Effects of transaction costs on choice of selling point : a case of smallholder banana growers in the great lakes region of Central Africa

Abstract

This article examines the effects of transaction costs on the choice of marketing channel by smallholder banana producers (i.e. travel to the market to sell their produce versus selling at the farmgate). A probit analysis is used to identify the factors which determine the choice of a selling point. Variables capturing transaction costs are used in the analysis and these relate to searching for a trading partner, gathering information about the transaction, contracting, negotiating, monitoring and enforcing of contracts. The findings reveal that collective action, gender of household head, degree of dependence on the crop, geographical location and access to price information significantly affect the choice of selling point. This suggests that policies aimed at establishing market information systems, promotion of collective action among smallholder farmers, increased investment in rural infrastructure and achieving gender balance in trade are important.