Transaction Costs and their Implication on Agrocredit Supply Arrangements in Western Tanzania

Ngaruko, Deus D. (2010) Transaction Costs and their Implication on Agrocredit Supply Arrangements in Western Tanzania. Huria Journal, VIII (1). pp. 1-26. ISSN 0856 6739

PDF Download (438kB)

Abstract

: The main objective of the current study was to apply transaction cost economics approach to identify and quantify transaction costs and their impact on choice by principal agrocredit suppliers of the most efficient transaction contractual arrangements. Based on information from the sample of 78 agrocredit transaction contracts in Kibondo district, western Tanzania, we apply both qualitative and quantitative analytical tools to first, describe principal suppliers and institutional arrangements through which farmers access agrocredit; second to identify and quantify determinants of transaction costs involved in credit supply arrangements to smallholder farmers; and third to examine the relationship between transactions cost determinants and choice of agrocredit transaction arrangements. Five contractual transaction arrangements (CTAs) were identified and described qualitatively. Frequency distribution measures of central tendency indicated that CTAs involving intermediaries were found to have higher mean transaction costs compared to direct transaction arrangements. It was also found that there was high significant probability for more preference for private than state coordinated CTAs (a) if size of loans demanded is small; (b) if there is increase in monitoring and enforcement cost; and (c) if the distance between contracting parties increases (and vice versa for high preference of state coordinated CTAs). The logits for negotiation and enforcement costs were more significant in determining probability that private principal suppliers used CTAs with intermediaries than those without intermediaries

Actions (login required)

View Item