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Candidate Number: 73752

MSc in Development Studies 2013

Dissertation submitted in partial fulfilment of the requirements of the degree

Collective action for smallholder market

access: the case of Tanzania’s Agricultural
Market Systems Development Programme

Word Count: 9981

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Abstract
Donor agencies and developing country governments are increasingly attentive to the potential for farmer’s
organisations to improve access to markets for smallholder farmers. This study looks at the Agricultural Market
Systems Development Programme (AMSDP), an aid-funded project operating in Tanzania between 2002 and
2010, which worked directly to form and strengthen farmers’ groups, provide market information and training,
and connect farmers to new markets.

The results of AMSDP suggest that the existing literature may have underestimated the potential of collective
action to increase incomes of farmers of staples crops and of poorer farmers; the potential of simple market
penetration strategies to raise incomes; and the difficulty of engaging in more complex product and market
development strategies.

However, the project raises questions about the sustainability of aid-supported farmers’ groups, and about the
cost-effectiveness of such interventions.
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Table of contents
1. Introduction………………………………………………………………………………..4

2. Theoretical framework……………………………………………………………………….……4

Collective action and market failure………………………………………………………...4

Agriculture in sub-Saharan Africa and the role of farmer’s organisations………………....5

Collective action for agricultural market access: some common conclusions……………...8

Theoretical conclusions for analysis…………………………………………………….…12

3. Case study: the Agricultural Market Systems Development Programme…………………….… 12

Case study background…………………………………………………………………… 12

Sources……………………………………………………………………………………..17

Findings……………………………………………………………………………….……18

4. Discussion………………………………………………………………………………….…..…24

5. Conclusion…………………………………………………………………………………..……27

References…………………………………………………………………………………….……..29

Appendix: list of interviews………………………………………………………………….……..33

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1. Introduction

Collective action is increasingly recognised as a common response to market failure in developing countries,
particularly with regard to natural resource management. In recent years, growing attention has been payed to the
potential for collective action by farmers to address failures in agricultural markets, which are frequently
characterised by high transaction costs and limited competition among buyers. Donor- and NGO-funded projects
supporting farmer’s organisations have proliferated in developing countries, in part in response to the
dismantling of state-run monopoly crop marketing schemes since the 1980s.

This study analyses the case of the Agricultural Market Systems Development Programme (AMSDP), a donor-
funded project operating between 2002 and 2010 in Tanzania. AMSDP employed local NGOs to form and
strengthen groups of smallholder farmers, provide capacity building in marketing techniques, provide market
information, and connect groups to a wider range of potential markets. The study draws on official evaluations of
AMSDP by donors, an in-depth study of the impact of AMSDP in two districts in Northern Tanzania, and
interviews with project staff.

The results suggest that collective action for market access has significant potential to improve both incomes and
production levels for smallholder farmers. In contrast to the prevailing consensus in the literature on collective
action for market access, the results of AMSDP suggest that collective action can improve the market
performance of farmers of staple crops and, under certain circumstances, poor farmers; and that simple strategies
of market penetration strategies can prove more viable and effective than strategies that seek to establish new
product lines or access new markets. However, the case of AMSDP also raises questions about the sustainability
of externally-assisted farmer’s groups, and of the cost-effectiveness of such interventions from a poverty
reduction perspective.

Section 2 discusses the theoretical framework of the study. Section 3 introduces the case study and presents
findings. Section 4 discusses the implications of the findings for our understanding of the usefulness of
collective action for smallholder market access. Section 5 concludes.

2. Theoretical framework

Collective action and market failure

Collective action is frequently defined as “voluntary action taken by a group to achieve common interests”
(Meinzen-Dick and Di Gregorio, 2004, in Shiferaw et al, 2011, p. 477). This definition excludes action required
by law or as part of paid employment, but still encompasses a wide array of activity ranging from trade unions to
cartel arrangements between firms (Olson, 1965).

Thorp (2003) identifies three core types of collective action groups, divided by their core function: ‘claims’, ‘pro
bono’, and ‘efficiency’. Claims groups exist primarily to “advance claims by [their] members to power and/or
resources.” Political associations, such as peasant’s movements, fit into this category. Pro bono groups exist
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primarily to advance the claims of, or to provide services to, non-members, and as such the type may overlap
considerably with claims groups: for example, trade unions may seek to improve the wages and conditions of not
only members, but non-unionised colleagues (p. 6).

Efficiency groups exist primarily to address market failures, thereby increasing the efficiency of economic
activities. Market failures addressed by groups include indivisibilities, for example high transaction costs
creating significant economies of scale that may deter individual market action; imperfect or asymmetric
information; and externalities related to non-excludability, whereby the rational utility-maximising behaviour of
individuals alone will not lead to the production of, or protection of, public goods (Thorp, 2003, p. 6).

Much of the literature on collective action to address market failure has focused on natural resource
management, the most famously example being the work of Ostrom (1990). In response to Hardin’s (1968)
theory of the ‘tragedy of the commons’ – the belief that, governed by rational utility-maximising preferences,
individuals would over-use any unrestricted common property resource until it is exhausted – Ostrom
demonstrated that communities frequently adopt collective management techniques in which individuals
voluntarily, although sometimes under threat of social sanction, moderate their use of resources to ensure
sustainability. In Thorp’s schema, this can be considered an ‘efficiency group’ response to externalities in the
use of common resources.

Inspired by the ‘new institutional economics’ and the perceived failure of market-led reforms in many
developing countries in the 1980s, increasing attention has been paid to the prevalence of market failures in
developing countries and the absence of necessary institutions for efficient market functions (North, 1990;
Kaufmann, D., Kraay, A and Zoido-Lobaton, 1999). The wider development debate has emphasised de jure
institutions such as property rights, and seen collective action firstly as a force for good governance and
accountability (e.g. Booth, 2012). However, efficiency groups have also been identified as an important part of
the ‘institutional arrangements’ for effective markets in developing countries, particularly in agriculture where
the state previously led a particularly active role (Ton, 2008).

Agriculture in sub-Saharan Africa and the role of farmer’s organisations

Despite rapid urbanisation in recent decades, the economies of sub-Saharan Africa (henceforth ‘Africa’) remain
heavily dependent on smallholder agriculture, with 60% of the population living in rural areas and 80% of farms
occupying less than two hectares (Nagayets, 2005, in Wiggins, 2009, p. 4).

Smallholder agriculture in Africa has undergone a complex series of transitions, from partially to fully state-run
and, in recent decades, back to a market approach. In the 1960s and 1970s, monopoly marketing boards were
commonplace, typically offering farmers a set price for their goods as well as subsidised inputs. These
institutional arrangements enabled governments to meet the food needs of growing urban populations and, in
some cases, to extract surplus from agriculture through exports (Bates, 1981, p. 14); they also offered an implicit
‘welfare subsidy’ to farmers in remote areas, by typically offering a fixed price nationally despite the substantial
transport costs involved in marketing produce from remote areas (Wiggins, 2002, in Oya, 2010, p. 98).
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However, farmers typically received only a small fraction of the final sale price of goods, and by the 1980s the
system was believed to be depressing production and deepening rural poverty (Bates, 1981, p. 83). Furthermore,
many parastatals were subject to fiscal mismanagement or corruption, and following the oil shocks of the 1970s
and rising transport costs, began to incur significant debts (Biermann, 1997, p. 59). In the 1980s, typically under
pressure from international donors, most sub-Saharan African countries dismantled or reformed these parastatals,
removing restrictions on private trading and transforming marketing boards into regulatory bodies.

