An Action Plan for Developing Agricultural Input Markets in Tanzania

To sustain the efforts in human capital development,
an association of input dealers called the Tanzania
Agri-Input Dealers Association (TADA) should be
established. TADA staff members should be trained in
administrative and technical matters and the association
should be empowered to conduct training for dealers,
operate market information systems, and do socially
responsible policy advocacy for market
development.
3. Improved Access to Business Finance
Finance is the lifeblood of any business activity.
Without adequate access to finance at a reasonable interest
rate, it would be difficult to develop dealer networks
in rural areas. The team’s discussion with commercial
banks, including Exim, NMB, and CRDB 7 and
their branches in the districts, indicated that these banks
were willing to participate in a scheme that would
spread the lending risks among various stakeholders.
Therefore, to improve access to finance by importers
and dealers by sharing risks, two funds should be created.
The first fund will be called Agricultural Input
Import Fund (AIIF). This fund will be maintained at
the Reserve Bank of Tanzania in foreign exchange. Any
importer interested in importing fertilizers or other inputs
will have access to this fund to get a letter of credit
(LC) from the commercial bank. The fund will be managed
in such a way that the importer will provide 30%
of the needed funds for an LC, the commercial bank
will provide 70% as a loan, but the Reserve Bank of
Tanzania will provide a guarantee for 30% of the 70%
loan. This will help in reducing the cost of imported
fertilizers by lowering the funds needed to acquire an
LC. The second fund will be called the Agri-input Business
Development Fund (ABDF). This fund will provide
financial guarantee for developing retail networks
in rural areas. Any dealer who is trained and knowledgeable
about the technical and commercial aspects
of the input business will be able to use guarantee from
this fund to invest in retail or wholesale business. Like
the importer, the interested dealer will provide 30% of
the required capital and the commercial bank will provide
70%, but 30% will be guaranteed by ABDF. The
ABDF will be managed by a reputable commercial
bank. By facilitating the availability of business capital,
the ABDF will help small and medium dealers in
developing dealer networks in rural areas. The exist-
7 Formerly Cooperative and Rural Development Bank.
19
ing input trust fund should be converted into ABDF,
with a better outreach. In addition to these risk-sharing
mechanisms, the local banks will be trained in using a
“bonded warehouse” as collateral for an input business
loan. Such an arrangement could reduce the working
capital needed to start or expand an input business. This
would allow a retailer to bring larger quantities of inputs
from the town, store them in a bank-supervised
warehouse, and draw down in small lots as his or her
sales increase.
4. Promotion of Market Intelligence and
Transparency
Competitive markets produce efficient outcome
only when there is transparency in the marketplace.
That is, all buyers and sellers know about prices and
quantities available in different segments of the market.
This means that if prices are high in Iringa or Arusha
and low in Dar, then buyers or dealers can move quantities
from Dar to Iringa or Arusha and reduce the unreasonable
gap between prices in these locations. During
the initial stages of market development, MAFS
should assume the responsibility of collecting and disseminating
information about prices, quantities, stocks,
and products in different locations. Although the
MAFS/inputs unit is maintaining data on crop and input
prices in different locations, the coverage is inadequate
and dissemination is limited. As a result, different
segments of the market are not well informed.
Additional resources and capacity should be allocated
to disseminate information more frequently. Bi-weekly
or monthly bulletins should be published in local languages
and distributed. The use of radio bulletins and
updated information on an Internet web site are also
desirable. The MAFS should work with TADA to establish
public-private partnership in this area.
5. Strengthening of Regulatory Capacity
Farmers can develop a preference for using improved
inputs if the inputs are of good quality and farmers
are confident of getting the desired field results. As
new entrants emerge into the market, farmers should
be protected from unsubstantiated product claims, product
adulteration, short weights, nutrient deficiency, and
other abuses. This calls for efforts to develop product
standards and enforce truth-in-labeling. In the long run,
TADA should be strengthened to provide quality control
service for members, so that the TADA seal becomes
a sign of quality and quantity.