Reducing global poverty and hunger requires accelerating growth in the agriculture sector through improvements in sustainable productivity. Smallholder farmers have the potential to increase productivity through the application of technology and knowledge, and through participation in input and output markets. Constrained by lack of resources, aversion to risk, and access to markets, smallholder farmers can benefit from assistance directed to their needs. Subsidizing quality inputs of seed and fertilizer to raise productivity has been a policy tool used for decades in developing economies, although economic efficiency has been poor.
Over the past decade, fertilizer (and seed) voucher schemes dubbed “smart subsidies” have been used by national governments and donors with various objectives and with questionable results. In particular, several governments in sub-Saharan Africa hurriedly introduced voucher schemes to subsidize fertilizer in response to the international fertilizer price spike of 2007 and 2008. This presentation, based on lessons learned, sets out the essential objectives of voucher schemes; the detailed planning and targeting required for successful, beneficial, and efficient implementation; their role as just one tool in sustainable market development; and the need for exit strategies from the usually high and unsustainable support cost.