While there remains significant disagreement about the effects of these reforms, it is generally accepted that the
private sector has not sufficiently replaced governments as a provider of inputs and buyer of outputs for
agriculture. While robust markets have developed in areas of high yields and those near to market centres, in
more remote areas, markets have remained characterised by “informal arrangements between producers and
small-scale intermediaries” (IFAD, 2003, p. 7). In institutional economics terms, smallholder agriculture in
Africa can be seen as suffering from a range of market failures: indivisibilities, notably in input and
transportation costs, which make it unprofitable for individual farmers to take goods to market; ‘thin’ markets,
with minimal competition between buyers of goods in many remote areas; excessive transaction costs, which
minimise the share of value accruing to producers; and highly asymmetric information, with many farmers
unaware of the prevailing market price and so unable to avoid exploitation by buyers (ibid., p. 10).

The result has been a reduction in, and in some cases reversal of, growth in agricultural production (Bryceson,
2009); de-commercialisation, where many smallholders in remote areas have ceased growing surplus for sale and
shifted to a largely subsistence lifestyle (Ellis, 2000, p. 64); and degrarianisation, where smallholders have
diversified their livelihoods away from agriculture by taking on more wage work or establishing microbusinesses
such as home breweries (ibid., p. 149). Despite progress in poverty reduction across Africa as a whole, poverty
has typically fallen much less rapidly than in urban areas (for the example of Tanzania, see Mashindano and
Maro, 2011).

Collective action, in the form of farmer’s organisations, has emerged as a key strategy to help address market
failures in agriculture. Following the reform of state-led agriculture marketing boards, voluntary farmer’s
organisations can act as a buffer between farmers and the market, addressing information asymmetries and
providing economies of scale in both inputs and output marketing. Collion and Rondot (2001) consider farmer’s
organisations “a new mode of economic and social regulation” occupying a space between the retreating state
and individuals (in Chirwa et al., 2005a, p. 1.)

Governments and development actors alike increasingly emphasise the role of farmer’s organisations in enabling
markets to ‘work for the poor’. The World Bank’s 2003 Rural Development Strategy committed the Bank for the
first time to supporting ‘Rural Producer’s Organisations’ (World Bank, 2003, p. 59); the 2008 World
Development Report, devoted to agriculture, declared: “For smallholders, producer organizations are essential to
achieve competitiveness” (World Bank, 2008, p. 14). Even national Poverty Reduction Strategy Papers have
emphasised the role of farmer’s organisations in improving incomes, for example that of Malawi (Chirwa et al,
2005a, p. 1).

Donor- and NGO-supported farmer’s organisations have proliferated in recent decades, both at national level –
for example, the USAID-funded National Smallholder Farmer’s Association of Malawi (NASFAM), founded in
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1997, which has now grown to include more than 5% of the Malawi’s small farmers (Chirwa et al, 2005a, p. 5) –
and at local level, such as the Urban Agriculture Network initiative in Ghana supported by the NGO
ACDI/VOCA (2013).

However, farmer’s organisations have frequently failed, often due to undercapitalisation or financial
mismanagement (Chirwa et al., 2005b, p. 1). Furthermore, farmer’s organisations which provided a conduit for
government- or NGO-subsidised inputs and extension services often collapsed or encountered severe financial
difficulties once subsidies ceased (Chirwa et al., 2005a, p 4; Bingen, Serrano, and Howard, 2003, p. 407).

As a result, farmer’s organisations are now discouraged from competing with private-sector service providers,
but instead to play a bulk buyer role obtaining services from the private sector (Chirwa et al, 2005a, p. 4). So-
called ‘new generation co-operatives’ typically eschew direct provision of inputs or credit in favour of focusing
on the marketing of outputs and obtaining low-cost inputs and services from the private sector. For example,
Malawi’s Smallholder Tea Authority, which provided a wide range of inputs and services, collapsed in the 1990s
and was replaced with the Smallholder Tea Growers Trust, which operates with much a much smaller staff and
emphasises private-sector services (Chirwa et al., 2005a, p. 4).

Effectively, these ‘new generation’ farmer’s organisations seek to address the market failures that prevent
smallholders from accessing affordable services and profitable markets. The subject of this study, the
Agricultural Market Systems Development Programme (AMSDP), operates within this model, providing
capacity building and training but no direct financial support, and encouraging groups to source inputs and
services from the private sector.

However, there remains significant scepticism as to whether farmer’s organisations can overcome market
failures to provide efficient output marketing or affordable inputs and services. Critics of support for the small
farms sector not the significant advantages of large farms in terms of economics of scale in terms of both inputs
and marketing of outputs (Collier and Dercon, 2009, p. 3). In the wake of the food price crisis of 2007-8 and
renewed concern about food security, African governments appear to be placing more emphasis on supporting
large farms (Deininger and Byerlee, 2011, p. 705). AMSDP therefore offers a chance to test whether
smallholders can achieve increases in income and production without external financial support.

Collective action for agricultural market access: some common conclusions

Since the late 1990s a range of empirical studies have analysed the effectiveness and limitations of collective
action as a tool for market access for small farmers. Many examples of successful farmer’s organisations have
been noted in crops such as cotton, green beans, onion and dairy farming (Bernard and Spielman, 2009, p. 34).

The literature on collective action in general, including in natural resource management, emphasises the internal
socioeconomic and cultural factors which enable groups to form and function effectively (e.g. Wade, 1990;
Ostrom, 1990). These studies identify a range of common factors that help ensure effective collective action,
including small group size; clearly defined boundaries; shared norms; heterogeneity of endowments and
homogeneity of identities and interests (Barham, 2007, p. 43). In general, the literature on collective action for
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agricultural market access generally finds similar factors to be significant (Markoleva et al., 2009). Barham
(2007) offers a study of the importance of similar factors for AMSDP.

However, the literature on collective action for market access also establishes a broad consensus about the
agricultural and economic conditions for successful farmer’s organisations that suggests the effectiveness of
collective action among poor farmers in sub-Saharan Africa may be limited. This section will review this
literature with particular focus on four areas which the case of AMSDP helps to illuminate:

 the ability of collective action for market access to assist the poor;
 the usefulness of collective marketing for staple crops;
 the effectiveness of collective action in improving returns on existing crops within existing markets, as
opposed to enabling diversification or value-adding activities such as processing; and
 the ability of farmer’s organisations to form and sustain themselves without external support.

Poverty

The literature on collective action in general is somewhat pessimistic about the helpfulness of collective action in
poverty reduction. As noted by Thorp (2003), the poor generally lack several forms of human, social, financial
and natural capital which are helpful in forming and sustaining groups: education, which enable group members
to organise and formalise groups; market information, which enables prospective groups to identify market
failures which could be addressed by collective action; financial capital for costs involved in establishing
collective action; labour capital, to allow time for group activities; and social status, which can provide groups
with support from their communities (e.g. from village elites) (p. 14).

