Reducing Barriers to Saving in Malawi

On average, developing countries have fewer than 20 bank branches per 100,000 adults, and people deposit money at a rate one-third of that in developed countries.[i] This lack of formal financial services, along with many other factors, may inhibit farmers and other entrepreneurs, particularly in rural areas, from increasing savings and investments, and smoothing household consumption. Financial services could help farmers to accumulate funds to purchase tools such as fertilizer which are helpful for increasing production. If barriers to financial services are reduced or eliminated by offering enhanced savings products, what is the impact on the use of different agricultural inputs, farm output, and overall well-being in rural farming households?

Context:

Tobacco is one of Malawi’s primary exports, employing many of the country’s farmers. Income volatility influenced by macroeconomic forces can be particularly harmful to those farmers living near the poverty line, causing households to skip meals and forgo necessary healthcare expenses.

Opportunity International, an international NGO, opened the Opportunity Bank of Malawi (OBM) in 2002 with a license from the Central Bank of Malawi. OBM provides financial services to the rural poor and has partnered with researchers and two private agricultural buyers, Alliance One and Limbe Leaf, to offer enhanced savings products to tobacco farmers.

Description of Intervention:

The study assessed the impact of OBM’s savings programs on the behavior and well-being of local farmers. Farmers were organized in farmers clubs, with an average of 10-15 members, by one of the agricultural buyers. In exchange for group loans in the form of fertilizer and extension services, administered by OBM, the club allowed the commercial buyer to make the first offer on the national auction floor, essentially creating an exclusive relationship. Farmer clubs in this sample were randomly assigned to one of two savings account treatment groups or a comparison group. Clubs in the comparison group received information about the benefits of having a formal savings account. Clubs in the treatment groups received the same information about savings accounts and were also offered individual savings accounts into which proceeds, after loan repayment, would be directly deposited.

Farmers in the first treatment group were offered an “ordinary” savings account with an annual interest rate of 2.5%. Those in the second treatment group received the same individual savings account, in addition to a “commitment” savings account which allows farmers to specify an amount of money to be frozen until a specified date (e.g. immediately prior to the planting season, so that funds are preserved for farm input purchases).

To assess the impact of public information on financial behavior, farmer clubs in both treatment groups were randomly assigned to one of three raffle schemes providing information about club level savings. Raffle tickets to win a bicycle were distributed to participants on two occasions based on savings balances as of two pre-announced dates. One third of farmers received raffle tickets in private, one third received tickets in public when names and numbers of tickets were announced to the club, and one third was ineligible for the raffle.

Results and Policy Lessons:

Savings Behavior: Twenty-one percent of farmers who were offered a commitment savings product (no raffle), made transfers to their account, while 16% of farmers who were offered the ordinary savings product (no raffle) had their harvest proceeds directly deposited into their individual account, and no farmers in the comparison groups received funds directly in an OBM account. Overall, farmers in the six treatment groups deposited substantial amounts into their individual bank accounts; among farmers who were offered the commitment savings account, most of these deposits were made into the ordinary savings account.

Farmers in the commitment savings group had higher net savings during the pre-planting period, and the commitment savings treatment group overall withdrew more money during the planting season. This finding implies that these farmers were better able to save money and delay consumption until the lean season when food supplies from the last harvest were scarcer. Farmers in the ordinary savings group did not experience an increase in net savings during the pre-planting season, or an increase in withdrawals during the planting season, suggesting they were not able to smooth consumption as effectively.

Inputs, crop sales, and expenditures: In relation to those in the comparison group, farmers who were offered commitment savings accounts had more land cultivated, higher value of inputs, and greater value of harvest at a statistically significant level. These commitment savings farmers cultivated .33 more acres of land (compared to an average of 4.3 acres of land in the comparison group) and used 17.1% more inputs. This increase in land under cultivation and inputs used by the commitment savings group led to a 20.1% increase in value of crop output above the levels in the comparison group. Finally, farmers in the commitment treatment group increased total expenditures reported in the last 30 days by 13.5%. Overall, farmers in the ordinary savings group did not have outcomes that were different from those in the comparison group at a statistically significant level.

