Addressing informality in the poultry sector of Tanzania

By Alpha Ngunyale (Executive Secretary at Tanzania Commercial Poultry Association)

Informality in Tanzania’s poultry sector is a pervasive issue, with an estimated 80%of business dealings operating outside formal structures. This high level of informality is not unique to the poultry sector but reflects broader trends in Tanzania’s economy, where the informal sector accounts for a significant portion of economic activity.

Recent studies indicate that informality in agriculture, including poultry, is driven by factors such as limited access to formal markets, high costs of formalization, and inadequate regulatory oversight. The poultry sector’s informality manifests in unregistered farms, informal trading networks, and a lack of standardized record-keeping, which complicates efforts to track production, revenue, and growth.

IMPACTS OF INFORMALITY

The impacts of informality in the poultry sector are multifaceted, affecting farmers, the government, and the broader economy:

1. Revenue and Taxation Losses: Informal operations evade tax frameworks, resulting in significant revenue losses for the government. This limits funds available for reinvestment in agricultural development, infrastructure, and farmer support programs. For instance, the inability to collect taxes from informal poultry businesses restricts the government’s capacity to fund extension services or subsidize inputs like feed and vaccines.
2. Limited Access to Finance and Investment: Informal poultry farmers often lack the documentation required to access formal financial services, such as loans and insurance. This restricts their ability to invest in improved breeds, feed, or infrastructure, perpetuating low productivity and poverty cycles. Studies highlight that formalization can improve access to credit, as financial institutions prefer registered businesses with verifiable records.
3. Unstructured Market Growth: The absence of formal structures makes it challenging to track production volumes, demand trends, and price fluctuations. This lack of data hinders informed decision-making by farmers, traders, and policymakers. For example, without accurate data, it is difficult to predict market needs or plan interventions to stabilize prices, leading to inefficiencies and market volatility.
4. Compromised Product Quality and Health Standards: Informal settings often lack regulatory oversight, increasing the risk of poor biosecurity practices, disease outbreaks, and compromised food safety standards. Recent analyses emphasize that informal hatcheries and feed suppliers, which dominate the sector, are often unregulated, leading to variable product quality and health risks for both poultry and consumers.
5. Weakened Value Chain Efficiency: Informality creates inefficiencies in the poultry value chain, such as inconsistent supply of inputs (e.g., feed, chicks) and unstable pricing. This limits the competitiveness of local poultry businesses, particularly in the face of cheap imports and illegal trade, which further undermine formal operations.

Approximately 64% of rural households engage in poultry farming, These farmers primarily focus on subsistence rather than commercial production, contributing to the persistence of informality in the sector.

Additionally, across 11 regions, an estimated 170 informal hatcheries collectively produce nearly 2.8 million chicks annually. However, these hatcheries operate without formal registration or adherence to quality control measures, impacting the reliability of chick supply and genetic quality, ultimately hindering productivity improvements. Market participation among smallholder poultry farmers is also constrained by factors such as flock size, access to market information, and availability of Resources.

Due to these limitations, many informal farmers remain excluded from structured market systems, forcing them to rely on traditional and less profitable trading methods. Furthermore, market trends indicate a rising demand for poultry products, fueled by urbanization and the expansion of the middle class. Despite this growth, informal producers struggle to meet demand due to restricted access to high-quality inputs, modern production techniques, and structured distribution channels. These challenges reinforce the cycle of informality, limiting the sector’s potential for sustainable growth.

STRATERGIES TO REDUCE INFORMALITY

To address informality in the poultry sector, the poultry associations can collaborate with stakeholders to implement the following data-driven strategies:

1. Simplify and enhance Farmers Registration and Licensing: Advocate for streamlined, low-cost registration processes tailored for small-scale to large-scale poultry farmers leveraging the existing Mifugo integrated management information system (Mimis) and Associations data bases, Studies and experience shows that high registration costs and bureaucratic complexity deter formalization. Reducing these barriers can increase the number of registered poultry businesses.
2. Provide Incentives for Formal Businesses: Propose government-backed incentives, such as tax breaks, subsidized inputs, and access to low-interest loans, for formalized poultry businesses. studies show that incentives significantly increase formalization rates, with formalized businesses showing higher productivity and revenue growth. For example, formalized farmers are more likely to invest in improved breeds and biosecurity measures, enhancing sector competitiveness.
3. Enhance Market Intelligence Access: Through Digital Solutions Develop mobile and web-based platforms to connect informal farmers with buyers, financial institutions, and service providers. These platforms can also serve as record-keeping tools to build financial credibility. Recent initiatives in other agricultural sectors demonstrate that digital platforms increase market participation by providing real-time market information and reducing transaction costs. In the poultry sector, such platforms can help informal farmers transition to formal trading network
4. Strengthen Poultry Association: associations enable Farmers to pool resources, improve negotiating power, and facilitate formal transactions. Associations can also serve as a platform for training and extension services. Evidence from Tanzania’s agricultural sector shows that Associations increase formal market participation by 30–40%, as they provide a structured framework for collective action and resource sharing.
5. Build Capacity Through Training and Awareness: Conduct training programs on business management, taxation, and compliance with health regulations, targeting informal farmers. Awareness campaigns can highlight the benefits of formalization, such as improved market access and financial support. Studies emphasize that training and awareness significantly increase formalization rates, with trained farmers showing a 25% higher likelihood of registering their businesses. These programs are particularly effective when delivered through existing networks, such as extension services or Associations.
6. Improve Infrastructure and Value Chain Support: Advocate for investments in poultry-related infrastructure, such as cold storage, processing facilities, and reliable transportation networks, to reduce reliance on informal trading practices. Research highlights that infrastructure improvements reduce post-harvest losses by up to 20% and increase market access for smallholder farmers, making formalization more viable. For example, access to cold storage can enable farmers to meet quality standards required by formal markets.
7. Foster Public-Private Partnerships (PPPs): Facilitate PPPs to fund and implement formalization initiatives, such as input subsidies, extension services, and technological advancements. PPPs have been shown to increase formalization rates by leveraging private sector expertise and resources. In Tanzania’s poultry sector, PPPs can support the integration of informal hatcheries into formal systems, improving quality control and market access.

While the established narrative often frames informality as a problem to be eradicated, it is important to critically examine this perspective.

Informality in the poultry sector provides livelihoods for millions of smallholder farmers, offering low barriers to entry and high levels of entrepreneurship. Recent studies suggest that informality can be a source of resilience, particularly in rural areas where formal systems are inaccessible or inefficient.

Therefore, rather than seeking to eliminate informality, the Associations should aim to harness its strengths—such as flexibility and local knowledge—while addressing its weaknesses, such as lack of regulation and market access. This balanced approach can ensure that formalization efforts do not undermine existing livelihoods but instead build on them to create a more inclusive and sustainable poultry sector.

Informality in Tanzania’s poultry sector presents significant challenges, including revenue losses, limited access to finance, and unstructured market growth.

However, it also offers opportunities for innovation and resilience, particularly for smallholder farmers. By implementing data-driven strategies, such as simplified registration, incentives, digital solutions, training, infrastructure improvements, and PPPs, the associations can play a pivotal role in reducing informality while preserving the sector’s economic contributions.