In addition to making it difficult for the poor to form groups, these limitations can bar the poor from
participation in groups formed by better-off neighbours. The result is a commonly-observed ‘middle class
effect,’ whereby groups often exclude both the richest members of a community, who see no need for collective
action, and the poorest, who are barred from participating. Bernard and Spielman (2009) find that in agricultural
marketing collectives in Ethiopia, both education and landholding are the dominant determinants of household
participation in cooperatives, but the marginal effect of landholdings decreases above 4 hectares (Ha) (p. 62).”
Where poorer farmers are able to form or join groups, these same limitations are still likely to reduce the
effectiveness of the organisation, suggesting clear trade-offs between participation of the poor and commercial
performance, particularly in more consensus-driven groups (Berhard and Spielman, 2009, p. 61).

Of course, in agricultural groups in particular, landless people, who are typically among the poorest in rural
Africa, are naturally typically barred from participation unless they are able to rent land (Ellis and Ndoe, 2003).

Overall, the conclusion from previous studies has been that collective action in agriculture may not be an
appropriate intervention if poverty reduction, as opposed to food security, is the priority. This draws on Hitchens
et al’s (2004) concept of ‘viability voids’ where below a certain level of resource endowment, the “rationale and
efficacy of income generation promotion is questionable and of a low priority compared to relief or social
protection measures” (in Shiferaw, 2011, p. 486).

The usefulness of collective action for marketing in staples

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There is also a considerable degree of pessimism in the literature regarding the appropriateness of collective
action for staples agriculture. The majority of academic studies of farmer organisations have been in higher-
value or perishable goods, while studies of staples marketing have suggested the benefits are significantly lower
than in higher-value goods (Bernard and Spielman, 2009, p. 61).

High-value and particularly perishable crops may have a limited number of available markets, maximising the
capacity of collective action to increase farmers’ bargaining power or enable access to profitable new markets by
reducing transaction costs. For farmers selling undifferentiated, unprocessed commodity goods such as grains or
rice paddy, where there are often a large number of potential buyers, “the incremental benefits from collective
marketing [are] often not enough to offset the transactions costs of organising” (Markoleva, Meinzen-Dick,
Hellin and Dohrn, 2009, p. 4). Berdegue (2001), in his study of peanut farmer’s groups in Chile, found that
collective marketing failed to raise incomes for farmers selling unprocessed goods in spot markets, and was only
effective in value chains with particularly high transaction costs, such as the dairy sector (p. vii).

It is often suggested that collective action for staples growers should emphasise diversification into higher-value
crops. The aforementioned NASFAM, a so-called ‘new generation cooperative’ formed in 1997, eschews staple
crops, working exclusively to help smallholders break into higher-value and horticultural crops previously
dominated by large farms (Poole, 2010, p. 69). If agro-ecological and irrigation conditions do not allow for this,
organisations are then encouraged to explore value addition through processing or product upgrading (see
below).

The usefulness of market penetration strategies

Collective action can enable a range of different marketing strategies, each with a different level of complexity
and risk. The Ansoff Matrix of marketing strategies (Lundy, 2006, in Barham, 2007, p. 145) helps to clarify the
different options available.

Fig. 1. Ansoff Matrix. From Barham (2007), p. 145.

The simplest marketing strategies are labelled ‘market penetration’: these involve increasing the performance of
existing products in existing markets. For smallholders, the simple act of bulking produce and selling it
collectively, especially if combined with increased information about prevailing prices, can increase farmers’
bargaining power and enable them to extract a higher price from buyers. In the case of farmers in more remote
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areas, collective action may enable shortening of the value chain: farmers can collectively hire transport to
market and cut out the need for a ‘rural assembler’ or middleman (Barham, 2007, p. 58; Peppelenbos, 2006, p.
5). Where farmers are able to collectively build or acquire storage, for non-perishable crops such as cereals, they
can select their time of sale to benefit from higher prices, for example by avoiding supply gluts immediately after
harvest.

‘Market development’ refers to seeking new markets for existing products: most commonly, this takes the form
of contract-farming arrangements to supply minimum quantities to a single buyer; it may also mean farmers
simply looking for new markets in which to sell goods. ‘Product development’ consists of producing new
products for existing markets: this could include diversifying into new crops, but is more likely to include adding
value to existing products by processing, packaging or labelling. ‘Diversification’, in Ansoff’s terms, refers to
the production of new products for new markets – for example a contract-farming scheme which requires
farmers to grow a new crop.

It is frequently claimed that, particularly for staples goods, the gains to market penetration activities will be
minimal, and may not be enough to justify the cost of organising; and that the ‘real gains’ from collective action
arise in market development, product development and diversification. Markoleva and Meinzen-Dick (2006)
summarise a common view:

Local markets may not present a viable and profitable option for the majority of smallholders since
most of the households around them grow the same crop; the price for this crop is low due to either the
lack of demand or overflowing supply… where collective action comes into play is in the attempts to
reach larger markets, i.e. urban, regional, and international (p. 3).

This belief is strengthened by the trend in agricultural markets away from local spot markets towards more
integrated value chains, driven by the rise of supermarkets, with the resulting centralisation of wholesaling and
establishment of private quality and safety standards (Peppelenbos, 2006, p. 3).

Overall, the literature suggests that collective action will be largely ineffective unless used to move smallholders
into higher-value markets or product categories.

The need for external support

It is generally agreed that collective action groups for agriculture, and particularly for outputs marketing, are
unlikely to commonly form without external support from the state, the private sector, or an NGO or existing
civil society organisation. Hellin (2009) concludes that “it is very rare for farmers to self-organise on a formal
basis” (p. 20). For example, despite a relatively successful history of farmer organisations in both countries, less
than five percent of horticultural producers in Honduras and El Salvador are members of a farmer organisation
(ibid., p. 20).

Historically, NGOs have played a common role in supporting production-focused farmer organisations with
financial capital. However, this has led to significant problems of dependency. Output marketing-focused
organisations may need less initial financial support, and AMSDP provided none to the groups it supported.
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However, assistance is still generally needed in the form of training and capacity building, both in the forming
and operating of groups and in marketing (Chirwa et al, 2005b, p. 9).

Furthermore, there is evidence that even commercially successful groups find it difficult to sustain their activities
in the long term without a long period of NGO support. Donovan, Stoian and Poole (2008) propose that it may
take “three to five decades” for rural commercial enterprises, even where commercially successful, to reach
“organisational maturity”, arguing that a priority for interventions should be to “identify viable shortcuts to RCE
development” to shorten this period (in Poole, 2010, p. 64).

Theoretical conclusions for analysis

From our review of the literature, we can draw five generally held beliefs:

1: By increasing economies of scale, collective action can enable smallholders to access profitable output
markets and access affordable inputs, enabling increasing production without state input support.

2: Collective action for market access is likely to exclude poor farmers, and groups that do contain large
numbers of poorer farmers are unlikely to succeed commercially.

