Successes and failures of institutional innovations for improving access
to services, input and output markets for smallholder pig production
systems and value chains in Uganda
Alex Tatwangire (tatwangire@yahoo.co.uk)
Smallholder pig value chains development project, ILRI Kampala Office
“Workshop: In-depth smallholder pig value chain assessment and preliminary
identification of best-bet interventions, Kampala, 9-11 April 2013”

Section 1 Section 2 Section 3 Section 4
• Definition of • The nature of • Average revenue • Institutional
innovations and input and output and costs innovations
innovation marketing associated with recommended by
processes. channels in marketing different
Uganda. channels institutions:
• Successes
• Institutional
innovations and • Pig farmers’ • Institutions that • Failures
the functioning of participation in aim at improving • Major constraints
markets. different access to services in the
marketing and markets implementation
channels.
• Way forward for
the SPVD project

 Agricultural Research for Development (ARD) in Africa- dominated
by the traditional approach of linear research, extension and
adoption that has failed to improve livelihoods especially those of
the poor.
 The SSA CP introduced an Integrated Agricultural Research for
Development (IAR4D) approach to address the challenges of the
traditional approach of ARD.
 “limited impact of African agricultural research on the intended
beneficiaries”.
 When farmers and other value chain actors are not deriving gainful
exchange in the market, it means that there are no ideal conditions
of market exchange- , implying high transaction that create
opportunistic behaviour in form of cheating and free riding.
 Institutional innovations create good institutions that improve
market exchanges- by minimising transaction costs at reasonable
cost.

 Innovation is a new way of achieving the tasks:
 a process that comes up with solution to problems in a new manner
 Encourages the need to experiment and develop market opportunities.
 Changes the way formal Research and Development (R&D) service providers
function in terms of behaviour and roles.
 facilitate efficient and equitable outcomes of economic development
 enhances fair interaction of independent actors along the value chain.
 Innovation can be technological, institutional, or political:
 Technology innovation - about innovating the tools at our disposal- about
what we may use to achieve our goals.
 Process innovation - how we may achieve our goals more efficiently and
more quickly (changing the responsibilities and the perceptions of the people
involved )
 Institutional-about innovating who we are and why we are doing what we
do.

 An innovation starts as a concept that is refined and
developed before application- to overcome main
failures and constraints in markets.
 Innovations may be inspired by reality requires:
 Research
 Development (up-scaling, testing)
 Production
 Marketing
 Use
 Innovations respond to need and economic
conditions: farmer cooperatives created in response
to low prices
 The process of innovation requires:
 the need to understand how existing institutions work, and
how individuals react in order to introduce activities and
products that serve peoples’ need and that are sustainable
economically and politically.

 Informal institutions
 cooperative behavior sustained through reciprocal exchange
and repeated interaction
 e.g., informal credit markets, village markets, community
initiatives
 Conditions under which these work?
 Small setup costs, but rising costs as the number of
participants and geographical scale increase
 Belief systems
 behavior that is driven by internalized ideas about what is
right
 morals, religion, ideology …
 State institutions
 Cooperation achieved through “third-party enforcement” of
rules and contracts
 Implicit force of state punishment

 Institutions are a prerequisites for markets :- minimise transaction
costs, transmit information, mediate transactions, facilitate the transfer
and enforcement of property rights and contracts, and manage the
degree of competition.
 Institutions are the norms, rules, and organizations that “govern”
transactions:-mechanisms for mitigating the collective-action problems
that lie at the heart of economic development.
 Market institutions can be defined as rules of the game, enforcement
mechanisms and organizations that facilitate market
interaction, coordination, contract formation and enforcement
 The poor are dependent on poorly functioning inefficient markets for
the livelihoods.
 Need well functioning markets that support competition, lower the
costs of doing business, and provide incentives for trade and
investment.

