International Journal of Economy, Management and Social Sciences, 2(11) November 2013, Pages: 919-923

TI Journals

International Journal of Economy, Management and Social Sciences

ISSN
2306-7276

www.tijournals.com

Determinants of Farmers Group Membership Satisfaction in

Mbozi Distict, Tanzania: Exploring Farmers Options
Deus D. Ngaruko *1, Deogratias D. Lwezaula 2
1
2

Centre for Economics and Community Economic Development, Open University of Tanzania.
Division of Research and Development, Ministry of Agriculture, Food Security and Cooperatives, Tanzania.

AR TIC LE INF O

AB STR AC T

Keywords:

The paper investigates the principle determinants of farmers satisfaction from group membership
that accords selectivity models widely used in the market participation literature. In the selectivity
model used, the decision to participate in the groups is seen as a sequential two-stage decisionmaking process due to the influence of various farmers characteristics and external factors
regarding decisions before and after participation. We use the Heckman two-step analysis with
fitted cross-section data of 310 sample farmers from Mbozi District to explore factors influencing
farmers to participate in groups that also correlates to members satisfaction. The results of the
selection regression which involved the probit analysis on the discrete decision of whether to
participate in groups as the first stage are presented. The results show that agricultural-based
groups, presence of agency facilitating group establishment, distance from household to group
collection centre and group trust correlate with satisfaction levels. The results show a negative sign
which is statistically significant at which a farmer rated the level of satisfaction as average
ascertaining that as age increases lowers the probability of satisfaction with the group membership.
The results also show that the likelihood of farmers to be highly satisfied with group membership is
positive which increase if the group is formed with external facilitator and as distance increases
away from group convening place.

Farmers Group membership

membership satisfaction
farmers options

2013 Int. j. econ. manag. soc. sci. All rights reserved for TI Journals.

1.

Introduction

Partial withdrawal by the state from providing goods and services and further privatization and decentralization has created possibilities for
Farmer Groups (FGs) to become service providers themselves, or share in the costs of service provision [1]. Similarly, liberalization has
posed several challenges for FGs to become capable and strong actors in shaping market relations, organizing support services that allow
members to access these markets and avoid exploitation of their members. This has placed renewed attention on institutions of collective
actionmost often realized through the structure of Farmer Groups (FGs)as an important and efficient grass root mechanism for
enhancing smallholder farmers income and potential institutional solution to overcome high transaction costs and other market
coordination failures in developing countries ([2], [3]).
It is widely acknowledged that successful and sustainable groups are built on two cornerstones: they satisfy members felt-needs first, not
the needs of outsiders and they generate net positive benefits for their members, i.e., for each member, the economic and social benefits of
participation in the group must outweigh the costs of that participation - without this there simply would be no participation. It is thus
expected that a farmers decision to join a group or not is influenced by a multitude of factors: socioeconomic characteristics at the
household/farm level, production and group characteristics, as well as personal attitudes towards and experiences with the existing groups
in the communities ([4], [5], [6]). However, farmer groups are not always successful, and there is a need to better understand under what
conditions collective action is useful and viable ([7], 8]). Several literature have documented relevant factors for group participation
including level of education, opinion leadership status, organizational membership, extension contact, size of group, formalization,
satisfaction, source of information and member attitude.
In this paper, we apply appropriate econometric techniques to model farmers satisfaction with group participation bearing in mind that
Tanzanian farmers group participation literature suffers from a failure to employ rigorous statistical techniques, while their studies and the
prospects for successful self-management in the country remain rare. The theoretical justification of farmers group study is based on
management literature, particularly the writings of [9] and [10].

* Corresponding author.
Email address: deus.ngaruko@out.ac.tz

Deus D. Ngaruko and Deogratias D. Lwezaula

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Inter nat ional Journal of Economy, Manage ment and Social Scie nces , 2(11) Nove mber 2013

2.

