1. SOKOINE UNIVERSITY OF AGRICULTURE
FACULTY OF AGRICULTURE
DEPARTMENT OF AGRICULTURE ECONOMICS AND AGRIBUSINESS
SPECIAL PROJECT PROPOSAL
TITLE: BANANA VALUE CHAIN ANALYSIS IN MLALI VILLAGE MOROGORO
STUDENT NAME: MNYAMBO ERASMUS
REG. N0: AEA/D/07/T. 7875
SUPERVISOR: MR. MASSIMBA
2009/2010
2. 1.0 INTRODUCTION AND BACKGROUND INFORMATION
BANANA is one among the major commodities in agricultural sector which is used as both food
and cash crop. The consumption of banana is one of the highest in the great lake region.
However, the average yield is low as bananas are cultivated in subsistence system with low input
and output. Considering the importance of banana and its potential for production and marketing,
the ministry of agriculture is committed in developing a programme on national level to improve
production, marketing and diversify use.
Globally banana is the 4th
most important crop in the world after wheat, rice and potatoes
(Gaidashova.2001). Tanzania is the second banana producer in East Africa after Uganda and
seventh in the world (KCDP, 2002) in Tanzania about 350,000 ha of bananas is cultivated and
produces about 2.6 million metric tons per year (MAC, 2000). Bananas are an important crop for
global trade and nutrition where they are intensively cultivated but few efforts exist to breed
superior bananas (Jim Lorenzon, 2008). Small producers one group that needs special attention,
while they are the key to the Africans food self- sufficiency it is hard for them to respond
effectively to increase food needs on their own. One way to support them is to encourage the
movement of their produce into alternative uses within the food chain (IITA REPORT. 2008). It
is the traditional food and cash crop in East Africa and central Africa mainland, Tanzania
inclusive where its production is largely for food security and unique in the world. For Tanzania
banana is produced in most areas of the country but largely in the regions including Kagera,
Kilimanjaro, Mbeya and is produced in small extent to the rest of the regions (Gold and Jamil,
1993).
1.1.1 Economic importance
Banana is a major staple food in Tanzania and Uganda, as well as an important cash crop in the
local economy. An indispensable part of life in Uganda, bananas provide an estimated 30 percent
of the calories, 10 percent of the protein and 5 percent of the fat intake of the population,
representing 25 percent of the total value of Agricultural output (FAO. 2002).
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3. In Tanzania banana are staple foods of an estimated 20 – 30 percent of the total population
(Walker et al, 1984). In the heavily banana based farming systems such as Kagera and
Kilimanjaro regions, about 70 – 95 percent of house holds grow banana for food and/or cash and
the average field size of bananas grown ranges from 0.5 to 2.0 ha per household (Byabachwezi
and the Mbwana, 1999).
Banana ranks first as a major staple food and second or third as a cash crop in the banana and/or
coffee based farming systems of Kagera, Kilimanjaro, and Mbeya regions (Nkuba et al. 2003).
1.1.2 Areas of production
In Tanzania, zones of production are located in the highlands of Kagera and Mara regions in the
lake zone, following by Kilimanjaro, Arusha and Tanga in the Northern zone; Mbeya, Ruvuma
and Iringa in the in southern highland zone; coast and Morogoro in the eastern zone and Zanzibar
Islands. The lake zone has the highest banana production followed by the northern zone. In
1997/98 and 1998/99, the lake zone produced, the lake zone produced 45 percent and 43 percent
of the total banana production in the country, respectively (MAC, 2000).Uses of banana; banana
is a multiuse crop; it is used for cook, beer, roast and fruit (International Food Policy Research
Institute Report1 55).
