Improving Institutions Pro-Poor Growth (IPPG) website

The role of institutions in Tanzania's coffee market - a case study

IPPG PhD student Shireen Mahdi recently created a stir with her policy note on the role of institutions in Tanzania's coffee market. Shireen writes:

In November 2008, the results of Tanzania's first household budget survey in seven years were released. The results were considered to be disappointing by many stakeholders, because they showed very slow progress in poverty reduction, particularly in the rural areas. Whilst overall access to public services had increased, the growth in rural incomes did not catch up with population growth. So even though the proportion of people below the poverty line decreased marginally, the total number of the poor increased by around one million.

The results sparked policy dialogue between government, civil society and the donors. The role of agriculture in reducing poverty was questioned.

In this context, I shared an analytical note that incorporated some of my IPPG-funded research on the role of institutions in Tanzania's coffee market with colleagues in government and the donor community.

The main findings of my research were:

Tanzania's agriculture sector policy and programmes (including those funded by donors) have underestimated the role of institutions in fostering economic growth. A one-off gain was realised in many markets from price reforms during the liberalisation period, but reforms of Tanzania's inefficient agricultural market institutions have not been significantly pursued since.

Several of the coffee market's institutions, such as the grading and contracting mechanisms, are causing inefficiencies that lead to the under-provision of quality in the market.

The village-level political institutions have created conditions where village leadership, with the power to regulate the market, has been captured by the coffee co-operatives and has limited the overall level of competition at the village level, causing a downwards pressure on prices.

A new approach that involves market-specific institutional analysis, innovation and reform, and that takes the political economy of the market into account, is needed in order to tackle the persistent rural poverty.

The note was circulated and quoted widely in the policy dialogue around agriculture and pro-poor growth. The findings of the note were discussed in the annual review of general budget support in the presence of Tanzania's minister and the permanent secretary for agriculture.

A box on the note was also inserted in to the annual poverty assessment by Poverty Monitoring Group (a joint government and donor group). The note has also been shared with members of parliament of northern coffee-producing regions, and senior government advisors.

The main impact of the note was to raise the profile of institutions as obstacles to or drivers of pro-poor agricultural growth. The note is currently being finalised as a World Bank country policy note and will then be submitted as a World Bank working paper. The World Bank team has also laid plans to carry out institutional assessments of other key agricultural markets, such as maize and cotton, in preparation for the next policy dialogue cycle.

I also shared the note with the new director of the Tanzania Coffee Board, who welcomed and confirmed the findings. He stated that he will use the analysis in designing a new set of interventions for the coffee market, and for requesting donor assistance to set up a consultation and information-sharing forum for coffee growers at the regional level.

Read Shireen Mahdi's draft note, The Impact of Regulatory and Institutional Arrangements on Agricultural Markets and Poverty - a case study of Tanzania's Coffee Market here [this page will be updated when the final version is published].

Biography:

Shireen Mahdi is a development economist and a PhD candidate at the Institute of Development Policy and Management of the University of Manchester. Read Shireen's profile and learn more about IPPG's PhD studentships here

Last modified: 11th June 2009