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Abstract
Agricultural marketing in Kenya, just like other developing countries,
is characterised by long transaction chains, poor access to appropriate
and timely information, high transport and transaction costs. In
Murang’a County the banana is an important horticultural crop in
terms of its present and potential contribution to income enhancement
of smallholder farmers. Farmers can opt to sell their bananas through
various marketing outlets. The main outlets include sales to local
traders and brokers at the farm gate, direct marketing to consumers
and to a lesser degree, through producer marketing groups. Among the
factors influencing choice of marketing outlet used to sell bananas by
a farmer, are the transaction costs embedded in each outlet. However,
the effect of transaction costs on choice of marketing outlet for bananas
has not been extensively explored in Kenya, thus the purpose of this
study. Primary data was obtained from a survey of 120 smallholder
farmers in Murang’a County. A multinomial logit analysis was used
to analyse the factors influencing choice of marketing outlet. The
study draws imperative findings that could guide policy towards
reducing transaction costs in banana marketing. Particularly, results
indicate that farmers make a decision on choice of outlet based on the
market information cost, hours of information search, road condition,
trust in buyer, negotiation time, distance to the market and transport
costs associated with that outlet. Encouraging group marketing and provision of timely and reliable market information are some of the
key recommendations from this study which could help to improve
banana marketing, so that smallholder farmers can benefit from high
value markets.