Methodology

2.1 Data collection methods

The empirical study on which this paper is based was conducted in Mbozi District in the Southern Highlands of Tanzania the year 2011.
The district was selected because it is among the agricultural potential districts with concentrations of farmers groups (FGs). Nineteen
villages were covered with cross-section data from a sample of 310 farmers. For the purpose of this analysis that also accords the specified
model requirement we selected both farmers participating in groups 205 (66%) and no-participants 105 (34%). The data were collected
using semi-structured questionnaire administered on face-to-face interview arrangement. Farmers selection was purposive to ensure
interviews are conducted to those in groups and non-group members.
2.2 Empirical model specification
Before embarking on utilizing specified model for the present study, we start explaining measurement and random selection issues as
related to appropriate model to employ. It is widely acknowledged that farmers have both characteristics that are observable (such as age,
sex, wealth, etc) and unobservable (such attitudes, morale, conservatisms, being in an abstract condition). All of these are expected to affect
their level of satisfaction. Various literatures have defined unobservable variables, in general term as unmeasured variables, unobserved
variables, constructs, hidden variables. In other words they refer to variables in the model that are not present in the data set. Thus,
unobservable characteristics affecting the decision to become a member will be correlated with the unobservable characteristics affecting a
farmers level of satisfaction with his/her group membership.
Given that 66% of the total respondents in the survey did participate in farmers groups, it would imply that they are satisfied by mere
being in groups. It is likely that, the characteristics of participants will differ from non-members. On the other hand, this implies that when
only such households are considered in estimating the level of satisfaction, the parameter estimates are bound to be biased due to sample
selection bias. Using the ordinary least square (OLS) method would thus be inappropriate since it may not cater for selection bias. For
details see in early writings of Heckman, [11] and also latest in [12] , [13], [14] and [15]. Recognizing this, [16] introduced the dimension
of selectivity bias that would be present in sampling and therefore affecting the measurement. Therefore, drawing inferences about the
determinants of membership satisfaction for all farmers would be based on the observed level of satisfaction of the subset which is actually
a group membership. This implies that when only such farmers are considered in estimating their decision to participate, the parameter
estimates are bound to be biased due to the sample selection bias.
The literatures as pioneered by Heckman suggest that using ordinary least squares (OLS) method would thus be inappropriate since it may
not cater for the selection biases. The Heckman two-step method is, therefore, selected to correct for this selection bias. We use Heckman
procedure which accounts for incorporation of unobservable characteristics affecting the decision vis avis unobservable characteristics
affecting satisfaction,
2.3 The Heckmans sample selection model
From literature, Heckmans two-stage sample selection model copes with such a selection problem by assuming that the farmers make two
judgments with regard to membership and membership satisfaction, each of which is determined by a different set of explanatory variables.
As has been cited in various literature such as Maddala [17], the Heckman procedure provides consistent and asymptotically efficient
estimates for all the parameters. This method assumes that the missing value of the dependent variable imply that the dependent variable is
unobserved (not selected). The regression equation is therefore specified where the decision to become a member or not is modeled as
equation 1.
Heckman selection-correction model uses the participation probit model to calculate the inverse Mills ratio and includes this as a regressor
in the underlying regression models, which for this case is satisfaction model. That is the second stage equation is also probit. The literature
describes it as the ratio of the probability density function over the cumulative distribution function of a distribution of which probit is
derived. Use of the inverse Mills ratio is often motivated by the following property of the truncated normal distribution. This calculation
corrects for possible selection bias that can yield unbiased and consistent estimate in the participation and satisfaction models (Ibid). Thus,
by including a variable in the selection model that is not found in the outcome equation i.e. a variable that affect the first stage-group
participation.
In the first-stage, the regression equation for the decision to become a member is modeled as selection equation and specified as:

ln(

Di
) 0 1Fci 2 Ei i
[1 Di]

1if j hh ij

j
Pi
0 otherwise

(1)

k att ik m gch u 0
m

where Pi is a binary variable which takes the value one if the farmer is a member of the group and zero if the farmer decided not to
become a member, hh denotes the vector of socioeconomic characteristics of the household / farm, att stands for the personal attitudes of
the farmer toward the structure and conduct of the existing groups, and gch for the group characteristics related variables. , , & are
the parameters to estimate, and u is the error term (the corresponding log-likelihood function for equation 8 as in Maddala, 1998. [17]
In the second-stage of Heckman, the farmers satisfaction equation is modeled as:

Determinants of Farmers Group Membership Satisfaction in Mbozi Distict, Tanzania: Exploring Farmers Options

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Internat ional Jour nal of Economy, Mana ge ment and Social Sciences , 2(11) November 2013

satisi u Knhhin oattio sgchis rTCir v

n

(2)

where satis takes the values based on the four point Likert scale where {1: 'very satisfied', 2: 'satisfied', 3: 'somehow satisfied', 4: 'not
satisfied'}, later on the variable not satisfied was dropped from the model due to lack of observations, hh denotes again the vector of
socioeconomic characteristics of the farmer, att stands for the personal attitudes of the farmer toward the structure and conduct of the
group, gch for the group characteristics related variables, and TC captures transaction costs. u , K , , ,& , are the parameters to
estimate, and v is the error term (the corresponding log-likelihood function for equation 10 is given in [17].
Given the distribution of the dependent variable, we estimate [1] as an ordered probit model and address possible selection bias by
following Heckmans two-stage estimation procedure. The first stage of the estimation procedure consists of estimating equation [1] as the
membership equation, the second stage of the estimation procedure is the ordered probit equation of membership satisfaction which
contains the inverse mills ratio as a correcting term. The first stage of the estimation procedure consists of estimating equation [1] as the
membership equation, the second stage of the estimation procedure is the ordered probit equation of membership satisfaction which
contains the inverse mills ratio as a correcting term. In this analysis, the determinants of participation are estimated while censoring those
households which did not join in the reference period. The selection variable therefore is whether the farmer did participate during the
reference period. The zero values for the participation variable are considered as unobserved. Thus, accords that this is a good way of
predicting the value of the dependent variable that would be observed without biases that would arise due to the selection of those
participating or not [17]. The Heckman Maximum Likelihood selection model was run concomitantly (i.e equation 1 and 2 above) to
determine the coefficient estimates of the underlying regression equation and the selection equation using STATA 11 software.