3. Collective action for market access will be of limited benefit in the marketing of staple crops.

4. Collective market penetration activities will be largely unsuccessful; the most successful groups will be
those which diversify into new products or add value to existing products through processing.

5. Collective action for agriculture will rarely occur, or be sustained, without external support.

The remainder of this study will test these conclusions against the example of the Agricultural Marketing
Systems Development Programme that operated in Tanzania between 2002 and 2010.

3. Case study: the Agricultural Market Systems Development Programme

Case study background

Tanzania

The United Republic of Tanzania is a predominantly agricultural country: agriculture provides the primary
livelihood for 74% of households and accounts for 28% of GDP (Mashindano and Maro, 2011, p. 7, 17). The
country’s agricultural sector remains dominated by smallholders producing staple food crops, primarily maize,
cassava, rice, millet and sorghum, although there is evidence the number of larger landholdings is growing (Ellis
and Ndoe, 2003, p. 1373) and that smallholders, particularly in irrigated areas, increasingly also grow export
crops and vegetables for domestic markets (Wolter, 2008, p. 14).

Owing to Tanzania’s large land mass, pressure on land holdings is less than in many other African countries: the
average landholding is a relatively viable 2.5Ha (Gaddis, 2013). However, lack of irrigation and inputs means
that per-hectare cereal yields are among the lowest in the region (World Bank, 2011). Just 15% of Tanzania’s
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irrigable land is irrigated, and the majority of smallholders use only a hand hoe (Government of the United
Republic of Tanzania, n.d.).

Tanzania’s agricultural sector has undergone a messy and incomplete transition from state-run to market-led. In
the late colonial period and in the first decades after independence, parastatals held monopoly rights to market
post agricultural products, particularly staples, culminating in the 1970s in the controversial policy of
‘villagisation’ which saw around 9 million rural farmers relocated from disparate homesteads into villages for
collective farming. Co-operative societies and co-operative unions formed part of the state marketing system, but
were subject to significant financial problems and frequent delays in payments to farmers; co-operatives were
ultimately abolished in 1976, only to be reintroduced a decade later as part of liberalising reforms which saw
marketing monopolies gradually abolished, private trading permitted, and the major parastatal, the National
Milling Corporation, reduced to a strategic role as ‘buyer of last resort’ (Bryceson, 1993).

Although the overall effects of Tanzania’s reforms on agriculture aere subject to ongoing debate (Minot, 2006, in
Barham, 2007, p. 52), it is widely accepted that the private sector has largely failed to replace the former
government monopolies in remote rural areas as a source of affordable inputs or as a purchaser of produce.
Fewer than 15% of farmers use fertiliser (Wolter, 2008, p. 14), primarily larger commerical farmers. Agricultural
production between 1980 and 2010 barely kept pace with population with a per capita growth rate of 0.5% per
annum (Wiggins and Keats, 2013, p. 73); the Government estimates that production could more than double with
the use of fertiliser and modern hybrid seeds (Government of the United Republic of Tanzania, 2007b, in Wolter,
2008, p. 14). Despite its ample agricultural land, Tanzania is increasingly reliant on food imports (Wolter, 2008,
p. 15).

Food crops are primarily grown for subsistence (Ellis and Ndoe, 2003, p. 1477). Though the rural non-farm
economy remains in its infancy, there is evidence of increasing deagrarianisation: in a 2008 survey in the West
Usambara Mountains in North Tanzania in 2008, 60% of households had at least one member engaged in wage
work (Mueller, 2012, p. 1). 39% of households which draw a primary living from agriculture are below the
poverty line, higher than in any other sector (National Bureau of Statistics, 2009, in Mashindano and Maro,
2011, p. 19).

Smallholders who are able to produce and sell some surplus typically sell to local middlemen or bulking agents,
who take on the considerable cost of transporting goods to market. These relationships appear subject to a
significant degree of exploitation: competition between traders is low, and farmers often receive fertiliser on
credit at the beginning of the season, compelling them to sell any surplus to their creditor after harvest at the
latter’s chosen price. Crops are typically sold by volume, and farmers frequently believe they are regularly
underpaid by traders who fraudulently overpack produce bags (Barham, 2007, p. 108).

As such, Tanzania’s smallholder agriculture can be seen as subject to a significant degree of market failure. This
is exacerbated by excessive taxes and restrictions on trade in many areas, a legacy of the state monopoly era
(Cooksey, 2012).

As in other African countries, the government remains officially committed to supporting smallholder
agriculture. The centrepiece of its agricultural programme for much of the 2000s was the Agricultural Sector
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Development Strategy, an investment program focused on small farmers which included the limited
reintroduction of subsidies for irrigation (Cooksey, 2012, p. 9).

However, while this strategy remains in place, attention has been shifting towards the large commercial farming
sector in the wake of the food shortages which led the government to temporarily ban exports of staple crops
between 2008 and 2010. A new private-sector led strategy, Kilimo Kwanza (‘Agriculture First’), emphasises
public- private partnership between government, large commercial farms and multinational companies. Although
it is not officially a government program, Kilimo Kwanza appears to have become the focus of the government’s
agriculture efforts amid growing concern about the difficulties of increasing smallholder production (ibid., p. 9).

The Agricultural Market Sector Development Programme

Inaugurated in 2001 and active between 2002 and 2010, AMSDP was an aid-funded project that sought to
“improve the structure of the agricultural marketing and pricing systems in order to improve the food security of
the rural poor, raise their incomes and diversify their production” (IFAD, 2011a, p. xii). The project was a
partnership between the International Fund for Agricultural Development (IFAD), the African Development
Bank (AfDB), and the Government of Tanzania, with additional funding from Irish Aid and a few smaller donors
(ibid, p. 14). AMSDP operated in 30 of Tanzania’s 169 districts, primarily in the South and North-East regions
of the country, predominantly maize-growing areas (ibid., p. v).

AMSDP’s activity was organised around four key ‘components’: Policy Development Support; Producer
Empowerment and Market Participation; Financial Market Services; and Rural Marketing Infrastructure Support,
as well as a fifth overarching co-ordination component.

The focus of this study is primarily on the Producer Empowerment and Market Participation component, which
focused on forming and strengthening producer groups – small, local farmer’s organisations – to improve the
market access of smallholders. Employing local NGOs and private sector organisations as partner agencies, the
component aimed to strengthen and formalise producer groups as organisations, to provide training on profitably
marketing produce and identifying new markets and to provide information on market opportunities and prices.

The specific targets of the component included:

 Form or strengthen 1000 producer, processor and trader groups, and increase the number of groups
which are formally registered;
 Improve the quality of groups’ marketed products;
 Increase the number of contractual arrangements between producers and traders/buyers;
 Increase the number of agri-businesses;
 Institute a “comprehensive and effective market information system,” with information on prices
collected from districts and disseminated to groups (IFAD, 2011a, pp. 63-4).

The component was allocated 33% of AMSDP’s US$42.3 million budget (ibid., p. 14).

