The relative importance of transaction costs in the adoption of certified maize seed: a case of Moist Transitional (MT) zone in Embu

Abstract

The rising world prices for major tradable staples such as maize have been a concern of many Sub-Saharan African countries also in Kenya. Kenya is a maize deficit country and has to meet domestic demand through maize imports. Maize is a major staple food for over 80 percent of Kenya's population. It contributes up to 40 percent of the dietary energy supply and the country is accordingly searching for ways to increase maize productivity. History has shown that growth in productivity and functional input and commodity marketing systems are intimately tied with gains in agricultural production.

Maize productivity has been rising in the last decade mainly as a result of the use of improved germplasm and fertilizer. However, the proportion of farmers using these technologies is low and the aggregate productivity in maize is still low compared to other countries and its potential. Many adoption studies have been carried out in Kenya and recommendations given, but the problem of low adoption rates for improved germplasm persists. This thus necessitates re-looking at the problem of technology diffusion from a different perspective.

Previous studies have often assumed the existence of perfect input and product markets, tending to ignore the important but significant role played by institutions as well as the role of transaction costs associated with market exchange. The analysis detailed in this thesis makes use of qualitative information from institutions and actors in seed input value chains as well as quantitative information collected from a sample of 150 representative small-scale farmers in the Moist Transitional Maize Zones of Embu in Kenya.

A two stage regression model was applied to analyze determinants of adoption and factors affecting degree of adoption of certified improved maize seed. The results indicate that factors such as Experience in years of using certified maize seed, Distance to motor-able road, Access to credit, Age of the head, education level of the head, Degree of market participation, size of cultivated acreage and fourth wealth. play an important role in the decision of whether or not to use certified seed and on what proportion of maize area to allocate to certified seeds. By introducing elements of transaction costs this study found that as farmers adopt certified seeds, they incur higher transaction costs than non-adopters. However, the only category of transaction costs found significant were costs related to seed search costs.