1.2 Problem Statement and Justification
Development of banana production has been increasingly in Tanzania, the potential increase of
banana production has a potential contribution to crop Tanzania economy, creating employment
and reducing poverty in rural areas. Currently the industry has several constraints that hinder
further expansion and good performance among the key actors. Banana value chain comprises
large number of producers who wish to produce banana at large quantities with very low
performance. The poor performance of farmers arose due to the low prices paid to their
produces. A consequence of low price is due to poor production practices especially in branding,
packaging and storage which lead to relatively low quantities of bananas. The low prices paid for
banana to farmers lead to low farmer’s income, discouraging banana farming hence poor rural
livelihood. The other group is traders including wholesalers and retailers who always tend to
maximize profits. They are making very profits in the value chain through charging high prices
to the final consumers deliberately. Nkuba (2003) said that many producers have no information
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4. about prevailing prices in the markets. Farmers have little alternative but to sell banana at “thro-
way” prices. In issues of low price, intermediaries are damned of distorting the chain by buying
cheaply from the farmers and pushing at high price to consumers (Abbort, 1986). Abbort
condemn intermediaries for collusion and freezing prices for their use despite that there are
important actors who link producers to ultimate consumers buyers of their produce in the value
chain.
1.3 Problem Justification
The study will concentrate in detail to collect full information showing inappropriateness
performance of actors to banana value chain in Mvomero District in Mlali village. Then the
study will give out the full information from the area of study which will be used to relate the
banana value chain actors to other areas which produce bananas within and outside of Tanzania.
The study will stand as a source of other critical studies which will concern the value chain.
More over, the study will help middle key players including village farmers, wholesalers and
retailers, agents (collectors) to improve their altitudes and the way they can compete each other
in order to improve their incomes and livelihood.
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5. 1.4 Objectives
1.4.1 General objectives
The main objective of study is to evaluate banana value chain analysis in Mlali village
1.4.2 Specific objective
1. To determine the price of banana at each level of the value chain
2. To establish margins at different levels of banana marketing chain
3. To examine the loss of bananas in the banana value chain
1.5 Research questions
1. What is the price banana at different level of value chain?
2. What are the margins at different levels of banana value chain?
3. To what extent banana lost in its value chain?
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6. 2.0 LITERATURE REVIEW
2.1 Meaning of value chain
A value chain is a chain of activities which products pass through from production centers to
ultimate consumers. Products pass all activities of the chain in order and each activity the
product gains some value. The chain of activities gives the products more additional value. The
firm’s margin or profits then depends on its effectiveness in performing these activities
efficiently, so that the amount that the customer is willing to pay for the product exceeds the cost
of the activities in the value chain. It is in those activities that a firm has opportunity to generate
superior value of it products (Porter, 1985). Porter has referred value chain to the way a firm
develops a competitive advantage and creates shareholder value. These value- generating
activities can be identified as a primary and support activities. The goal of these activities is to
offer the customers a level of value that exceeds the cost of activities, there by resulting in profit
margin. Value chain analysis examine the full range of activities required to bring a product or
service from its conception to its end use, the firms that perform those activities in a vertical
chain and final consumers for the product or services. The activities include design, production,
marketing and support to get the final product or service to the end consumer.
Value chain describes productive processes around a product from the provision of input to
production, transportation, processing, marketing, trading and retaining to get the final
consumption (Humphrey, 2005). Since production only translate into income once final
consumers really demand and buy goods, the value chain approach encourages looking at the
production process from the consumer’s end. Humphrey has point out that, the image of the
chain emphases on the fact that most goods are produced by sequence of interlinked actors and
activities. For the purpose of fostering agricultural growth aligning the agricultural sector
development with urban and other trends in the society, value chain provides a fairly holistic
frame work, which can encompass a number of different development activities.
Value chain is defined by Deardoff, (2001) as the sequence of steps often done in different firms
and or locations in a view of producing final goods from primary factors. The value chain can
also be defined as the distribution of channel of a product from its sourcing to its delivery to the
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7. end consumer (Nguruse, 2007). Value chain consists of a network of retailers, distributors,
storage facilities, and suppliers that participate in sales, delivery and production of particular
product. On its way of sourcing point a product acquires a value through transportation,
packaging, processing storage facilities.
2.2 Local markets
In Tanzania local markets of bananas are found in urban areas located outside banana producing
zones, including Mwanza and Shinyanga for banana produced in the Lake Zone, and Dodoma
and Dar as Salaam, for banana produced in the northern eastern and southern highland zones
(International Food Policy Research Institute, research report 115). (Nkuba,2005) conducted a
study of banana market covering major growing zones and urban areas of demand (including
Bukoba, Mwanza and Shinyanga, Musoma, Dodoma, Arusha, Moshi, Singida, Morogoro, Dar es
salaam, Zanzibar, Iringa and Mbeya). In each zone of production farm get prices for banana
bunches fluctuate within and between harvesting seasons. Large producers receive the largest
share of gross marketing margins, followed by the retailers, small traders and farmers.
