Transaction costs and other determinants of choice of compliance arrangements with globalgap standards among smallholder french bean farmers: the case of Kirinyaga South district, Kenya

Abstract

Compliance with various food safety standards has continued to gain significance in the international agri-food trade arena. Although considered voluntary, farmers involved in agri-trade have to comply with safety standards to access international markets. One of the private food safety standards that Kenyan horticultural farmers have to adopt to remain in production is the GLOBALGAP (formerly EUREPGAP). Smallholder farmers in Kenya can comply with the GLOBALGAP either through exporter-individual farmer (private) partnerships or group-based institutional arrangements. Currently, there is no evidence of factors driving farmers to choose any of these arrangements or any other compliance mechanism. Moreover it is not known whether transaction costs have an influence on the choice of compliance arrangements adopted by farmers. So far there is no study that has quantified both visible and hidden transaction costs incurred due to compliance with the food safety standards. This study is an attempt to: describe the different compliance arrangements prevalent among smallholder farmers; compare transaction costs across the different arrangements and identify factors influencing the choice of compliance arrangement selected by smallholder French bean producers in Kirinyaga South district. The district was selected because not only does it have large numbers of smallholder farmers growing French beans but also all the compliance arrangements are prevalent making it a good case study area. The factors hypothesized to influence the choice of compliance arrangement with the standards were age, gender, household size, education, social capital, income, farm size, transaction costs, market access and availability of credit and extension as well as inputs. The study was conducted in three villages which have the highest production of French beans in terms of area under the crop in Kirinyaga south district. Purposive sampling was first employed to select the French bean producing villages, a census was then done with the help of village elders and systematic random sampling was used to select 100 farmers for the survey. The census was carried out to enable sampling from the population in order to capture all compliance categories of farmers. Descriptive statistics and regression analysis (binary logit) were used to analyze the data. Descriptive analysis and empirical estimation was done using SPSS and STATA statistical packages. The findings show that both visible and hidden transaction costs of compliance were higher for an individual than a group farmer. The binary logit results show that recurrent transaction costs and income had a positive influence on individual compliance. Distance to the market, age of household head, numbers of groups the households belong to and household size negatively influenced individual compliance. Hence markets should be brought close to the farmers to reduce transaction costs. Policy should also aim at assisting farmers in compliance e.g. through credit and input support. Smallholder farmers should be encouraged to form groups in order to comply with the standards and to avoid their exclusion from the market. An understanding of the above aspects is critical for both the private and public sectors to inform the formulation of policies and strategies to aid the French bean sector as it provides foreign exchange, employment and food to the Kenyan economy.