Evidence suggests that the positive results in the commitment savings group were not due to helping farmers solve self-control problems since most money accrued in ordinary savings accounts and actual commitment account balances were low. There was also no direct evidence that the results were derived from farmers keeping funds from their social networks. Psychological phenomena such as mental accounting may be behind the impact of the commitment accounts. However, the current study does not empirically test this hypothesis and psychological mechanisms are addressed in future research. Results from the public and private raffle treatments were inconclusive.

 


[i]Consultative Group to Assist the Poor/The World Bank, “Financial Access 2009:  Measuring Access to Financial Services around the World,” http://www.cgap.org/gm/document-1.9.38735/FA2009.pdf(Accessed January 9, 2011).

For more details, see the Gates Foundation briefing note on this project.

Examining the Effects of Crop Price Insurance for Farmers in Ghana

Policy Issue:
Many small-scale farmers in the developing world face significant income uncertainty, and rural farmers who live from harvest to harvest don’t have much room for error. Variables beyond the farmers’ control, such as fluctuating crop prices, can make a significant difference in how much a family earns for the year.  Farmers may be unwilling to take on additional risks by borrowing and making long-term investments due this uncertainty. This reluctance is thought to contribute to the decision of many farmers not to invest in technologies such as hybrid seeds, fertilizer, or irrigation that could potentially improve crop yields. Many lenders are also extremely wary of extending credit to farmers, fearful that they will inherit the risks inherent to farming. Crop price insurance could help solve this problem, reducing the risk to farmers and providing them with encouragement to make investments in their farms. Lenders, too, may feel more confident in lending to farmers with greater income certainty, facilitating even more capital investments.
 
Context of the Evaluation:
In Ghana, 50 percent of the rural population lives in poverty. In the Eastern Region where Mumuadu Rural Bank (MRB) operates, an estimated 70 percent of households make a living in the agricultural sector, but agricultural loans make up only 2 percent of the bank’s loan portfolio. Focus groups with maize and eggplant farmers in the area revealed that farmers were hesitant to borrow for fear that fluctuations in crop prices could force them to default. Rainfall fluctuations, typically an important source of risk for farmers, are not a great concern in this part of Ghana. The prices offered for traded crops, however, do fluctuate greatly. Information gathered in baseline surveys suggested that there was a potential but untapped market for crop price insurance: farmers in the area served by MRB expressed that they would be willing to pay to guarantee a certain minimum crop price. Despite this encouraging baseline finding, banks and insurance providers face the challenge that insurance is not a commonly understood concept among farmers in the region.
 
Details of Intervention:
Researchers developed an agricultural loan product in coordination with MRB that had an insurance component that partially indemnified farmers against low crop prices. Specifically, if crop prices at harvest dropped below a set price floor (the 10th percentile of historical prices for eggplant and the 7th percentile for historical maize prices), the bank would forgive 50 percent of the loan and interest payments. Borrowers were not required to pay any premium for the insurance product. The goal of incorporating insurance into the loan product was to reduce farmers’ risk in borrowing to invest in agriculture inputs. The intervention targeted maize and eggplant farmers in particular because the crops are both commonly grown in the region and subject to volatile (but historically well documented) prices.
 
Standard Mumuadu procedure is to invite farmers to meet in a group with Mumuadu employees to discuss the bank’s financial services, and to encourage farmers to come to a branch to apply for a loan. The average loan size is approximately US$159, which represents a significant change in cash flow for the borrower. For this project, Mumuadu employees approached community leaders to obtain a list of all maize and eggplant farmers in the village. The same community leaders then invited farmers to attend one of the bank’s information sessions. Farmers on the list were randomly assigned to one of four groups, each of which received a variation on the Mumuadu marketing pitch. The four groups were:
  1. Farmers who were offered the standard Mumuadu loan product;
  2. Farmers who were offered the Mumuadu loan product with complimentary crop price insurance;
  3. Farmers who received financial literacy training, before being offered the standard Mumuadu loan product;
  4. Farmers who received financial literacy training, before being offered the Mumuadu loan product with complimentary crop price insurance.
Prior to the marketing of the loans, Mumuadu employees conducted a survey of the farmers, gathering information relating to their credit history, risk perception, financial management skills, and cognitive ability. An analysis of baseline data, bank administrative data, and a followup survey that focused on farmer investment decisions allowed researchers to draw conclusions on the effect of crop price insurance on borrower behavior and agricultural investment in Ghana.
 
