Are common bean traders efficient? An empirical evidence from Malawi

Abstract

Efficient agricultural markets can be a bedrock for diverse economy-wide benefits ranging from improvements in resource use to price stabilisation. However, as is the case with most developing and agrarian countries, Malawi's agricultural markets are still developing. This is mainly the case in the country's legume markets, especially the bean marketing system. The current study assessed the market efficiency of common bean traders in Malawi using a multiple linear regression model. By focusing on the bean traders in the major markets in Malawi, the study departs from earlier research on bean marketing, which has placed greater emphasis on the farmer. The findings reveal that traders in bean markets mostly use informal sources of market information. Again, transaction costs such as transportation, storage, handling and distance to sources of bean reduce marketing efficiency. The scale of the operation portrayed a positive influence on marketing efficiency. Access to credit significantly increased marketing efficiency for both wholesalers and retailers. In addition, markets that are located in rural areas had a negative effect on marketing efficiency as compared to markets in urban areas, further agreeing with the focus of the National Agriculture Policy (NAP) to introduce structured markets in rural areas. The study recommends adjustments in policies in the NAP that would promote smooth access to reliable market information, especially in rural areas. The upgrading of the rural road system and warehousing facilities should be promoted in order to lower transaction costs. This will enable bean traders to expand their operations on a larger scale while also lowering expenses and increasing profits.