Clusters of Agrocredit Suppliers in Tanzania and their Associated Transaction Costs: A Scholarly Personal Narrative
Keywords:Transaction cost, agrocredit suppliers, agrocredit borrowers, agribusiness, Tanzania
AbstractThis paper blends the Scholarly Personal Narrative (SPN) with desk reviews of selected literature on the key concepts and their applications in understanding the key features of agrocredit supply in rural areas. The findings of this exploratory study indicate that the informality of agrocredit supply is associated with low transaction cost, low levels of credit and low levels of repayment rates. It is also noted that the formalised and regulated suppliers are more associated with higher levels of transaction cost with relatively higher levels of repayment. Transaction costs related to searching for potential borrowers, negotiation and enforcement are higher for most regulated suppliers because they involve third parties. Where the transaction involves small volumes of agrocredit, the transaction cost increases due to supplier’s compliance to legal formalisation and licensing. In-kind agrocredit supply models are recommended to be the most plausible models for resource poor smallholder farmers due to the fact that in-kind credit is not agile and that it can be used on intended cause. It is also recommended that in order to reduce transaction cost, agrocredit suppliers of in-kind agrocredit should deal with the farmer groups or primary cooperatives which act on behalf of member farmers.