Results:
Take up of loans among farmers was quite high, with 86 percent of farmers in the comparison groups choosing to borrow and 92 percent of farmers in the treatment groups taking out a loan.  This high take up across both treatment and control groups made an analysis of the features that predicted take up difficult.  In fact, the researchers found no systematic difference across the treatment and control groups when considering which features predicted borrowing. Overall, those who borrowed tended to be older, with higher scores on tests of cognitive ability.  They were also more likely to have a record of previous borrowing.  
 
Apart from predictors of borrowing, researchers were interested in whether crop price insurance changed farmers’ investment behavior. There is evidence that it did, but not overwhelmingly. The small sample and high take up across both groups may have played a role in this outcome. Farmers offered the insurance spent 17.9 percentage points more on agricultural chemicals (mostly fertilizer) than those who had not been offered the product. There was also a trend towards growing more eggplants and less maize among these farmers. Farmers offered the insurance were also between 15 and 25 percent more likely to bring their produce to markets rather than sell to brokers who come to pick up the crop. Anecdotally, it is believed that the so-called “farmgate” sellers offer guaranteed purchase contracts, but at lower prices locked in before harvest. Selling in the market, on the other hand, is a potentially more profitable but riskier option.  
 
There are a number of potential reasons why the researchers did not find large effects of the crop price insurance product on either or take up or investment, and further research in necessary to determine their roles. It is uncertain, for example, whether farmers truly understood the benefits of the insurance. Farmers may also have been reluctant to make long term investments changes before an insurance product demonstrates an established presence in the area. Alternatively, crop price uncertainty may not be as important of an indicator of investment decisions as previously thought. Further research, with a larger sample size, is needed to better understand the roles of risk, financial literacy, and product design in determining microinsurance impact.

Environmental Investments on Private Land: Planting Trees in Chipata

Many climate change programs that target small-scale farmers seek to change farmers’ agricultural practices, whether to sequester additional carbon or to improve climate resiliency. Farmers are often hesitant to adopt new practices as they often entail high upfront costs. Climate change programs therefore generally provide inputs or incentives for adopting and complying with the program’s objectives. Yet it is unclear how much farmers respond to inputs and incentives, and to which they respond more favorably. This study in Zambia assesses the impact of two programs, one that provides incentives to farmers to grow a nitrogen-fixing tree, and another that provides inputs. 

Policy Issue:

Financing for carbon offset investments is growing quickly. The voluntary market for carbon offsets traded over 700 million dollars worth of emissions reductions in 2008, a third of which came from land use projects.[1]  These investments have the potential to benefit smallholder farmers, not only by creating revenue from selling carbon credits, but also by incentivizing more climate-resilient agricultural practices and technologies to increase production. Many climate change programs that target smallholder farmers seek to modify current agricultural practices, whether to sequester additional carbon or to improve climate resiliency. Because these changes often impose costs on the farmer, many programs provide upfront inputs or incentives for adopting and complying with the program’s objectives.

However, in spite of a growing number of NGO- and government-led adaptation and climate resilience projects, farmer adoption remains a challenge and concerns persist due to the high cost of inputs, training and monitoring in comparison to the value of the credits earned from sequestered carbon. A more rigorous understanding of the relationship between input costs, compliance incentives and program outcomes may help improve the success and cost effectiveness of both carbon offsets and climate resiliency programs. To date, none of the numerous programs that offer landholders inputs or performance payments have systematically varied contract design to generate causal evidence on the determinants of program success.   This study proposes address this knowledge gap in the context of a program promoting fertilizer trees in Eastern Zambia.

The project implementation is designed to allow the researchers to investigate (a) the role of option value in shaping farmer decisions, and (b) the effect of cost sharing and performance incentives on selection into the project and on long-run performance under the contract.

Context:

The partner organization, Mitengo Zambia promotes a fertilizer tree (Faidherbia albida), locally known as the masangu tree, both for its carbon sequestration potential and its ability to help farmers adapt to a changing climate.  Faidherbia fixes nitrogen in its leaves, providing benefits to farmers, including better soil fertility, maize yields and resilience to climate change. To grow the tree, seedlings must be purchased and raised, and then planted among low growing crops, weeded and watered. These adoption costs are highest in the first year and tree survival is low.

Mitengo Zambia  has partnered with Dunavant Cotton to investigate the carbon sequestration and soil fertility potential of encouraging agroforestry adoption among Dunavant farmers. Findings from the research phase will be incorporated in program scale-up with Dunavant Zambia Limited, a leading cotton ginning company in Zambia.