Some elements of the other components were complementary to the formation and strengthening of producer
groups and are highly relevant to this study and. The Financial Market Systems development component aimed
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to provide credit to farmer’s groups through a network of savings and credit co-operatives (SACCOs) and
microfinance institutions, and to establish a warehouse receipt system, whereby smallholders can store their
produce after harvest and borrow against its sale value to meet immediate cash needs, then sell their produce a
few months later when prices have risen (Coulter and Onumah, 2002).

The Policy Development Support component had a governance focus, aiming to assist national and local
government with reforming policies, including tax regimes, to remove barriers to agricultural marketing. The
Rural Marketing Infrastructure Support component, funded by the AfDB, focused on physical market
infrastructure, upgrading rural roads and building marketplaces and storage facilities, in part to support the WRS
(IFAD, 2011a, p. 15).

However, the Policy Development Support component was only a limited success: AMSDP successfully
negotiated reductions in local agricultural taxes, but only in 16 of the 30 project districts (ibid., p. 25). From the
Financial Market Systems component, only the WRS was implemented. As such, the primary activities of
AMSDP as carried out were its work with producer groups and its investments in physical infrastructure.
AMSDP constitutes one of the largest aid-supported programmes supporting collective action for market access.
Significantly, the AMSDP did not provide any direct financial subsidy or subsidised inputs to groups, making it
a useful case study of the impact of output marketing-focused interventions.

AMSDP interventions with producer groups

AMSDP’s work with producer groups was led by 20 NGO “partner agencies,” each operating in either one or
two districts, and in three ‘waves’, the first beginning in 2004 and ending in 2007 and the last beginning in 2007
and ending in 2009. Each partner agency typically worked with around 20 farmer’s groups each year in each
district during each ‘wave’. Groups were typically operated at village level, the majority with 20-40 members.

Groups were selected, or villages invited to form groups, according to criteria provided by AMSDP which
emphasised targeting existing farmers with less than 2Ha each, a large number of members below the poverty
line and of women-headed households, and at least one crop with high market potential (Barham, 2007, p. 63).
However, local government officers were responsible for selecting the groups and political factors appear to
have led to these criteria being ignored in some cases, with the number of predominantly poor groups well below
the target in some cases (ibid., p. 64).

The most detailed information on the partner agencies’ interventions comes from Hai and Aremeru districts
(ibid.). The partner agencies there trained their groups in both group functions and rudimentary marketing skills:

• Group registration
• Communication and group dynamics
• Group record keeping
• Leadership
• Administrative and financial management
• Setting up bank account
• Establishing action plans
DV410 Page 15 of 29 73752

• Establishing savings and credit cooperatives

• Farm record keeping
• Cost-benefit analysis
• Accessing market information
• Negotiating prices
• Choosing an enterprise and finding potential markets/buyers.
• Contract farming

The training also included visits to existing farms growing products with high market potential, and market
research visits to meet wholesalers and retailers to make market connections (ibid., p. 73). In addition, agencies
connected groups directly to large-scale buyers to set up contract farming schemes.

The market information aspects of the component were implemented differently in different areas, in some cases
in collaboration with two overlapping aid-funded market information projects, the First Mile Project and
‘Linking Local Learners’ (IFAD, n.d.; Magohe and Makwassa, 2008). In some areas, partner agencies or
AMSDP staff provided centralised information on prices using boards in communal areas; in others, groups were
being given mobile phones and assisted with contacting markets directly to find out prices (IFAD, 2011a, p. 34).

Sources

Information on the AMSDP and its impact is drawn primarily from the following sources:

 The Project Completion Digest for AMSDP produced by IFAD (2011b);

 The Project Completion Report of the AfDB (2010), focused on the Rural Marketing Infrastructure
Component;
 The Interim Evaluation of AMSDP and RFSP produced by IFAD (2011a);
 Additional material on the rural poverty impact of AMSDP and RFSP produced by IFAD’s evaluation team
(Nyoni, 2010);
 Interviews with project and partner agency staff and a member of the evaluation team
 A PhD dissertation on the project (Barham, 2007), and brief published version (Barham and Chitemi, 2013).

IFAD’s evaluation took place over two weeks in 2010, and consisted of visits to project sites, interviews with
staff and beneficiaries, and discussions with the Prime Minister’s Office, which oversaw the project for the
Government (IFAD, 2011a, p. xi).

Naturally, there are limitations to the accuracy of donor evaluations: it is widely believed that donor agencies
frequently selectively present information to exaggerate or emphasise the positive impacts of projects and
minimise problems (Levine, 2006).Because of the highly distributed nature of the intervention – only around 1%
of the farmers in each project district were directly engaged by the project – IFAD was unable to carry out any
quantified study of the project’s impact on production or incomes, although production estimates were
constructed from information collected from groups. Assessments of the effectiveness of the project, and its
poverty impact, are therefore based largely on the evaluators’ interviews with farmers involved in the project.
DV410 Page 16 of 29 73752

However, IFAD is generally considered a strong performer in terms of the quality of its evaluations, and is
identified as a model of good practice in DFID’s 2011 Multilateral Aid Review (DFID, 2011a, p. 49). The
evaluation was carried out by independent consultants and does not appear uncritical of the project, citing areas
where AMSDP failed to meet targets as well as where it succeeded (see below). Project staff interviewed, some
no longer tied to any donor-funded project, generally endorsed the overall findings of the evaluation.

In addition, one quantified study has been carried out on AMSDP, which provides helpful, independent extra
detail, especially on the differential performance of different AMSDP groups. Barham (2007) focused on
AMSDP-supported groups in Hai and Aremeru districts in the Northern region of Tanzania. Employing a
combination of semi-structured interviews and observation, Barham assessed the market position of each of 34
AMSDP-supported groups early in their involvement with the program and again six months later, and assigned
each group a ‘market performance rating’ based on any improvement in their market performance, such as
increased sales, higher sale prices, more reliable markets, diversification or involvement in post-harvest value-
adding activities such as processing (Barham, 2007, p. 85).

The AMSDP was carried out (and evaluated) alongside another IFAD-funded project, the Rural Financial
Services Programme, which similarly to the Financial Market Systems component of AMSDP aimed to support
the development of rural credit institutions, but without tying those institutions specifically to the needs of
producer groups. The RFSP appears to have been successful, supporting around 800 SACCOs and informal self-
help groups (IFAD, 2011a, p. xiv). Care must therefore be taken to separate the impacts of AMSDP from those
of RFSP, as well as of changes in the overall economic environment during the project period.

Despite these caveats, the aggregate picture of the impacts of AMSDP from the information available offers a
sufficient indication of the project’s successes and failures to cast some light on the aforementioned common
conclusions.

Findings

In terms of outputs, AMSDP beat many of its internal targets for working with producer’s groups. The project
formed or strengthened 1,202 groups, with a total of 46,500 members, well ahead of targets (IFAD, 2011a, p.
xiii). Interestingly, the project, while beating expectations in working with producers’ groups, fell well short of
target on working with processors’ and traders’ groups (ibid., p. 26).

IFAD’s evaluators found that the assistance of the program had helped most groups improve their market access,
noting: “Though many groups are at an early stage of institutional development, the evaluation also met many
groups that had been able to increase sales and obtain better prices and in a few cases also engage in simple
processing, adding value to the produce” (IFAD, 2011a, p. xv).

