''Distance to markets, and the lack of roads, is a central concern for rural communities throughout the developing world. The rural poor need access to competitive markets not just for their produce but also for inputs, assets and technology, consumer goods, credit and labour.''

Market Access: Constraints and Opportunities

The problems of market access may be usefully considered in three dimensions: the physical (the distance of the poor from markets); the political (their inability to influence the terms upon which they participate in the market); and the structural (the lack of market intermediaries). All of these must be tackled if the measures are to have the desired effect on productivity, output or incomes.

Most developing countries have liberalized their agriculture to some extent, changing its institutions and structure. There is a role for intervention with three objectives:

• To remove or reduce barriers to market access, both by special support in places where markets are slow to develop spontaneously and by easing the market participation of the poor.

• To establish a more equitable set of market relations. This it would do by empowering smallholder farmers and agricultural workers, providing them with the knowledge and skills that they require both to enter the market and to improve the terms upon which they participate in it.

The high physical cost of accessing markets

• Lack of roads or seasonally impassable or poorly maintained roads;

• Poor or non-existent communications infrastructure for disseminating information on markets, products and prices;

• Low value/weight ratios of much of what poor people make and sell, which make transporting the produce to market both difficult and costly; and

• The perishable nature of much of the rural poor’s agricultural produce combined with a lack of storage facilities and long distances to markets. (In general, women do not produce commodities that are much more perishable than those produced by men. If they do, it is mostly for consumption and not for the market.)

Reducing physical costs of market access

• Road construction, road maintenance

• Improved storage and information

• Improving transport

Market Structure

Many rural markets are characterized by extreme asymmetry of relations between, on the one hand, large numbers of small producers/consumers and, on the other hand, few buyers/sellers. Such market relations are inequitable, frequently uncompetitive, and rarely to the advantage of the small producer.

Rural producers and consumers who face high physical costs in reaching markets often become dependent on traders coming to the village. Traders are essential lifelines for remote rural people, providing opportunities to sell agricultural produce and to purchase inputs and consumer goods. Traders, especially if they are irregular or face little competition, may not be much concerned about their reputation. In such cases, asymmetric information often forces the poor to accept low prices for products and to pay high prices for consumer goods.

Market Access and Commercialization

It is increasingly apparent that continuing to place exclusive emphasis on food crop production will not allow the agricultural sector to achieve the growth levels necessary for a significant impact on rural poverty, or generate the cash need to sustain the development of economic and social services.

Once food surplus is achieved, further increases of rural incomes and broad-based economic growth hang squarely upon the ability of smallholder producers to diversify their production systems, base their production decisions on changing market opportunities, and so participate in the rapidly expanding cash crop complex. There is also evidence that regions that produce commercial crops are generally better-off than regions under subsistence production, and that the poor in these regions are also better-off and have more secure jobs.

Access to labour markets

Access to labour markets is particularly important for many of the poor, who are highly dependent on their labour power. The ability of the poor to participate in the labour market is subject to a number of constraints arising from remoteness; lack of access to other assets, such as education; lack of participation in institutions such as credit groups; household characteristics such as family size and composition; cultural norms; and discrimination against women or ethnic minorities.

Liberalization, Market Access and Rural Poverty

Trade liberalization has helped the rural poor when it is linked to measures to improve market performance and access; missing markets can mean that liberalization worsens poverty.

Market Access and Globalization

Under globalization, market access becomes increasingly important as only those who have it can exploit the new opportunities available. Without market access, the potential benefits of higher product prices and lower input prices are not transmitted to poor households.

Conclusion

• If the rural poor are to escape poverty, they need access to competitive markets - not just for their produce but also for inputs, assets and technology, consumer goods, credit and labour.

• Confronting physical and institutional transaction costs through market reform and infrastructure development will raise productivity and incomes through greater farm output and more rural farm and non-farm employment.

Poverty can be reduced as the poor acquire access to wider market exchanges, but there are a number of provisos:

• The poor’s progress through market development is strongly complementary with asset redistribution. Control by the poor over some human capital and, if in farming, some land, enormously increases the poor’s willingness to take risks required for successful involvement in expanded markets.

• Just as the case for liberalization embodies the truism that people are seldom helped by hampering their trade and exchange, so the case for globalization risks importing a number of fallacies: that the further away one trades or invests the better; that local linkages are second-best; and that it acceptable to subsidize trade and exchange.

For further information contact:

At.Rahman@ifad.org or G. Geissler@ifad.org
Corporate Strategy Unit

Prepared by the Communications and Public Affairs Unit
IFAD, Via del Serafico 107, 00142, Rome, Italy
Tel: (00) 3906 5459 2485, Fax (00) 3906 5459 2143
E-mail: communications@ifad.org