therefore, Farmer-Based Organisations can help to improve farm productivity and farm income, hence, policy makers need to provide more capacity building initiatives to promote efficient delivery of agribusiness services delivery farmers.
CHAPTER ONE
INTRODUCTION
Background Information
The agricultural sector is the mainstay of the Malawian economy. It contributes up to 30% of the total Gross Domestic Product (GDP). The sector accounts for 80% of export earnings. Moreover, it is a source of employment to more than 85% of the total rural population and it provides food and raw material to non-agricultural sectors of the economy (GoM, 2016).
The agricultural sector in Malawi is dominated by smallholder farmers who are challenged with low productivity and high vulnerability, limited access to markets and poor road infrastructure. In addition, agribusiness in Malawi is in its initial stages as most of the produce is sold as raw materials. This is because smallholder agriculture is associated with less value addition. As a result, smallholder farmers fail to meet the growing demands for agricultural products for both local and world markets (World Bank, 2013). To reduce the negative effect of such challenges, the government has encouraged the formation of Farmer-Based Organisations (FBOs) in its national development framework (Mapila et al., 2010).
FBOs in the form of farmer clubs were introduced in 1978 through the Ministry of Agriculture. The major objective of their formation was for channelling agricultural credit and extension services to smallholder farmers (Kishindo, 1988). This was in recognition that FBOs generate opportunities which enable underprivileged smallholder farmers to access markets, credit, extension services and other limited resources (Sangole et al., 2014).
With the advent of structural adjustment and market liberalisation programmes, the role of FBOs was expanded as they became commercial organisations substituting parastatals in the delivery of agricultural marketing facilities. This was aimed at overcoming the market failures of parastatals as agricultural marketing agencies. However, the development in private sector investment in these services has been unsatisfactory as market failures still continue to exist. This has led to growing calls for more comprehensive market liberalisation strategies to overcome challenges deterring access to markets by smallholder farmers. The strategies comprise of improved investment in; infrastructure, legal institutions, market institutions, research and extension services. This should be coupled with an improved responsibility of FBOs (Bingen et al., 2003).
An earlier study by Rondot and Collion (1999) shows that the record of FBOs performance is mixed. Some FBOs have made substantial improvements in member’s incomes through enhanced access to markets and other services, despite the fact that numerous FBOs have been unsuccessful. This is because some FBOs are weakened by efforts to scale up too rapidly or take several activities. Another reason for failure is the provision of subsidies that lead to a failure to concentrate on fundamental profit making activities that provide more benefits to members. Besides, support from donors and government and the interference by such institutions by using FBOs as development agents than as private businesses can lead to non-satisfaction of member’s needs.
This situation has persisted and the government through its national policies for instance the Malawi Poverty Reduction Strategy (MPRS) of 2002 places importance on advancement of FBOs to facilitate smallholder farmer access to inputs, credit, output markets, market research, technical training and improve coordination within the smallholder sector (GoM, 2007). Over the years, literature has pointed out the importance of FBOs as a new approach to economic and social regulation that can advance access to services by smallholders farmers through replacement of governments’ hierarchical coordination (Peacock et al., 2004). Moreover, FBOs have the possibility of improving the competitiveness of smallholder farmers in Malawi (Christian AID and CISANET, 2015).
In Malawi, pigeon peas (Cajanus cajan) is one of the major legume cash and food crops grown in the Southern part of the country. The production of pigeon peas has been increasing with an estimated annual production of 80,000 metric tons making the country the largest producer in East and Southern Africa (Christian AID and CISANET, 2015). The crop has several unique characteristics that makes it a very vital crop among the smallholder farmers. Nutritionally, it has important nutrients (protein and amino acids) that improve the diet of most households in the communities. Besides, pigeon peas is processed into dhal (split decorticated pigeon pea) and exported through the local, regional and international markets (Kananji et al., 2009). The study also indicated that only 10% of processed pigeon pea is consumed locally, with the major focus being the export market.
The majority of smallholder farmers in Malawi mainly sell pigeon peas to local traders, who then sell to intermediaries and processing companies. This has led to availability of unorganised system of marketing that does not allow smallholder farmers to sell pigeon peas at a reasonable price. Therefore, the majority of such smallholder farmers depend mainly on rural buying agents who buy at low prices (Kulkarni, 2013). As such it has been found essential to bring together farmers into FBOs (associations and cooperatives) to enable smallholder farmers supply national and international markets successfully.
