This note uses Tanzania’s coffee sector as a case study of how institutional and regulatory arrangements can depress market outcomes, particularly for the smallest and the poorest stakeholders. Whilst the characteristics of the coffee market are in many ways unique to its own circumstances, most of the insights, such as those relating to group dynamics, quality incentives and price determination are broader than the peculiarities of the coffee sector. In addition, policy dialogue and interventions in Tanzania’s agricultural sector have tended to centre more on variables such as attracting foreign investment, input subsidies and research and extensions service than on the institutional foundations and the regulatory arrangements of markets, with few results to show for it. This note argues that it is time to take a broader view of how agricultural market institutions may be critical to setting Tanzania on the path to poverty reduction that has proven to be elusive despite significant GDP growth and large inflows of aid.
The arguments in this note are not reductionist in approach. It is recognised that many of the regulations that are currently in place are critical and beneficial to the functioning of markets. In fact, several of the market constraints discussed in the analysis arise because of the lack of a regulatory framework. Nevertheless, there are also frameworks in place that need to be amended in order to improve the livelihoods of the rural poor.
Discussion Paper Series, Research Programme Consortium for Improving Institutions for Pro-Poor Growth, Manchester, UK, No. 40, 21 pp.