Gum arabic production and marketing in Senegal: interlocked transactions and supply chain implications

Interlocked relationships are characterised by traders’ supply of inputs and cash to producers oncredit, to be reimbursed at sale time based on pre-defined prices which are often lower than theprevailing market price. The study analyses determinants of choice for interlocking in the gum arabicsector in Senegal and the effect of interlocking on gum production and market participation; gumarabic is a natural exudates of Acacia Senegal trees that grow in the semi-arid lands of Africa. Datafrom 422 gum producers in Northern and Eastern regions of Senegal are used. About 45percent ofrespondents are involved into interlocking with village shop-owners or mobile traders. Interlockinghas a negative effect on prices received by gum collectors. However, in the absence of effectivecredit markets, interlocking positively influences market participation and production as foundthrough a two-step Heckman selection model by the provision of market assurance and safety foremergencies.