International Journal of ICT Research and Development in Africa, 1(2), 1-18, April-June 2010 1
Copyright © 2010, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global
is prohibited.
Keywords: Farm-Gate Prices, Formal Channels, Formal Market Information, Smallholder Farmers,
Uganda
IntroductIon
A lot of work has been done to improve small-
holder farmers’ adoption of new agricultural
technology packages in Uganda. However, little
commensurate effort has been made to improve
farmers’ access to formal market information
services. Therefore, farmers do not only need
advice on how to grow new high-yielding or
drought resistant crops, but also need market
information on when, where and which quanti-
ties to supply and at what prices. Thus the need
to improve farmers’ access to formal market
information services is very important. Low
incomes for farmers, higher costs to consum-
ers, greater risk for traders, high transaction
costs, high wastage and low competitiveness
in most commodity markets in Uganda are in
Effect of Access to Formal
Market Information on Prices
received by Smallholder
Farmers in uganda
Barnabas Kiiza, Makerere University, Uganda
Johnny Mugisha, Makerere University, Uganda
Stephen Lwasa, Makerere University, Uganda
AbStrAct
Much work has been done to improve smallholder farmers’ adoption of new agricultural technology pack-
ages in Uganda; however, little commensurate effort has been made to improve their access to formal market
information channels like mobile telephony, FM radio stations, Internet, and other information centers. This
study is based on data obtained in 2006 from farmers affiliated to Uganda Cooperative Alliance and those
who are not; however, both cohorts are located in the districts of Mukono and Masaka. Findings show that
households in more remote locations are less likely to use formal channels, and conversely, perception of
reliability of the information, membership in a farmers’ group and commercial orientation of the farmer, all
increase the likelihood of their use. The authors’ findings indicate that farmers who have access to informa-
tion from formal channels consistently obtain higher farm-gate prices than those who obtain information
from informal channels.
DOI: 10.4018/jictrda.2010040101

2 International Journal of ICT Research and Development in Africa, 1(2), 1-18, April-June 2010
Copyright © 2010, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global
is prohibited.
part attributed to the lack of market information
(MFPED, 2002).
Market information must have value to
make it worth seeking by farmers. It is only when
market information is of value that smallholder
farmers will seek it and use it, and even try new
media like the internet to access it. The first
objective of this study is therefore to examine
the factors that contribute to the likelihood of
a smallholder farm household participating in
formal market information services in the case
of Uganda. In other words, the study seeks to
determine the major factors that may hinder or
facilitate the adoption of ICT-based services
in a developing country setting. To the best of
our knowledge there are no known studies in
Sub-Saharan Africa that explicitly determine
the factors that affect the probability of small-
holder farm household participation in the
use of ICT-based formal market information
services. These services include those pro-
vided by farmer groups or market information
centers through media such as radio, mobile
phones, internet facilities, etc. This study then
examines the impact of adoption of ICT-based
market information services on the welfare of
smallholder farmers. Thus the second objective
of this study is to determine the impact of the
access to formal market information services
on the level of farm-gate prices received and
gross returns realized by smallholder farmers
in Uganda.
Several studies in the literature as indicated
below show that access to market information
improves the prices received by smallholder
farmers. However, these studies do not attempt
to determine the drivers of adoption of ICT-
based market information by the farmers. These
studies also do not take into account the fact that
the access to market information variable, used
in their outcome models, is endogenous which is
not addressed in their estimations. In our study
we take care of this endogeneity problem in a
two stage estimation and also address sample
selection bias in our outcome models. In addi-
tion, the media or channel of market information
used in most of the studies below is either radio
or telephone alone, whereas our study examines
access to formal market information through
several channels, that is, mobile phones, radio
and internet services from a telecentre. This
study contributes to the existing literature in
developing countries, especially, Sub-Saharan
Africa. In the next section below we review
some of the literature that examines the impact
of access to market information on economic
development in general. This is then followed
by a simple exposition of the empirical model
used in our study and thereafter a discussion of
the results and finally the conclusions.
the Literature
Eggleston et al. (2001) indicate that farmers
need price information for several main reasons.
First, relative prices inform the farmer on what
mixture of crops to produce or the price of a
given crop tells them how much to produce if
it is a single crop. Second, prices enable the
farmer to purchase inputs when and where they
are cheapest or alert them to the existence of
inputs that would profitably boost their pro-
duction. Third, price information allows the
farmer to know where to sell their output and
the appropriate price to accept, thus avoiding
exploitation by traders, brokers or middlemen.
Kiiza and Lwasa (2006, 2007, 2008) find
that most smallholder farmers obtain market
information from informal sources, such as
local traders, brokers and fellow farmers. Very
few use formal outlets such as those provided
by farmer groups or market information centers
with media such as radio, mobile phones, inter-
net facilities, etc. It is a known fact that brokers
and local traders cannot be the ultimate or best
source of market information for the farmers in
the long-run since there is information asym-
metry biased in favor of the traders. In simple
terms, the availability of market information
enables farmers to check on the prices they
receive and compare them with the prevailing
market prices which helps them make better
decisions in terms of the prices at which to
sell. This point is illustrated in the empirical
studies below.
Kiiza and Lwasa (2006) show that farm-
ers with relatively good market information
consistently received higher prices than those