The dairy industry has great potential to improve living standards for the poor in Tanzania and more so for smallholder farmers who account for the largest share of milk consumed nationally.
To increase production efficiency and overall output, the Government of Tanzania and its development partners are promoting dairy market hubs (DMHs) to enhance access to milk markets, inputs and services. However, there is limited empirical evidence on the degree to which these potential benefits translate into real benefits in dairy production and income, particularly for smallholder farmers. This paper therefore, examines the effect of DMHs on smallholder farmers’ income. Using primary data collected from 461 smallholder dairy farmers in four districts in two regions of Tanzania (Tanga and Morogoro) the study employs quasiexperimental methods combining propensity score matching and difference-in-difference (DD) to estimate treatment effects. The results indicate that participation in DMHs increased household dairy income by 4.07 percentage points on average for the period 2014 to 2016. Participation is encouraged by group membership, land owned and quantity of milk sold. It relates negatively with milk price and negatively, though weakly, with age. These results suggest that it would be productive to support livestock producer groups across all potential dairy areas to move towards forming DMHs. Specific actions that could facilitate this are discussed.