MSc

Malawi is a land-locked country located in the Southern Africa along the Great Rift Valley. The country has a population of approximately 14 million people, of which 51 per cent are women. Agriculture is the mainstay of the economy, providing livelihood to 80 per cent of the population and generating 35 to 45 per cent of GDP.

The growth of economy is fundamental through exploitation of abundant natural resources, particularly enterprise development in agriculture sector. The rural poor, largely women are the players in informal sector, as cultivators, growers, vendors and buyers of agro-based products. The sector is informal in the sense that the units involved are mostly unregistered, not recorded in official statistics, and have little or no access to formal markets for goods and credit facilities.

The informal sector activities have widely been recognised for its important role in promoting food security and poverty reduction. Surplus production at household level has been the major sources for translating to rural economic activities. The sector plays central function in addressing challenges of rampant unemployment and small incomes.

The study was conducted in Balaka district, which is situated in the South and Ntcheu in the Central region of Malawi. In Balaka, Mangochi turn-off and Ulongwe markets were targeted while in Ntcheu, Tsangano turn-off and Kampepuza markets. Hence, four local markets were purposively sampled due to the nature of agro-based businesses carried out. Thirty farmers involved in the informal sector were randomly selected from each of the markets as respondents, making a total sample size of 120 farmers.


The main objectives of the study were analysing the internal and external factors influencing the sector, examining the supply chain dynamics of agricultural commodities and understanding the spatial distribution of the informal sector. In addition, the study determined policy suggestions for possible up-scaling of the role of informal sector in promoting food security and poverty reduction in rural Malawi.

The results revealed that informal sector activities were largely carried out by females accounting 61.7 per cent of total respondents. 50 per cent of respondents had education up to the eighth standard. Almost two-third of the respondents were involved in farming and agri-business activities operating along the main roads. The majority of respondents had average monthly income between MK10,000-MK30,000 (55%) and only 6 per cent had average monthly income of more than MK50,000.

The computed household commercialisation index (HCI) revealed existence of three levels of commercialisation among respondents; subsistence (38%), semi-commercial (33%) and commercial (29%). This delineation suggested bringing specific support for improving the commercialisation processes at each level with rightful policy measures. Computation of crop commercialisation index (CCI) was another important measure that determined crops amenable for commercialisation. The results indicated that vegetables were the best option for commercialisation. Ranked second, third and forth were tubers, fruit and food grains in that order.

Finally, an analysis of enterprise profit as percentage of annual crop sales was done in order to understand about crop diversification potential. The results indicated that the enterprise profit as percent of sales from vegetables, fruits and tubers were higher than that of food grains. For example, in 2010-2011 growing season, percent of tubers (82%), vegetables (79%), fruits (93%) and food grain registered only 48 percent.


The multinomial logistic regression revealed that credit facilities, farmer business orientation, innovativeness, commodity transportation, monthly income and information source utilization were the significant factors influencing the transition from subsistence to semi-commercial. Education and extension services were significant factors contributing to the transition from semi-commercial farming to commercial.

Despite the successes registered, the informal sector continues to face problems ranging from its productivity to managerial aspects. Its productivity is constrained with inadequate infrastructures (roads, markets, water, electricity, etc), access to credit facilities, lack of processing facilities and marketing linkages. On managerial aspects, prevailing situation indicated that there is limited farmer capacity building, limited information and non farmer favouring policies regarding their growth in the sector.

In conclusion, the informal sector demonstrates immense potential in bringing better wellbeing of rural communities. It holds the promise of being the target for developmental activities by different agencies, as better technologies, market information and farmer support can help increase the volume, efficiency and value share of the informal sector which will ultimately improve the rural economies to a great extent.