Informal Market Management

  1. Why are informal markets important to a smallholder farmer?
  2. What can smallholder farmers do to successfully access informal markets for their horticultural produce
  3. What is the importance of having informal market information by smallholder farmers?
  4. Discuss strategies that must be ensured by smallholder farmers to meet the market demands

Informal (traditional) markets dominates rural and urban areas of many Sub-Saharan Africa countries including Rwanda. Although unstructured, they offer huge opportunities to smallholder farmers among other market intermediaries. Buyers from these markets buy most of the produce from smallholder farmers in Rwanda, pay largely on cash basis and in most occasions invest in their own transport logistics.

4.1 Characteristics of Informal Markets

Key characteristics of informal markets are as follows;

  • Provide significant income opportunities for producers, wholesalers and retailers.
  •  Has both wholesalers and retailers of different size/capacity
  • Lacks transaction documents/not organized  
  • Serves rural and urban communities 
  • Commodities mostly traded in the open
  • Managed by city/town/municipal council
  • Sometimes deals with multiple commodities

4.2 Collective Marketing

It is an act of sharing common resources and pooling abilities to enable a group of people harness group synergy to service a certain market demand competitively

Key benefits of Collective Marketing

Common Resources

  • Purchasing of common inputs at reduced prices and improved quality
  • Share cost of marketing operation like transportation, communication, marketing personnel and packaging
  • Share common facilities like bulking facilities and warehouse, processing equipment and  storage
  • Share duties in accordance with expertise, experience and availability
    • Access of credit facility for the  groups’  members  through  group guarantee system that is prevalent in the Micro Finance Institution industry.

Pooling Abilities

  • Bargaining power for inputs with reduced prices and quality inputs – fertilizers, production tools, technology etc
  • Bargaining power for markets including better prices and huge market share,
  • Ability to service a huge order through bulking and scheduled production
  • Peer education on various issues to do with production to marketing

Servicing Common Market demand

  • There must be a market demand to be serviced by a group for any successful business.
  • Producing common product(s) for a common market(s)

Competitiveness

  • Ability  to  maintain  consistency  in  supply  as  a  result  of  scheduled production
  • Minimization of risk i.e. lowered production as a result of unforeseen risks or poor planning
  • Ability to sell to the outlets and eventually to consumers at lower cost because of synergy from common resources sharing.

Sustaining group competitiveness

  • Must be a common interest group
  • Must have a cohesive group
  • Must have regular planning meeting
  • Must have a collective strategic plan – production, marketing, financial, processing, administration
  • Must collect market information regularly
  • Must be aware of changing market trends and adapt accordingly

4.3. Informal Markets Development Process

 

Conclusion

Market development support services are essential for growth for Farmer organizations however, the market linkages must be developed, negotiated and implemented in a sustainable way to ensure that it is of benefit the farming enterprises as well as the service provider. Farmer group should determine well in advance the services they require to ensure that their agricultural enterprises to thrive. The farmer groups should not only respond to the demands of the buyers but ensure that thy clinch a market that adds value to their farming as a business.