The costs of transporting banana from the areas of supply to the nearest wholesale market
depend on access to roads and vary substantially among the production zones. Transport costs
were relatively high (Nkuba, 2003).
2.3 Marketing
Banana and Plantain are basic food crops for over 70 million people in Africa, but yield have
been declining. Increasingly banana are targeted for commercialization not only within Africa
but also for the lucrative and emerging markets in the middle East and Europe, where dessert
bananas are hugely popular as fruits. Recently large international producers has announced plans
for long term strategic investments in Sub-Sahara Africa, shifting banana production for
European markets from Latin America to Africa. To capitalize on this wave of charge, we
organize the banana conference 2008, the first over Pan-African banana conference that linked
Research to markets within the African context (IITA Annual Report, 2008/09).
Elina (2005) has points out that if marketing margins are independent of price and thus constant
in absolute terms, price changes are being passed on the next chain of the level. Such situation is
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8. consistent with the competitive market modal and does not prevail under exploitative pricing
conditions. Independent marketing margins and prices. This corresponds to a situation in which
selling and buying are highly correlated.
2.4 Pricing efficiency
Pricing efficiency is concerned with the ability of the marketing system to allocate resources and
coordinate the entire agricultural or food production and marketing processes in accordance with
consumer directions, possibly the best measure of the satisfaction output of the marketing system
is the price that customers will pay in the market place for the product, commodity or product in
question (Kriesberg, 1974).
Markets of banana in Tanzania are categorized into two, rural and urban markets. In rural
markets certain specified days of the week, growers bring their produce at the place as a market.
During these days producers bring several bunches of banana to the market and sell them either
in whole or subdivided. Within the urban market bananas are auctioned at wholesale prices and
retailers price stake charge of banana business. Stock owners and shopkeepers also participate in
the selling of banana (Ngeze, 1994).
2.5 Review of empirical studies
Sekiku in 2005 conducted a study at Karagwe and found that among the traditional use of banana
is to ripen the banana, make juice that can be used non-alcoholic drink or ferment it with malts to
make various beers. This won a big acceptance even among the non traditional banana
communities and indeed somehow increased banana use in the country. Sekiku has found that,
all the year round fruiting habit makes banana a very reliable food and income sources for the
banana dependant communities. On steep highland slopes, the crop is important for minimizing
soil erosion through its root system and the mulch it provides from dried leaves and pseudo-
stems.
Walker in1984, found that overall about 30% of the people in rural Tanzania principally derive
their carbohydrates from bananas with annual per capital consumption in the range 28-500kg.
According to Gold and Jamil (1993), bananas are produced in all regions of Tanzania from
coastal area to highland. However it is the major staple food in only four regions which are
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9. Kagera, Kilimanjaro, Arusha and Mbeya. The fifth expected is Morogoro to expand production
because of its proximity to Dar-Es-Salaam, which provides a reliable market.
Robinson in1996 argues that in Uganda and Tanzania, a nutritious beer is also brewed from
plantains and large quantities of this are consumed in the region. Rukazambuga (1993) most of
banana produced in Morogoro region are transported to Dar-Es-Salaam which provide a reliable
market. Besides the forces of supply and demand, prices of banana vary from place to place due
to variety of banana size, maturity stage, income of the population and taste and preference.
Seasonal variations in banana prices are influenced by other several factors.
The substitute of banana influences the price at any time (Msambichaka, 1983).
Banana is produced in arable land and contributes a large share of household’s incomer in
banana growing zone (Mpysie, 2000).
3.0 RESEARCH METHODOLOGYAND DESIGN
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10. This study presents the methodology to be used. It covers conceptual framework, description of
the study area, data collection and sources, study population and sampling procedures, sample
size, tools of data analysis.
