In interlocked contractual relationships traders' supplies of inputs and cash to producers during the growing season is reimbursed with harvests. This study analyses interlocking contracts in gum arabic production in Senegal. Gum arabic is a natural exudation of Acacia senegal trees that grow in the semi-arid lands of Africa. Gum arabic is widely used as a food additive, including in soft drinks, among others, and as an emulsifier and coating agent in industries. World demand is high, but smaller producer countries including Senegal struggle to organize a stable export flow. The producer incentives to collect gum from the forests seem to be problematic. In this paper we analyse whether interlocked contracts could contribute to a conducive market environment that stimulates producers to collect and market gum. We collected data of 422 gum producers in Senegal. Results suggest positive effects of interlocking relationships as producers with interlocked contracts are found to collect larger quantities of gum and obtain larger economic returns.
- east java