Description of the Intervention:

Around 2,000 outgrower farmers associated with Dunavant cotton in Chipata, Eastern Province, Zambia receive training and subsidized inputs (seedlings) for growing Faidherbia on their land. Most Dunavant farmers produce on a small-scale, with a mean landholding size in the study sample of around one hectare, and have access to loans for cotton inputs from Dunavant.  The company organizes the farmers into groups of approximately 15 geographically clustered farmers. Each group has one lead farmer who, under the Dunavant system, is responsible for training his farmer group on cotton production and, under the Mitengo Zambia program, on Faidherbia planting and management.  

Lead farmers organize trainings on Faidherbia for their groups of farmers, which are attended by Mitengo Zambia and IPA staff who assist with administration of the treatments and the baseline survey.

After their training, farmers decide whether to join the program based on two factors:

(1) Variation in input prices – Farmer groups will be randomly assigned to receive one of four input prices that range from fully subsidized (free) to the cost-recovery price for the implementing organization (approximately $2.50 US). A transport allowance (of $2.50), provided to the farmers to remunerate any transportation costs of attending the lead farmer's training, ensures that farmers have enough cash to make a participation decision based on willingness to pay, not on liquidity constraints. Variation in input prices allows researchers to test hypotheses on risk and on cost-sharing. Specifically, how the probability of take-up changes as the input prices increase, controlling for individual characteristics and incentives, will be assessed.

(2) Variation in incentives – Individuals will be randomly assigned to receive different levels of incentive pay, which farmers are informed of either before or after making their take-up decision. The range of incentives is based on project pilots from the previous year, which ranged from $0 - $30 (0 - 150,000 ZMK). The use of scratch-off cards to reveal the incentives ensures that incentives cannot be manipulated and that the variation is perceived as fair by the participants.  Incentives will be paid after one year, conditional on 70% tree survival.  All farmers received 50 seedlings. The variation in incentives will allow researchers to test the causal effect of incentives, by comparing the probability of take-up and the rate of tree survival for farmers at different incentive levels, controlling for individual characteristics.

At the time of training, farmers receive a detailed baseline household questionnaire that includes modules on demographics, socioeconomic status, agriculture and environmental knowledge. The survey is administered to all farmers who attend the training, regardless of their decision to participate. One year after contracts are initiated, all participating farmers will be visited and the number of surviving trees recorded, an incentive payments delivered on the basis of tree survival.

Results:

Summary results forthcoming.

See more information including detailed findings from an in-country event with cross-sector stakeholders from the Zambian government, private sector, international donor and research community, and leading non-governmental organizations here.

 


[1]Conte, M. and M. Kotchen. Explaining the price of voluntary carbon offsets. Working Paper. (2009)

 

 

Evaluating the Integrated Agriculture Productivity Project in Bangladesh

Despite recent economic growth in Bangladesh, food insecurity remains widespread. Researchers evaluated the impact of an agricultural training program for farmer groups on technology adoption in rural Bangladesh, and investigated what drives adoption and who is affected by the training, both directly and indirectly.

Policy Issue:

In South Asia’s highly agrarian and populous countries, farm holdings are typically small and agriculture is characterized by intensive cultivation.1 Despite recent economic growth, 17 percent of the population was undernourished in 2011-2013, making the region home to the highest number of undernourished people in the world.2 Adoption of certain farming technologies, such as improved seeds, farm-yard manure, and integrated pest management, may enable farmers to produce more food and earn more income, yet many farmers have not adopted these technologies. This research contributes to our understanding of technology adoption in the region.

Context of the Evaluation:

Over the last two decades, Bangladesh has achieved impressive economic growth and poverty reduction. Its agricultural sector grew at a rate of 4.8 percent between 1990 and 2005. However, poverty-related food insecurity is widespread, bolstered by the soaring prices of key staples like rice, wheat, and legumes. The country has a poverty rate of over 30 percent and a highest incidence of malnutrition: in 2008, Bangladesh’s food insecure population was estimated at 65.3 million, or 45 percent of the population.3

The Government of Bangladesh is pushing for increased use of technology and more intensive agricultural practices to improve food security and sustain economic growth.  The government is implementing the Integrated Agriculture Productivity Project (IAPP) under the supervision of the World Bank and U.N. Food and Agriculture Organization, and with funding from the Global Agriculture and Food Security Program. The project aims to enhance the productivity of crops, livestock and fisheries. It is taking place among small-scale and marginal farmers in northern and southern districts of Bangladesh, which are characterized by high rates of poverty and food insecurity, and vulnerability to the negative effect of natural shocks, such as tidal surges in the south and flash floods and drought in the north.

