What Policies Boost Farmer Use of Improved Inputs?
One of the perennial challenges across sub-Saharan Africa is increasing agricultural productivity. Governments have experienced decades of different policies, from state-controlled and subsidized input and output markets to various forms of liberalization meant to generate private sector investments in the sector. What policies have effectively boosted smallholder farmer use of improved agricultural inputs?
1. The costs of input subsidy programs tend to outweigh their benefits. Though this has been a long-standing view on input subsidy programs, the Lab took a step back to assess the “second wave” of input subsidy programs across Africa that began in the early 2000s. It synthesized available evidence for African countries through 2013. By then, 10 African governments had spent about $1 billion annually on these programs, roughly 29 percent of their public spending on agriculture. Though these programs often lead to short-term increases in food availability, they don’t contribute to more stable food markets and prices. They inadvertently weaken local markets for private providers of agricultural inputs and absorb public resources from other much needed investments, such as research and development and infrastructure, both more recognized to boost agricultural development.
2. Fertilizer subsidies don’t always buy votes. Not surprisingly, agricultural input subsidy programs often persist more because of politics than economics. The rationale is that providing subsidized inputs may increase the likelihood that households recipients vote for the party providing the subsidy. It seems logical, but the relationship strategy doesn’t always hold. Using data from Zambia, the Lab found that the Movement for Multi-Party Democracy governments targeted subsidized fertilizer to households in where the party had strong support in the previous presidential election. However, as the Lab explains, “contrary to conventional wisdom, marginal changes in the scale or coverage of the fertilizer subsidy program had no statistically significant effect on the share or number of votes won by incumbent presidents.”
3. But input subsidy programs can be innovative, and they need to be. As governments continue using these programs for political gain, the challenge is how to make them more effective and “doing no harm” to the local private sector. Governments across Africa have been exploring different ways forward. In Zambia, where the government relies heavily on its Farmers Input Subsidy Program to ensure smallholder access to agricultural inputs, analysis by Indaba Agricultural Policy Research Institute (IAPRI) documented Farmer Input Support Programme (FISP) costs and inefficiencies, and proposed an alternative and more effective approach based on e-vouchers. The introduction of e-vouchers gave farmers greater freedom to decide which inputs to buy and in what quantity, an alternative to distributing given amounts of specific inputs. Not only are farmers better off, but e-vouchers have led to a boost in agro-dealers who are taking advantage of this new market. Input subsidy programs can also be designed to promote climate-smart agriculture.
For more insights on the incentives and disincentives shaping smallholder adoption of agricultural inputs, check out additional work done by the Feed the Future Innovation Lab for Food Security Policy.