Structure, conduct, and performance of beans marketing in Malawi: A case study of Lilongwe District

Abstract

Poorly performing markets are one of the major limitations to achieving high farm income and ultimately poverty reduction in sub-Saharan Africa. Using the structure, conduct, and performance approach applied to bean markets in Malawi, we bring to light the status and performance of the smallholder marketing system. Multiple methods were employed in this study: the Herfindahl-Hirschman Index to evaluate the market structure; adopted pricing strategies and affiliation with large companies or associations to assess conduct; and marketing margins to measure market performance. Our results show that 39 percent of markets are imperfectly competitive. Also, the lack of reliable markets, purchase prices, access to credit, operating capital, and transaction costs were major factors that undermined the potential for bean traders to operate at a higher scale. The commonly adopted pricing mechanisms include cost-plus pricing, dynamic pricing, and quality-dependent pricing. Very few bean traders (7%) are affiliated with large trading companies and associations. Seven bean marketing channels were observed. We recommend that policies favoring improvements in rural road networks and market infrastructure should be encouraged to reduce transaction costs. In order to eliminate barriers to increasing quantities of beans handled by traders, the government should provide soft loans with low interest rates to traders. Deliberate actions to promote the affiliation of small traders with larger companies and associations involved in bean trading should be promoted.