Statement of the Problem
Farmer-Based Organisations have been in existence in Malawi since 1978. These organisations are formed to provide agribusiness development services to smallholder farmers. These services include: access to output market, access to credit, access to extension, capacity building, access to market information and access to inputs. As much as this is the case, access to agribusiness development services by smallholder pigeon pea farmers remains a challenge. As a result, interventions meant to enhance the livelihoods of rural smallholder farmers become unsustainable and these farmers’ business enterprises remain uncompetitive. Therefore, this study was aimed at determining the effect of farmer participation on profitability of pigeon pea enterprise in Mulanje District, Malawi.
Objectives of the Study
General Objective
The general objective of the study was to contribute towards improved smallholder livelihood through promotion of sustainable and market oriented FBOs among smallholder farmers in Malawi.
Specific Objectives
1. To compare the socio-economic characteristics of members and non-members of FBOs in Mulanje District, Malawi.
2. To determine the perception of pigeon pea farmers on the services provided by FBOs in Mulanje District, Malawi.
3. To determine the effect of farmer participation in FBOs on the gross margin of pigeon pea enterprise in Mulanje District, Malawi.
Research Questions
1. What are the socio-economic characteristics of members and non-members of FBOs in Mulanje District, Malawi?
2. What is the perception of pigeon pea farmers towards the services provided by FBOs in Mulanje district, Malawi?
3. What is the effect of farmer participation in FBOs on the gross margin of pigeon pea enterprise in Mulanje district, Malawi?
Justification of the Study
The National Export Strategy (NES) of 2016 for Malawi states that the increasing demand for pigeon peas in the world market and the need for increased public-private partnerships as a way of promoting market integration requires increased participation of smallholder farmers through FBOs (GoM, 2013). The National Agriculture Policy of 2016 also stipulates that there is need to double the production of legumes and promote value addition to achieve sustainable agricultural transformation that will result in significant growth of the agricultural sector, increase in farm incomes, improvement in food and nutritional security for Malawians and increase in agricultural exports (GoM, 2016). In this regards, given the fact that poverty reduction is a critical issue in Malawi with agriculture as the driving force to the same, higher farm returns from farm enterprises ensures income availability at farm household level. Hence, any study that aims to better understand functionality of FBOs geared to solve the problem of low household income is essential.
In this regard, this study will help to improve the production and marketing skills of farmers through selection of better integration channels for pigeon pea enterprise that will enable the farmers easily access production, marketing, advisory and financial services deemed to be necessary for the success of their enterprise. In addition, agricultural stakeholders, planners, NGOs and policy makers would have appropriate information when formulating policies, technologies, trainings and agribusiness extension methodologies that ensures full knowledge of agriculture development through FBOs. Future researchers who might be interested in a related topic would be able to have relevant literature about the study problem.
Scope and Limitations of the Study
This study focused on data for the 2015-2016 agricultural season and the area of coverage included Milonde, Msikawanjala and Thuchila Extension Planning Areas in Mulanje District, Malawi. This study was restricted to farmers whose major enterprise was pigeon peas. This study relied on the availability and accessibility of the members, hence respondents were followed to their homestead and farms for data collection. The study sorely relied on the farmer’s ability to recall information due to poorly kept records. However, probing technique was used to enhance the accuracy of the information obtained
Operational Definition of Terms
Agribusiness: This is the commercialisation of pigeon pea production among smallholder farmers
Effect: This is a change that is observed on pigeon pea farmers brought about by the presence of a Farmer-Based Organisation
Farm Business Enterprise: It includes all activities (production, sales and purchases) of farm goods and services involving financial and commercial aspects.
Farmers Organisations: These are groups of farmers with special interests and concerns with developed structure, formal membership, status and a set of by-laws and rules to provide market opportunities and empowerment to all members.
Gross Margin: This is the difference between the gross income of pigeon peas and total variable costs incurred in production and marketing of pigeon peas. It is measured as gross margin per hectare.
Livelihood: This refers to the means of making a living and it includes the abilities of the farmer, assets, income and activities necessary to get the needs of life.
Market Access: This is the ability of smallholder farmers to participate in beneficial selling and buying of agricultural outputs and inputs.
Perception: This is the judgment that one can develop or have resulting from awareness or understanding of a particular issue or thing. Value Addition: It includes local processing, packaging, or marketing, which improves the value of pigeon peas produced by smallholder farmers.
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