Details of the Intervention:

Researchers are conducting a four-year randomized evaluation in 316 villages to study the impact of the IAPP’s livelihoods field schools (LFS) on technology adoption, and to investigate what factors drive adoption of new technologies. The LFS consists of groups of approximately 25 farmers who meet twice a month with extension agents. The aim of the school is to promote adoption of new seed varieties and improved production practices.

To evaluate the overall impact of IAPP activities on farmer livelihood and the effect of  LFS on technology adoption, in 2012 researchers randomly assigned 96 villages in six districts to either the treatment group, which participated in program activities immediately, or the comparison group, which received the program two years later. In treatment villages, one demonstration farmer was chosen for each type of technology introduced into the farmer group. This demonstration farmer received free seeds, fertilizer, and training. The selected farmer cultivated the promoted crop in the first year, and the rest of the group was expected to learn from his or her experience. In the second year, the rest of the farmers were encouraged to grow the crop. Farmers that adopted the technology in the second year received free seeds and some training sessions but no other inputs.

In addition, to test which demonstration plot approach produces the greatest increase in adoption within the farmers’ field school model, a randomized evaluation is being conducted in 220 villages in 2 districts. Villages have been randomly assigned to one of five treatment arms:

1.)   Regular demonstration plots (54 villages):These villages have the standard IAPP project activities beginning in the second year of the project  

2.)   Shared demonstration plots (56 villages):These villages also have the standard IAPP project activities beginning in the second year of the project. However, each demonstration package of seeds, fertilizer, and training have been shared by two to four group members having contiguous plots, as opposed to just one in the traditional/regular demonstration plot system.

3.)   Incentives for self-demonstration (54 villages):These villages also have the standard IAPP project activities beginning in the second year of the project. However, instead of demonstration plots, all farmer group members have been offered a chance to try out the new technology by themselves. The demonstration package was divided among all the farmers who were interested.

4.)   Short-term comparison (36 villages):These villages have the standard project activities beginning in the fourth year of the project. There was no project activity during the second and third year when the treatment villages were phased in for the “Demonstration Plot Evaluation” exercise.   

5.)   Long-term comparison (20 villages):These villages will have the standard project   activities in the fifth and final year of the project.

This study is evaluating the impact of the technology adoption program on the LFS members’ crop productivity, fisheries productivity, and livestock productivity. The study is also measuring the impact of IAPP on farmers’ overall income, income from agriculture, and food security in relation to farmers who did not receive the training. Furthermore, researchers are mapping the social networks within groups in order to understand how relationships affect technology adoption, evaluate any differences in how the program affects men and women, and conduct a cost-benefit analysis.

The evaluation is led by the World Bank’s Development Impact Evaluation Initiative and the South Asia Agricultural Development team, in collaboration with and external research partners, the Yale University School of Management and IPA Bangladesh.

Results and Policy Lessons:

Project ongoing, results forthcoming.

 


[1]U.N. Food and Agriculture Organization. “Food Security in South Asia.”

[2]U.N. Food and Agriculture Organization. “The State of Food Security in the World.” 2013

[3]U.N. Food and Agricultural Organization and World Food Program (WFP). “FAO/WFP Crop and Food Supply Assessment Mission to Bangladesh.” 2008.

Tracking Agricultural Households in Sierra Leone

Sierra Leone’s government made agriculture its top priority beginning in 2008, but policymakers lacked information about the status of the sector. In August 2009, the Government of Sierra Leone commissioned a large-scale survey to obtain accurate and credible agricultural data that could serve as a baseline for years to come.