Issue/Market Failure Intervention
Unequal Access to Information •Public interventions
•Market Development / private participation
(e.g. ICT, credit bureaux etc)
•Collective action and network development
•Excessive Costs and Risks of •Risk reduction
Transactions •Guarantees
•Coordination failures – no access to •Value chain interventions
supply chains /hierarchies •Institutional innovation e.g. Contracting,
•Indivisibility (minimum Collective Action
transactions sizes) •Market facilitation and Development

 No public institution, NGOs, or private institution has had
significant interventions to improve marketing of pigs and
pig products along the value chain in in Uganda.
 Few organisations have been engaged with restocking and
formation of farmer groups - include: NAADS, World
Vision, and Child Fund.
 The formation of farmer groups has failed to generate the
anticipated collective action.
 NAADS has not attempted to promote the marketing of
inputs and pig products:- no focus on traders, input
dealers, and processors”
 Other institution Include: the East Africa Diary Development Project
(EADD), Foodnet, VECO, IBI-Trust, the Sub-Saharan Africa Challenge Program
(CIAT-Africa, Agricultural Research Institute Kabanyolo, Africa Highlands
Initiative (AHI), Huntex Industries Company Limited-Kabale, Kabale Local
Government, NARO – KAZARDI, Makerere University, and ICRAF.

 Focus is on organizing smallholders into farmer
groups or producers organizations to overcome
market failures and maintain their market
position by:
 acting collectively
 become better positioned to reduce transaction costs for
their market exchanges
 obtain necessary market information
 secure access to new tech-nologies
 tap into high-value markets that allows them to compete
more effectively with large farmers and agribusi-nesses.

 Active producer groups or associations- a reliable way of
improving access to output markets, inputs, services and in acquisition
of skills that are vital for improved production and management.
 Formation of farmer groups at village level:- village clusters
represented on District/LG IPs
 Lead farmers appointed by groups : to test, demonstrate or
provide learning sites for alternative technologies
 Producers linked to processing/major companies - so that they
become contract growers.
 Farmer groups sourcing inputs and marketing produce collectively
 University students undertaking research - requested by local
communities and the feedback of results to farmers
 Seed loans by seed companies being repaid in kind with seed
donations also being made to other farmers, pass-on-seed scheme
 Sustainable intensification in smallholder dairy business
though institutional innovative system (in this case, the “dairy hub
marketing”).

 New high-yielding crop varieties (cereals, legumes, and
root crops) being selected tested and adopted by
farmers in all Pilot Learning Sites (PLS)
 Double bagging of grain to prevent weevil damage
(from Purdue University)
 R&D converting an indigenous sorghum porridge to a
non alcoholic “Mamera” sorghum juice now sold in
local supermarkets
 Potato washing, grading, packaging using local
materials and marketing in hotels and supermarkets
 Increasing use of organic and inorganic fertilizer and
basins- the development and sale of vegetable boxes by
agro-dealers, contain seed, fertilizer and chemicals
sufficient for 0.1ha with credit being available for their
purchase.

 Certain conditions need to be in place, if
incentives for farmers to organize around
marketing are to be created and sustained
 Producer/farmer groups can simplify long
marketing chains by connecting smallholders
directly to markets, bypassing various
marketing intermediaries.

 Lack of credit and high cost of credit are major impediments for adoption.
 Limited access to information and sources of technology, higher cost of
inputs.
 Limited or no skills of the various players in the chain- a high learning cost
 Low quality agricultural produce, inadequate supply
 High transaction costs- high market risk and cash flow problems.
 Poorly organized market for crop and livestock products
 Domestic market for local foods, including pork exists, but is disorganized –
many players in the value chain
 Low participation of cooperatives, associations and farmer groups.
 Price variability, low volumes, lack of buyers, and low business skills.
 No standards for marketing products, linked with knowledge &
information
 Disorganized markets that can’t provide a win-win situation for all the
players in the value chain.
 Failure to transform the raw foods into some form of
processed, branded, easier to move and that can fetch better prices.
 Limited ability to transform our products to take advantage of our
infrastructure conditions.

 Promote and enhance interventions that:
 Encourage systemic and institutional change- the use of market-based incentives to
leverage the “enterprise” contribution to development
 improve governance and participation- mechanisms for improving access to
operating capital; and effective strategies for risk management and enhancing
the business skills of the Producer Marketing Groups.
 Attract more direct participation from the private sector
 Build advocacy capacity and alliances with “change agents”
 Sensitize members on the democratic principles of participatory group
governance through elections
 Provide initial start-up capital to kick-start their operations, and to encourage
members to increase their registration fees for membership to raise the
necessary minimum capital.
 Encourage increased annual contributions to the PMGs by the membership.
 Train and equip PMGs with business skills to facilitate effectiveness and
accountability in running the PMGs as business enterprises.
 Register PMGs as legal business entities and not as self-help groups, which
restricts their ability to access essential business services.
 Enhance the ability of the PMGs to access working capital through access to
financial credit: - encourage formal financial institutions to extend pig inventory
credit services to PMGs.