A Dissertation Submitted in Partial Fulfillment of the Requirements for the Award of Degree of Master of Science in Economics (MSc. Economics) of Mzumbe University 2013The Warehouse Receipt System (WRS) is one of the reform measures undertaken by the government of Tanzania in efforts to address the problems inefficient crops marketing systems. It is assumed that an improved efficiency of the marketing system through the WRP can help in poverty reduction by enhancing incomes of farmers via stable prices and reduced transactional risks. The main objective of this study was to examine the contribution of the WRS on the economic welfare of cashew nut farmers in Newala district. The underlying hypothesis of the study is that the WRS improves income of the farm households in Newala. Data was collected in six villages from a representative sample of 200 farmers out of 403,356. The studies applied a regression technique to analyze the postulated relationships. The findings showed that income of the farmers has significant effect on poverty reduction. Output price were negatively related with the income of the farmers using Warehouse Receipt System. These happen due to decrease change of price of cashew nut in the world market. The income of farmer improved slightly, but did not exceed Tshs. 500,000/= per annum. This represents an increase of about 43% of the farmers’ income. Levels of education of the farmers have positive impact with income and marketing on reduction of poverty. It can be concluded that the WRS can be an important tool for alleviating cashew nut marketing problems. However, at present, the significance of the WRS has not been felt much by farmers notably due to other distortions emanating from taxes and levies. The government should look into these issues carefully for the betterment of the cashew nut farmers. For better understanding of the contribution of the WRS, more research is needed especially on the role played by cooperative societies within the WRS framework.