3.1 Conceptual frame work
Conceptual frame work of banana value chain performance and the way in which the value chain
are structured, are essential guidelines in identifying important variables for effective and
efficient data collection. Kydd (1992) stress that such frames work should indicate to allocate the
most useful areas in which to focus. Limited research resources and ensure that data collected is
relevant to the objective of research. There are three important factors in determining value chain
channels. Explained in the figure 1 below
Demand
mand
3.2 Area of study
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Production Marketing
Consumption
Producers
• Entrepreneurs
Generate income and
Marketing agent
• Village
collectors
• Wholesalers
• Brokers
• Retailers
Consumers
• Households
• Supermarkets
• Individuals
• Pharmaceutical
iindustries
Production
• Factors of
production
(land, labor,
and capital)
• Access to credit
Market efficiency
Market performance
• Market margins
• Gross margins
Amount and rate of
supplied banana
11. Mlali is a village which is found in Mvomero district in Morogoro region. Its geographical
coordinates are 6°57’0” south and 37°32’0”East. The area is selected for study because it
involves the production of banana of different variety and marketing of banana in the region
(Morogoro municipal), and are also traded in large extent to Dar Es Salaam and Dodoma.
3.3 Population, Sample, Sample size, Sampling procedures and technique
3.3.1 Sample and sample size
A sample is subset of the population (Business Statistics, 2005). The selection of sample is
important since represent the whole population. It easy and less costly to administer and less time
consuming than census (Kilima, 2008/09). The study will consider a sample size of 50 people of
the whole population in the village.
3.3.2 Sampling procedures and techniques
3.3.2.1 Sampling procedures
The procedure to be used in selecting representatives of the population is probability sampling
refers to a particular method of selecting a sample or subset of units from a population (Phillips
B.S1996). Under this regard probability sampling will be highly employed because it reduces the
biasness in data collection since every individual has great chance or degree to be selected and
included in the sample.
3.3.2.2 Sampling techniques
Sampling approach which will be adopted in selecting the members are both simple random
sampling (SRS) and clustered simple random sampling (CSRS).
3.3.3 Data collection and Sources
Data collection is the systematic seeking and gathering relevant information. Since Mlali has
many people the study will not survey all but, only 50 people will be surveyed. For data
collection; structured questionnaires with both open and close ended questions will be
constructed and administered to 25 farmers of Mlali village members, 5 wholesalers from Mlali
auction, 10 retailers 5 in Mlali village 5 in Morogoro market respectively and 10 consumers from
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12. Morogoro Municipality sampled to collect both qualitative and quantitative data. The
questionnaire will be pre-test and will consist of three sections. The section will be designed to
capture the general back ground, information like prices of banana, level of profits and the
channel banana passes to final consumer.
3.3.3.1 Primary data
Primary data for this study will be collected through simple survey by using structured
questionnaire. The questionnaire will be sent to the selected respondents (household heads),
village collectors, wholesalers, retailers and consumers of bananas out of the village.
3.3.3.2 Secondary data
The secondary information is expected to be collected from DALDO office, Agricultural
extension offices and WEO offices.
3.3.4 Data processing, cording and Analysis
Data processing and cording is the preparation for data analysis. Data processing, cording and
analysis will be done by SPSS computer program.
3.3.4.1 Marketing margin is the difference between the value of product or group of products at
one stage in the marketing process or value chain of a product and the value of an equivalent
product or group of products at another stage.
MM = p2 – p1
Where,
MM marketing margin at each level in the value chain
P1 value or price at a given marketing level one
P2 value or price at a given marketing level two
3.3.4.2 Gross margin analysis
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13. The total gross margin (Gross Margin Analysis) or gross profit or gross profit rate is the
difference between the sales and the costs per unit of that product
1) Wholesale Gross margin (WGM)
WGM = (pw – fg)/fg
2) Retail Gross margin (RGM)
RGM = (rp – fg)/fg
Where,
wp = wholesale price
rp = retail price
fg = farm get price
Percentage gross margin = ∑(r – c)/∑r * 100%
Where,
∑ = total
r = revenue from sales
c = cost of sales
3.3.4.3 Profit margin: will be used to indicate had more influenced in the value chain as it is
believed that “the more profit one gets the more influence he has in the chain”
л = TR – TC Where, л = profit margin; TR = Revenue obtained; TC = total cost incurred
TR = ∑Py*Qy ∑ = summation; PY and QY price and quantity of a bunch of banana respectively
TC = ∑Px*Qx Px and Qx are costs of producing a quantity of a bunch of banana
3.3.5 Duration of the study
13
14. The study is going to be conducted for 5 months, 14 days are special for data collection to the
study area in which it is expected to start on 22nd
February 2010 and end up on 07th
march,
2010.thereafter data processing , cording and report writing will end up on May,2010.