In Hai and Aremeru districts, during the relatively short period of Barham’s study, 19 out of 34 groups – 56% -
were found to have improved their market performance (Barham, 2007, p. 114).

In terms of physical infrastructure, the project upgraded 957km of rural feeder roads, built twenty marketplaces
(a substantial reduction on the initial, over-ambitious target of 140) and built or rehabilitated nine warehouse
facilities for the WRS (IFAD, 2011a, p. 25). As noted above, many aspects of the Financial Market System
DV410 Page 17 of 29 73752

component were not implemented, but the WRS appears to have been successful, with 4,066 despositors
accessed loans through the AMSDP-led warehouses (ibid., p. 27).

Overall, the primary impacts of the AMSDP appear to have been in its work with producer groups, the
warehouse receipt system, and in road upgrading. The WRS can be considered an aspect of the collective action
work of the project, given that warehouses were run by AMSDP-supported SACCOs and were used primarily by
AMSDP-supported groups. However, the overall effects of the programme stem to some extent from the
physical infrastructure investment, which could also benefit individual farmers.

Agricultural production

AMSDP appears to have helped smallholders increase yields and their use of inputs. IFAD evaluators found
frequent instances of farmers investing increased revenue into inputs, in some cases enabling farmers to double
per-hectare yields (Nyoni, 2010, p. 5). AfDB (2010) found that production by AMSDP groups overall had
increased by 155% during the duration of the project (p. 46). The overall food security impact of the project was
assessed as “substantial” (IFAD, 2011a, p. 37).

However, the precise extent of increased input use under the project is not clear. In Hai and Aremeru districts,
only one group reported having independently increased their use of fertiliser, using a group lending scheme,
although several other groups increased its use as part of a contract farming scheme (Barham, 2007, p. 150).

Furthermore, the project also demonstrates the limits to smallholders’ ability to increase production in the face of
a non-enabling policy environment. Farmers reported that the 2008 ban on grain exports, implemented by the
Government in response to the food crisis, reduced prices by around a third for farmers accessing export markets
(Nyoni, 2010, p. 5).

Poverty

AMSDP does appear to have succeeded in assisting at least some poor farmers in raising their incomes.
“Interviews with farmers make clear that changes in their agricultural behaviour practices over the past four
years have given them higher and more stable incomes,” Nyoni (2010) notes (p. 2).

Notably, “one of the activities most often mentioned during field visits was the ability of parents to send their
children to school as a result of the increase in income (IFAD, 2011a, p. 9).” Given that school fees in Tanzania
are low, this appears to suggest these households live near or below the poverty line. Overall, IFAD (ibid.) found
that AMSDP had “to some extent influenced the poverty status of communities” (p. 32) and, “to a satisfactory
degree, assisted… poor farmers with improving their income and quality of life” (p. xvi).

Evidence from Hai and Aremeru districts suggests that AMSDP’s target of 50% of group members coming from
poor households proved difficult to achieve. As Barham (2007) notes, “The program aims to work with poor
farmers who have crops with market potential and good access to roads. The problem is that in reality most poor
farmers do not have crops with market potential and generally live in areas with poor road access” (p. 64).
DV410 Page 18 of 29 73752

Nevertheless, it appears that at least a quarter of farmers were near or below the poverty line: the average
landholding for the poorest quartile of groups (using an aggregate wealth ranking) was 1.83 acres or 0.75 Ha, an
area commensurate with significant income stress (Ellis and Ndoe, 2003).

Furthermore, AMSDP appears to have met its target to work with a large number of women-headed households,
which are more likely to be poor: around 41% of the membership of AMSDP-supported groups were female,
including a substantial proportion of female-only or predominantly female groups (IFAD, 2011a, p. 62).

However, the groups in Hai and Aremeru made up of poorer farmers performed less well than better-off groups
in the first year of the programme. Only two out of the eight groups (25%) from the lower quartile of the study
population were found to have improved their market performance, a ‘score’ of 25%, against 75% for groups
from the middle two quartiles (Barham, 2007, p. 130).

Furthermore, Thorp’s finding that the poor lack the human, social and natural capital to carry out successful
collective action is reinforced by Barham’s findings. Education, a key form of human capital, was found to be a
highly significant determinant of performance, with groups which improved their performance having an
average of more than seven years of schooling, and those which did not an average of less than seven years
(ibid., p. 119). Access to irrigation, a key form of natural capital, was found to be highly significant and closely
correlated to poverty. Only one out of the eight poorer groups had access to a reliable water supply, compared
with seven out of eight richer groups (p. 130).

Barham concludes that collective action for marketing can ‘work for the poor’, but may require a long period of
preliminary natural asset building (2007, p. 192).

Staple crops

AMSDP appears to have had some notable successes in raising incomes for farmers producing staple crops. In
particular, groups employing storage to avoid selling crops immediately after harvest – only possible with staples
such as maize and rice, rather than perishable crops such as vegetables – appear to have made significant gains.
Farmers employing the AMSDP-constructed warehouses were reportedly able to more than double their sale
price in some cases (IFAD, 2011a, p. xvi). In other districts several groups set up their own warehouses with the
help of village or district government: for example, one group in Hai district were able to rehabilitate an empty
building in order to store beans; increased sale prices meant farmers were able to cover the cost of rent and
security and still turn a profit on the enterprise (Chitemi, 2013).

Farmers who were able to shift their sales both temporally and spatially, by storing crops and later ‘cutting out
the middleman’ and collectively taking goods directly to market, seem to have made the largest gains: in Babati
district, by both storing their paddy (unmilled rice) and bypassing local bulking agents, rice growers were able to
increase their sale price six-fold (IFAD, n.d., p. 2).

However, results from Hai and Aremeru districts suggest that improving the market performance of staples
farmers was more difficult than for those growing higher-value goods. Six out of sixteen (37.5%) groups
growing rice or cereals and legumes improved their market position, as opposed to 100% of groups selling
DV410 Page 19 of 29 73752

vegetables and fruit (Barham, 2007, p. 126). Furthermore, two of the groups growing cereals and legumes
improved their market performance by diversifying into cash crops, Artemisia and flower seeds (ibid., p. 127).

Market strategies

Market penetration strategies appear to have proven quite successful for AMSDP-supported farmers, and product
development difficult.

The simple act of collective marketing, increasing farmers’ bargaining power, appears to have had a significant
positive effect on the prices received even from local bulking agents. By bulking goods and bringing them to a
central village point, farmers significantly reduce the transaction costs of local traders, enabling them to offer a
higher price; furthermore, by collecting additional information and undertaking gross margin analyses, farmers
were able to insist upon a price that would enable them to turn an acceptable profit (Chitemi, 2013).

Furthermore, as noted above, delaying sale through storage appears to have proven a successful method of
increasing prices. In some districts, farmers with access to irrigation were also able to avoid seasonal oversupply
by co-ordinating planting schedules (Barham, 2007, p. 146).