3.

Results and discussions

The realization of this paper employed cross-section data collected from households in Mbozi District, Tanzania. The survey responses are
divided into two groups: members of groups (n=205) and non-members (n= 105). The inclusion of non-members in the study allows us to
understand the determinants of members satisfaction. We thus estimate, as a first step, a Heckman selection probit model to identify causal
factors related to farmers decisions to participate in groups. Based on these estimates we calculate the inverse Mills ratio to account for
possible selection bias with respect to the estimation of the outcome equation (an ordered probit model of farmers satisfaction with their
groups). Secondly, we then investigate determinants of farmers satisfaction with their membership of groups including, beside other
explanatory variables, the inverse Mills ratio from the Heckman selection model.
The results of the Heckman two-step analysis on whether farmers participate in groups and members satisfaction are presented (Table 1).
The Table presents the results of the selection regression which involved the probit analysis on the discrete decision of whether to
participate in groups as the first stage. The robust standard errors obtained and the Wald test of the independency of the equation is shown.
The non-statistically significance of the Mills lambda implies that using Heckman two-step procedure was not appropriate to cater for the
selection bias that would have occurred in estimating the determinants of group participation without considering the discrete choice of
participation. The results show that agricultural-based groups, presence of agency facilitating group establishment, distance from household
to group collection centre and group trust correlate with satisfaction levels. The results of the underlying regression which establishes the
determinants of farmers satisfaction are also shown in the same Table.
The model predicts that probability of farmers joining a group would be lower if the type of group is agricultural-based compared to other
types of groups. This finding would be expected as most of the farmers and groups interviewed had more interest in groups that provide
loans such as credit and saving scheme and village cooperative banks. For instance, from descriptive analysis about 55.9 % of the group
participants had joined savings and credit scheme groups, which was statistically significant. It appears that farmers may not be interested
to join a group if it is agricultural-based, but there are other factors underlying their decisions and therefore, relevant to their satisfaction.
Level of trust was also found to be relevant to farmers satisfaction, showing that the probability of participation is lowered with if trust
among group members is low. The interviewed farmers farmers indicated that trust is relevant to bring about social unity and characterizes
communities with strong social capital and encourages members to interact or even help others in the same community or group. Of
significant, these findings reveal presence of a transparent management structure and structure for conflict resolution, which also highlight
the importance of good governance, much of which rests with trust of the group leaders.
A positive correlation is apparent between membership satisfaction, and decreases as farmers distance from group meeting centre increase,
which is statistically significant. This variable in the present paper is considered a proxy to transaction costs variable for transport cost in
search of information, which is again opportunity cost of time. The results also show that satisfaction increases probability of farmers
participating in groups if the group is formed with external facilitation. This, to our knowledge would be contrary to the general expectation
that locally initiated groups are more likely to be appreciated by individuals and therefore to decide to join and consequently attaining
satisfaction - and for that matter these groups are expected to be performing better than the externally initiated. On the other hand, this can
be expected because with community initiated groups farmers have no avenues for capacity building and able to be exposed to group
dynamic skills which is possible when an external agency is involved. For instance, as it was explained through group interviews
undertaken, various non-governmental organizations (e.g Techno-serve) have had been building capacity of farmers (particularly Village
cooperative banks) in such areas of entrepreneurial skills, conflict management in groups, group management, project write up and business
strategic planning. These are motivational approaches for the farmers to join groups and that the groups became satisfied and sustainable.
The result statistics of Mills ratio are ambiguous. The coefficients for inverse Mills ratio (IMR) for the two satisfaction levels (satisfied
and somehow satisfied) are positive indicating that there are unobserved variables that both increase the probability of selection and a
higher than average score on the dependent variable, albeit non-significant at different statistical significance (1%, 5% and 10%). While the

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Inter nat ional Journal of Economy, Manage ment and Social Scie nces , 2(11) Nove mber 2013

ratio for the model of very satisfied is negative indicating that there are unobserved variables increasing the probability of selection and the
probability of a lower than average score on the dependent variable and is non-significant (at 1%, 5% and 10%). The non-significance of
the group participation equation, imply that sample selection biases would have not even resulted if the group participation equation were
estimated without considering the discrete decision to participate in groups.
Table 1. Heckman selection model coefficient estimates for satisfaction in groups
The selection regression
Dependent variable: group participation; Y=1 and Y=0
Independent variable