Policy Issue:

Agriculture is the backbone of Sierra Leone’s economy. Agricultural production amounted to about 57 percent of Sierra Leone's GDP in 2011.1 In 2008, the Government of Sierra Leone made agriculture its top priority. Yet, policymakers lack information about the status of the sector, potentially inhibiting effective policy formulation, planning, implementation and performance evaluation. Therefore, in August 2009, the Government of Sierra Leone requested and supported an independent exercise, the Agricultural Household Tracking Survey (AHTS), to obtain accurate and credible agricultural data that could serve as a baseline for longitudinal analyses of Sierra Leone’s progress in agricultural development over the next several years. AHTS was commissioned and overseen by the Office of the President, and implemented collaboratively by the Ministry of Agriculture, Forestry, and Food Security, IPA/J-PAL.

[This project was not a randomized controlled trial.]

Details of the Intervention:

The main goal of the AHTS was to provide accurate and credible information about the agricultural sector in Sierra Leone from the household level. The AHTS was designed to capture decision-making by farmers, data on all aspects of cultivation from planting to harvest, and their access to services, technology, markets and infrastructure.

First, 920 areas were randomly selected out of 9,671 areas used in the 2004 census. Within each area, 10 agricultural households were selected to be interviewed. The total target sample size for the survey was 9,030 agricultural households. Twenty surveyor teams of five people collected data between March and May 2010. Field monitors, district coordinators, and ultimately, the AHTS technical team supervised the data collection.

Results and Policy Lessons:

The survey results confirm much existing knowledge about agriculture in Sierra Leone, for example, the national importance attached to rice and cassava, the concentration of cacao and coffee in the East of the country, and the existence of a seasonal hungry season. The results also point to various challenges faced by farming households. If these can be addressed, there is potential for large-scale improvements across the country. The results suggest that policy interventions in the agricultural sector should be intensified and expanded, particularly in the following areas:

  • Technology adoption:Levels of fertilizer use adoption of improved seed varieties were low, particularly for the main staples, rice and cassava;
  • Access to markets:Households' access to and interaction with markets remains low. For example, 92 percent of sampled households reported that their main point of sale for threshed rice was at farm gate (64 percent for clean rice). AHTS communities reported an average distance of 6.6 miles to the 
nearest market and 8.8 miles to the nearest permanent market.
  • Rural infrastructure:49 percent of farmers harvesting cereals stored their cereals in a room inhabited by the household; only 13 percent of households used a cement floor for drying. Out of 880 communities surveyed as part the AHTS community module, 25 percent reported a walking distance to the nearest road of more than 30 minutes during the dry season.
  • Financial access: The majority of farmers with existing loans borrowed on the informal market. Sixty-eight percent of households who did not borrow money said they had nobody to apply to for a loan.


[1] World Bank. “Sierra Leone at a Glance.”

 

Building Market Linkages for Smallholder Farmers in Uganda

Prices of staple foods like maize, beans, and rice vary substantially in Sub-Saharan Africa, depending on the season, country, and region. Addressing the imbalance in food supply and increasing farmer income may require a multi-pronged approach that tackles multiple barriers at once. Researchers will evaluate the impact of contract farming services and a mobile technology-enhanced trader alerts system on food markets across Uganda.

Policy Issue:

Prices of staple foods like maize, beans, and rice vary substantially in Sub-Saharan Africa, depending on the season, country, and region. Some countries face food shortages when there is ample supply in the country as a whole, and the same is often true on a regional level.1 The inability of markets to efficiently move food from surplus to deficit regions has a major effect on both farmer incomes and food security. Seasonally, farming families tend to sell when prices are low in the months following the harvest, and buy when prices are high in the months preceding the harvest. Within countries, some fertile and rainy regions experience a food surplus while other regions are chronically in crisis. This imbalance in food supply is often attributed to poor roads and infrastructure, as well as high transportation costs, but other factors likely hinder efficient market integration. Small-scale farmers often lack accurate or sufficient information about prices in other geographical areas, or any guarantee that they will be able to sell their goods elsewhere. Yet, research suggests that better information alone is not enough to persuade farmers to move their food surpluses to areas where there are deficits.2 Addressing the imbalance in food supply, and simultaneously increasing farmer income, may require a multi-pronged approach that tackles intermediation, information, and contracting barriers at once.

Context of the Evaluation:

A large portion of people in Uganda face food insecurity, though rates vary regionally. According to a 2013 report, almost half of Ugandans are food energy deficient.3 Over a third have low dietary diversity, but that number reaches 55 percent in the western region—a region also burdened with the highest rates of childhood stunting.     