In Hai and Aremeru districts, of a total of 30 collective action marketing initiatives carried out by the 19
successful groups, 13 can be classified as market penetration, despite these areas being largely outside the
warehouse receipt system.

By contrast, market development strategies proved difficult. In Hai and Aremeru districts, just four out of the
thirty collective action initiatives carried out by successful groups involved finding new buyers for existing
products, usually by visiting potential new marketplaces with the assistance of partner agencies. However,
transportation costs and, in some cases, registration fees for new marketplaces limited the opportunities for these
strategies (Barham, 2007, p. 146).

AMSDP did have several successful examples of groups engaging in product development: for example, ginger
growers in Same district were able to purchase solar dryers to dry their produce, increasing the sale price from
349Tsh/kg to around 1000Tsh/kg (Magohe and Makwasa, 2008, p. 70).

However, such successes appear to have been rare: IFAD (2011a) notes that “most AMSDP-supported groups
have not yet started to add value to their agricultural produce and those few which do… apply low-level
technology. Most groups still sell their production as fresh produce/unprocessed commodities” (p. 26). In Hai
and Aremeru districts, only two out of thirty initiatives involved adding value to existing products: one group
was able to carry out basic packaging and labelling, while another was able to increase livestock quality by
cross-breeding (Barham, 2007, p. 146, 150).

The upfront cost of processing equipment seems to have been the principle obstacle. “Interviewed producer
groups informed that even simple processing equipment is very expensive for them,” notes IFAD (ibid., p. 26).
Project staff interviewed agreed, without funding for equipment provided by the project, it proved extremely
difficult for groups to invest in processing machinery (Mwashi, 2013).
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Interestingly, diversification appears to have been more popular than processing despite also involving initial
financial investment. In most cases successful diversifications were part of contract farming schemes, with a
buyers absorbing some of the risk by providing financial support and a guaranteed market: for example, several
groups were able to begin growing mushrooms for a local supermarket chain (IFAD, 2011a, p. 26). In Hai and
Aremeru districts eleven out of thirty initiatives introduced new products, eight of which were contract farming
schemes (Barham, 2007, p. 146).

However, diversification is likely to be available as an option to only a small proportion of mostly better-off
farmers. Diversification into high-value crops is possbible with the correct agro-ecological conditions, including
access to irrigation (ibid., p. 127). Furthermore, the groups in Hai and Aremeru who pursued diversification
strategies tended to have a higher proportion of members who were community leaders, who may have
connections to outside buyers (ibid., p. 158). Diversification also proved a high-risk strategy, with one group
investing significant resources to grow safflower for a contract farming scheme, only to lose their investment
when the rains failed (ibid., p. 155).

The need for external support

While the very existence of projects such as AMSDP might appear to validate the common view that farmers
rarely self-organise, in fact the programme encountered a large number of pre-existing farmer’s groups,
frequently operating as communal savings or self-help groups, particularly among women (IFAD, 2011a, p. 35).
However, only a small proportion of these pre-existing groups had any formal status or were already involved in
collective marketing.

In addition, the project encountered many examples of groups which had formed spontaneously in AMSDP
districts in order to emulate project-supported groups. IFAD (2011a) notes that “a number of AMSDP
interventions are being copied and replicated spontaneously without AMSDP support, including producer group
formation and collective marketing” (p. 44). In some cases, a ‘trickle-down effect’ has been observed where
AMSDP-supported groups voluntarily ‘mentor’ or facilitate other groups to form and begin collective marketing
(ibid., p. 44).

In other instances, farmers occupying a single marketplace began collectively marketing their produce without
formally entering into a group arrangement (Seas of Change, n.d., p. 4). The warehouse receipt system has also
been copied spontaneously by non-AMSDP-supported groups (IFAD, 2011a, p. 45).

Overall, AMSDP presents evidence of extensive self-organisation by farmers, albeit at an informal level.

However, the AMSDP presents a more pessimistic picture when it comes to the sustainability of producer
collective action after external support ceases. By the end of the project, according to self-assessment data
produced by groups, only 16% of the groups formed or strengthened by AMSDP had reached the “performing”
stage, “implying that they are sustainable and do not need further external support (IFAD, 2011a, p. 51).”

A further 57% had reached the “norming” stage, meaning that they had obtained “group allegiance [and a]
shared vision” but were “still in need of some external support in order to become self-sustaining (ibid., p. 36).”
DV410 Page 21 of 29 73752

District councils were mandated by the government to take over support from AMSDP after the project ended,
theoretically enabling some of the “norming” group to continue; however, IFAD admitted that it was “highly
likely that a considerable number of… groups will collapse or become dormant in the years to come (ibid.,
p.51).”

The evidence of AMSDP does suggest that groups can become self-sustaining with a sufficiently long period of
support. Although the AMSDP worked with groups for six years, support was separated into three ‘waves,’ each
working with different groups; the waves were of unequal length, ranging from 4½ years for the first to just 2½
years for the third. As Fig. 2, drawn from the AMSDP groups’ self-reporting, demonstrates, groups with a longer
period of support were notably more likely to reach the “performing” stage. In interviews, AMSDP staff were
unanimous on the need for a longer period of support in future collective action interventions: most suggested a
period of 5-6 years’ support would enable a far higher proportion of groups to become self-sustaining (Chitemi,
2013).

Fig. 2. Proportion of groups reaching ‘performing’ stage. From IFAD, 2011a, p. 42.

Staff said that the difficulty of sustaining a commercial mindset was the primary reason for the poor performance
of the programme in terms of sustainability. “To change a human being from a subsistence mindset, growing for
themselves and selling whatever is left, to growing for the market, is not easy. It takes time,” said one (Chitemi,
2013). However, there is evidence that group cohesion is also important: groups which had existed before the
programme, even in a non-marketing capacity, generally performed better than those which were newly formed
(Barham, 2007, p. 124).

4. Discussion

Care should be taken not to over-interpret the results of AMSDP, given the limitations of the data available.
Nevertheless, the results of the project do suggest some clarifications to the prevailing consensus on the
limitations of collective action for smallholder market access.

With regard to production, the findings suggest that collective marketing can, in fact, enable smallholders to
invest in inputs and increase production. However, the extent and prevalence of this effect across the project’s
groups is unclear, particularly with regard to fertiliser use. In particular, it is not clear whether AMSDP enabled
DV410 Page 22 of 29 73752

farmers who were initially too poor to use fertiliser to begin using it, or simply enabled better-off farmers to
increase their existing use.

With regard to poverty, the findings suggest that, contrary to the prevailing pessimism, poor farmers can engage
in collective action for marketing and achieve some increase in incomes. However, the barriers to both group
formation and successful marketing for poorer farmers appear substantial, particularly for farmers with limited
natural assets, such as those dependent on rain-fed agriculture or with soils of low fertility.

Projects seeking to employ collective action to aid poor farmers may be best served by focusing on the
(potentially quite small) proportion of poorer farmers with significant untapped market potential, particularly
those with access to irrigation or the agro-ecological conditions to grow higher-value goods. Groups of poor
farmers are also likely to require longer and more intense support than the better-off.