Coefficient

Age
Sex
agricultural based group
conditionality to participate
external agency initiating group formation
farmers asset index
distance from household to group collection
centre
trust of the group
marital status of farmers
Constant
Mills lambda
Wald test of independent equations (rho)
Wald Chi2(df=9)
Probability> Chi2
Sigma
lambda

0.040593
1.893389
-4.33972***
-0.09687
-2.98399***
0.005506
8.147776***
2.902055***
1.725505
-1.20065

The underlying regression

Dependent variable: satisfaction; Y=1 and Y=0
Independent variable

Age
Sex
agricultural based group
conditionality to participate
external agency initiating group formation
farmers asset index
distance from household to group
collection centre
trust of the group
marital status of farmers
Constant

Very
satisfied
0.014514***
0.051139
0.10895
-0.10566
-0.23521***
-0.00068
-0.03809***
-0.14474
-0.02
0.338942
-0.0258818
-0.06670
20.42
0.0155
.38803388
-.02588178

Coefficients
Satisfied
-0.01285***
-0.01709
-0.12905
0.146791
0.262015***
0.000679
0.029228

Somehow
satisfied
-0.00167
-0.03405
0.020098
-0.04113
-0.02681
3.93E-07
0.008859

0.096458
-0.03427
0.650707***
0.211605
0.05636
19.05
0.0248
.37548149
.02116045

0.048281
0.054276
0.010351
0.0047213
0.02757
4.71
0.8586
.17123742
.00472132

N=101 (censored observations = 40, uncensored observations = 61

Note: *** denote significance at the 10%, 5% and 1% levels.

Most importantly, the coefficients accord the expected signs. A negative sign which is statistically significant at the 1%, 5% and 10% levels
is obtained at which a farmer rated the level of satisfaction as average (i.e satisfied) for the variable AGE ascertaining that as age increases
lowers the probability of satisfaction with the group membership. The results show that the likelihood of farmers to be highly satisfied with
group membership is positive which increase if the group is formed with external assistance (variable DINITIATI1) and as distance
increases away from group convening place (DISTANCE). The signs of the coefficient variable DINITIATI1 were negative for very
satisfied and positive for satisfied was positive, while in both cases was significant at 1%, 5% and 10% levels. None of the coefficients
for the dummy dependent variable rated farmers group satisfaction as somehow satisfied were found to be significant.
The sample selection model obtained in Table 1 is compared with standard probit. The results show that the coefficients and p-values are
very similar, though not identical (Table 2). They are not identical because for selection model STATA estimates both equations together in
a maximum likelihood process were in the standard probit only one model is estimated for each dummy.
Table 2. Coefficient estimates for group satisfaction - Standard probit model
Independent variable

Coefficient of Dependent variable: satisfaction; Y=1 and Y=0

age
sex
agricultural based group
conditionality to participate
external agency initiating group formation
farmers asset index
distance from household to group collection centre
trust of the group
marital status of farmers
Constant
No. of observations
Likelihood Chi2, df=9
Probability> Chi2
Pseudo R2

Very satisfied
.0404681*
.1105997
-.4241409
-.2403208
-1.071446*
-.0010367
-.0817802
-.1247774
-.0496191
-.0516349
77
14.90
0.0937
0.1513

Satisfied
-.0405371*
.024621
.02858078
.0424453
1.023125*
.0012305
.0761076
.01430439
-.1335088
.1571432
77
13.01
0.1620
0.1412

Note: * denotes significance at 1%, 5% and 10% levels

Somehow satisfied
-.0006884
-.4620219
omitted
.5303752
.0827944
-.0027159
.0037568
-.0311594
omitted
-1.397764
62
2.33
0.9392
0.0786

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Internat ional Jour nal of Economy, Mana ge ment and Social Sciences , 2(11) November 2013

4.

Conclusion and policy implications

In this chapter, the specifications of the empirical model used to determine the factors influencing farmers decision to participate are
explored. The discrete choice model for farmers participation in groups as correlates to eventual farmers satisfaction in group membership
is applied by following the selectivity models widely used in the market participation literature. In the selectivity models, the decision to
participate in the groups is seen as a sequential two-stage decision-making process due to the influence of various farmers characteristics
and external factors regarding decisions on participation and after participation. Factors that determine farmers satisfaction are explored.
The results show that the likelihood of farmers to be highly satisfied with group membership is influenced by age, whether the group is
formed with external assistance and village distance from group convening place. It implies that any farmers decision to participate in a
group is correlated with factors that influence satisfaction (Ibid).

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[11]
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[13]
[14]
[15]

[16]
[17]
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