3.3.6 Sources of fund and Budget
The study is going to be financed by High Education Student Loans Board (HESLB). HELSB is
going to finance only 180,000 Tanzania shillings.
Activity Cost (Tshs)
Transportation 30,000
Printing and photocopies 20,000
Stationeries cost 50,000
Miscellaneous 80,000
Total 180,000
3.3.7 Schedule of activities
S/N ACTIVITY/MONTH YEAR
2009 2010
Oct Nov Dec Jan Feb Mar Apr May
1 Proposal writing
2 Questionnaire
preparation
3 Data collection
4 Data processing,
cording and analysis
5 Report writing
6 Report submission
References
Borough, S and Kydd, J. (1992) Economic Analysis of Agriculture Markets: A manual
Natural Resources Institute (NRI). Marketing Series Vol.5, pp 25 – 31.
Byabachwezi,M.S.R.(2002) Banana research in Kagera Region: Situation in its social
context. Manuscript.
14
15. Elina, E. (2005) Agricultural Marketing and Supply chain Management in Tanzania: A
case Study of Maize in Iringa. Msc. Thesis Sokoine University.
Humphrey, J. (2005) Shaping Value Chains for Development: GTZ Publication. Volume 12,pp
90.
INIBAP (International Network for the Improvement of Banana and Plantains). (2000)
Annual Report. Montpellier, France: INIBAP.
Kalyebara, R. et al. (2007) Overview of the Banana Economy in the Lake Victoria
Regions of Uganda and Tanzania; Smale,M. and Tushemereirwe, W.K. (ed.) 2003K Street NW
Washington D.C. 2006 – 1002, USA pp 25 – 34.
KCDP (Kagera Community Development Programme). (2002) Annual Report. Bukoba,
Tanzania: KCDP.
MAC (Ministry of Agriculture and Cooperatives). (2000) Basic data. Agriculture and Livestock
Sector, Dar-Es- Salaam Tanzania: MAC.
MAFS (Ministry of Agriculture and Food Security). (2001) Unpublished data. Dar- Es-
Salaam, Tanzania: MAFS. Marketing Information Department.
Mbwana, A.S.S., M.S.R. Byabachweziand S.I. Mkulila. (1996) Banana germplasm
collection. Bukoba, Tanzania: Agricultural Research Institute Maruku.
Nzege , P.B (1994) Banana Production and Their Management: Ramsey and Sons co. Bombay
India.
Nkuba, J.M, S.R.B.Mgenzi, and C.Mushongi. (2003) Evaluating the marketing
opportunities for banana and its products in the principle banana growing countries of
ASARECA. Case study of Bukoba, Tanzania: Maruku Agricultural Research and Development
Institute.
Robison, J.C. (1996) Banana and Plantains: Cab International Wallingford UK.
Tomek, F and Robinson (1992) Agricultural Product Price: Department of Political
Economy, University of Glasgow.
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16. Walker, P.T., M. Hebblethwaite and J.Bridge. (1984) Project for Banana Pest control
and improvement in Tanzania: European Economic Community Report for Government of
Tanzania. London: Tropical Development and Research Institute.
APPENDICES
QUESTIONNAIRE
Appendix 1
I. FARMERS
Farmer’s name…………………………………date of interview…………………
1. Sex; 1, male …..2. Female…… (circle one)
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17. 2. Age of the respondent in years………….