With regard to staples, AMSDP appears to demonstrate that there is potential for farmers of staple crops to
achieve significant increases in income without diversifying into other crops, especially if they are able to
acquire storage or move up the market chain by bypassing local traders. This is significant because, as Barham
notes, the majority of farmers growing cereals and legumes may not be able to diversify in to higher-value
goods, particularly if they do not have access to irrigation (2007, p. 130).

With regard to marketing strategies, the findings suggest that the benefits of market penetration strategies, and
the difficulties of more complex strategies, may have been understated.

The better than expected performance of AMSDP in market penetration, particularly with staple crops, likely
reflects the poorly-developed state of agricultural markets in remote areas. As Bernard and Spielman (2009)
note, the majority of studies of collective marketing have focused on higher-value produce markets; most have
also been based in more fully-developed agricultural markets, for example in Latin America. In these markets,
Markoleva and Meinzen-Dick’s (2006) assertion that low prices are primarily the result of oversupply is likely
correct; however, in remote areas in sub-Saharan Africa, where production is low, low prices appear to stem
more from a lack of competition among buyers, with informal and often exploitative relationships between
farmers and traders. In these circumstances, the increased bargaining power provided by collective action can
enable farmers to extract higher prices without employing more sophisticated marketing strategies.

AMSDP also suggests that collective action without external funding may fail to drive significant market
development, particularly in areas with high transportation costs, and product development. In the case of
AMSDP, this is in part owing to the non-implementation of much of the Financial Market Systems component,
which was intended to include a loan fund for processing upgrades. This suggests that future AMSDP-style
projects should ensure loans for processing are available, or simply focus on market penetration strategies in
areas where markets are thin and farmer-buyer relationships informal or monopolistic.

With regard to sustainability, AMSDP offers a fairly pessimistic picture, suggesting that even a well-funded and
apparently relatively well-run project will fail to bring many groups to the point of commercial self-sufficiency.
However, the differential performance of groups with 3-4 years’ support from partner agencies, against those
with 2-3 years, suggest that a project that offers longer-term support may achieve significantly better results.
DV410 Page 23 of 29 73752

The phenomenon of groups spontaneously imitating AMSDP-supported groups’ marketing strategies suggests
the potential for ‘spillovers’ for projects such as AMSDP beyond directly assisted farmers. However, given the
poor sustainability performance of directly assisted groups, it seems uncertain many of these spontaneously-
emerging groups will last.

Overall, AMSDP seems to suggest that collective action for market access has significant potential to improve
the incomes of sub-Saharan Africa’s millions of smallholder farmers. However, the cost of the project raises
serious concerns with regard to the cost-effectiveness of measures to boost collective action among smallholders.

Cost-effectiveness analysis

As IFAD (2011a) notes, the cost of AMSDP’s direct work with producer groups was “extremely high” (p. 28).
The cost of the Producer Empowerment component is estimated at US$8000 per group assisted, or $209 per
farmer, equivalent to around two months’ living costs for a typical household. Given that most producer groups,
even after the intervention, had an annual turnover of around $2000, AMSDP invested the equivalent of four
years’ turnover per group (ibid., p. 29).

In part, these disturbingly high costs can be attributed to flaws in the design of AMSDP: the project’s work with
groups was distributed over a wide geographic area, the size of Italy, inflating transport costs and the general
logistical costs of management (ibid., p. xii). Future projects could reduce costs by concentrating their efforts
over a smaller area, particularly by focusing on areas with significant agro-ecological potential which are
nevertheless underperforming owing to high transportation costs.

Nevertheless, the high costs of AMSDP suggest a further clarification of the limitations of collective action for
market access. While AMSDP demonstrates that collective action can improve the livelihoods of even poor
farmers and farmers of staples, it also suggests the cost of providing the necessary support to achieve such goals
may be inevitably high. This would appear to strengthen the case for future projects to carefully select groups
with high market potential, or to focus on simpler market penetration strategies rather than more complex
strategies that are likely to need more support.

Nevertheless, it may be that on grounds of cost-effectiveness, collective action for market access can indeed fit
into Hitchens’ (2004) ‘viability voids’, where direct welfare support may prove more effective from a poverty-
reduction standpoint than income-generation support. This is especially pertinent given the increased interest in
cash transfers (DFID, 2011b). Given the alarmingly high cost of AMSDP’s work with producer groups, it is at
least conceivable that more poverty reduction could have been achieved by simply giving the money direct to
farmers.

Marketing Infrastructure, Value Addition and Rural Finance Programme

A successor programme to AMSDP and RFSP, the Marketing Infrastructure, Value Addition and Rural Finance
Programme (MIVARF), is currently in the early stages of implementation, and IFAD’s evaluation of AMSDP
was intended to directly inform the design of MIVARF (IFAD, 2011a, p. 48). With regard to sustainability, there
are signs that MIVARF has learned from AMSDP’s experience that pre-existing groups performed best: the
project’s target is to work with 1600 producer groups, of which 1300 are intended to be pre-existing (Wangaeli,
DV410 Page 24 of 29 73752

2013). The project’s targeting guidelines also explicitly aim for those smallholders “willing to be facilitated to
increase their livelihood incomes” (IFAD, 2010, p. 12).

MIVARF guidelines also more explicitly target “regions, districts and wards/shehia that have a high incidence of
poverty and food insecurity” (ibid., p. 11). While this should ensure MIVARF meets IFAD’s goal of at least 50%
poor farmers, it is likely to limit the strategies available to facilitated groups: areas of food insecurity may be ill-
suited to diversification into higher-value crops, for example. However, the evidence of AMSDP suggests that
market penetration strategies can still enable some increases in income in these areas.

It is not clear that MIVARF has responded to the cost problems of AMSDP. Rather than narrowing its
geographical focus, the project seeks to expand from AMSDP’s 30 districts to 141 (IFAD, 2010, p. 11). IFAD’s
Agreement on Completion Point for AMSDP, which includes responses from the MIVARF team to the
recommednations of the AMSDP evaluators, includes only a vague promise to “strive to use the lessons learnt
from the two preceding programmes to improve cost-effectiveness” (IFAD, 2011a, p. xxvii).

5. Conclusion

Collective action has significant potential to address market failures in agriculture and improve the access of
smallholders to markets, which in turn has significant potential to increase production and incomes.
Furthermore, the case of AMSDP illustrates that gains can be made even by poor farmers, farmers of staple
crops, and through simple, low-risk market penetration strategies, particularly in remote areas of sub-Saharan
Africa where agricultural markets are particularly undeveloped. However, the high costs of the project, and the
apparent differential performance of poor farmers, suggest that support for collective action may not be the most
cost-effective intervention, especially from a poverty reduction perspective.
DV410 Page 25 of 29 73752

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Appendix: List of interviews

All interviews conducted by telephone or Skype, August 2013.

Name Role in AMSDP

Chitemi, C. District focal person at project partner agency.

Mwashi, P. District focal person at project partner agency.

Baran, C. Member of IFAD evaluation team.

Wangaeli, W. Monitoring and Evaluation officer, AMSDP.

Ngoda, S. Regional co-ordinator, Northern Region, AMSDP.

Semwaiko, B. District focal person at project partner agency.