3. Marital status; 1. Married 2. Single 3. Divorced 4.widow (circle one)
4. Education level ;none ( ),primary ( ), secondary ( ), other ( ) (tick one)
5. How many seasons of banana production per year? .......................
6. How much do you harvest per season? .............................(number of bunches)
7. How many bunches of banana do you sell per season? .................................
8. Is there any loss of bunches of banana per season?................Yes/No (circle one)
9. How many bunches of banana lost per season? ....................
10. What is estimated cost of producing a bunch of banana…………………
11. What is a price of a bunch of banana during harvesting period? .................
12. What is a price of a bunch of banana during post harvest period? ..............
13. Do you think the price is satisfactory? ............... Yes/No
14. Who sets the price of your banana produce? ...................
a) A farmer
b) A buyer
c) government
15. To whom do you primarily sell banana?...............................
a) Village collector
b) Wholesaler
c) Retailer
d) Final consumer
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18. 15. Give any three challenges facing your business?
a)…………………………………….
b)…………………………………….
c)……………………………………..
Appendix 2
II. Wholesaler
1.Wholesaler’s name…………………………………date of interview…………………
2. Sex; 1, male …..2. Female…… (circle one)
3. Age of the respondent ………….
4. Marital status; 1. Married 2. Single 3. Divorced 4. Widow (circle one)
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19. 5. Education level; none ( ), primary ( ), secondary ( ), other ( ) (circle one)
6. Have you been attended any business course? Yes/No (circle one)
7. How long have you been in the business of banana?..................
8. Where do you buy banana bunches?..................................................................................
9. Is there any intermediary in your business? Yes/No (circle one)
10. a) If Yes; how do you call him/her………………………….
b) If No; how do you collect banana……………….…………………………………...
…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………………..
11. Where do you sell your banana?………………………………………………………
12. Who are your customers?……………………………………………………………….
13. What is a buying price per bunch of banana?…………………………………………
14. how much costof abunch of banana before sell?...................................................
15. What is the wholesaler price per bunch of banana?……………………………………
16. Is there any loss of banana in your business banana stock? Yes/No (circle one)
17. If Yes; how many bunches get lost in your banana stock?.............................
18. And mention the possible causes of loss
i. …………………………………………………………….
ii. ……………………………………………………………
iii. …………………………………………………………
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20. 19. If No; how do you preserve the loss of banana?..............................................................
20. Give any three challenges facing your business
a)……………………………………………………………………
b)………………………………………………………………………
c)………………………………………………………………………..
Appendix 3
Retailer
1.Retailer’s name…………………………………date of interview…………………
2. Sex; 1, male …..2. Female…… (circle one)
3. Age of the respondent ………….
4. Marital status; 1. Married 2. Single 3. Divorced 4.
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21. 7. How long have you been in the business of banana?..................
5. Education level; none ( ), primary ( ), secondary ( ), other ( ) (circle one)
6. Have you been attended any business course? Yes/No (circle one)
8. Where do you buy banana bunches?.........................................................................
9. Who are your customers?...........................................................................
10. What is the cost per bunch before sell?....................................
11. What is the retail price per bunch in the market?.................................................
12. Do you think the price is satisfactory?............... Yes/No
11. How the demand of banana to the local market is?
a) Very low
b) Low
c) High
d) Very high
12. How many bunches of banana do you sell per day?.................................
13. Is there any loss of bunches of banana during your business?Yes/No (circle one)
14. If yes; mention the possible causes of loss.
a)………………………………….
b)…………………………………..
c)……………………………………..
15. If not; how do you store the banana……………………………………………
16. How many bunches of banana lost per single business turn over?....................
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22. 17. Who sets the price of your banana produce?...................
a) A farmer
b) A buyer
c) government
18. To whom do you primarily sell banana?...............................
19. Give any three challenges facing your business?
a)…………………………………….
b)…………………………………….
c)……………………………………..
20. What is a buying price per bunch of banana?………………………………………
Appendix 3
III. Consumer
1. Customer’s name…………………………………date, of interview…………………
2. Sex; i. male ii. Female…… (Circle one)
3. Age of the respondent ………….
4. Marital status; i. Married ii. Single iii. Divorced iv. widow (circle one)
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23. 5. Education level: none ( ), primary ( ), secondary ( ), other ( ) (tick one)
6. Where do you always buy banana?
a) From producers
b) Market
c) Local vendors
7. How much do you buy a bunch of banana?..................................
8. How do you find the price of banana?........................................
9. List challenges facing your buying preference of banana
a)…………………………………………………….
b)……………………………………………………….
c)………………………………………………………
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