AgriNet, Ltd. the main project implementer, is the largest private-sector market brokerage firm in Uganda. AgriNet signs contracts with major buyers and then organizes supply from farmers. The company also has a “trader alerts” system, which feeds basic market information to farmers to help them bulk and sell at higher prices than are available on spot markets.

Details of the Intervention:

Researchers will carry out a randomized evaluation in 230 markets in 110 sub-counties in northeast, western, and central Uganda. The aim is to evaluate the impact of AgriNet’s mobile technology-enhanced trader alerts system on farmers and intermediaries’ profits, intermediaries’ method of connecting with farmers, additional market linkages, and price dispersion. Three institutions—AgriNet, Kudu, and IPA—will collaborate to implement and evaluate the program. 

The study team will randomly assign half of the sub-counties to the treatment group and half to the comparison group. In each of the 130 markets in the treatment group, AgriNet will recruit, train, and certify four commission agents.These agents, recruited from a pool of local traders, will actively link farmers to large buyers and operate the enhanced trader alerts system. The amount of grain farmers have for sale will be uploaded onto the trader alert platform and broadcasted to potential buyers and vice versa. Kudu, the mobile application integrated in the trader alerts, will serve to electronically bulk the grain, allowing buyers to view what is available for purchase at the village-level. In addition, traders will send information on local market prices to Kudu via SMS. Kudu will post this information daily, enabling farmers to sell when prices are most favorable and to negotiate for the prevailing market price. 

In the 55 sub-counties that serve as a comparison group, AgriNet will not execute any activities for the duration of the study.

To evaluate the impact of the project, IPA will conduct three types of surveys—an initial survey of farmer households, a survey of traders, and a market price survey—in both treatment and comparison markets. The trader survey will track the revenue, income, volumes, crops, and locations of trading for five buyers in each studied market as well as for commission agents in the study.  The agricultural household survey will be administered to 11 households in each catchment area that are active in agricultural markets (i.e. not subsistence farmers) around study markets, for a total of 3,000 households.

In addition, the market price survey will measure the impact of the project on price dispersion. For each market, IPA will recruit two traders, who are aware of market prices, train them to use the SMS survey system, and pay them (with mobile phone credit) to answer a detailed market survey every two weeks.

Results and Policy Lessons:

Results forthcoming.

 


[1] Feed the Future, East Africa Regional Profile.

[2]Fafchamps, Marcel, and Bart Minten. "Impact of SMS-based agricultural information on Indian farmers." The World Bank Economic Review 26, no. 3 (2012): 383-414.

[3] World Food Program; Uganda Bureau of Statistics (UBOS). “Comprehensive Food Insecurity and Vulnerability Analysis, Uganda,” April 2013.

Paul Gertler

Improved Sorghum Technology Adoption in Burkina Faso

Despite the availability of new agricultural technologies, which may increase yields and household income, few sorghum farmers in the Sahel region of Sub-Saharan Africa are using improved seeds and fertilizer. This study evaluates if providing seeds, fertilizer and training to sorghum farmers on “microdosing” increases productivity, and aims to identify the factors that prevent farmers from adopting new technology both on the demand side and the supply side.

Policy Issue:

Agricultural output has accelerated in Sub-Saharan Africa the last two decades, but agricultural productivity in the region remains low, especially compared to other regions of the world.1 Greater use of inorganic fertilizer and improved seeds are widely considered necessary to ensure African farmers boost production and farm profitably, but adoption of these technologies has been slow in the region.2  Previous research indicates that farmers invest in fertilizer when provided with small, time-limited discounts just after harvest, when they have income. To contribute evidence on the mechanisms that help people save enough money to buy fertilizer and seeds, this evaluation replicates this influential fertilizer study in the West African context with a fertilizer and seed, as opposed to only fertilizer. This study also investigates if people are more likely to adopt the technology if they receive it free of charge and how knowledge passes from farmer via social networks.

Context of the Evaluation:

Sorghum is the main food staple and most widely cultivated dryland crop among rural people of the West African Sahel. Despite the potential to attain over two tons per hectare with improved varieties, average sorghum yields in Burkina Faso are estimated at less than half that much. In addition, adoption of sorghum agricultural technology is far less than it is for rice, maize or specialty crops. To explore the reasons behind low adoption, and identify ways to promote higher adoption, researchers at Michigan State University partnered with IPA and the following organizations: AGRODIA, an agricultural non-profit based in Burkina Faso, and INERA, the Environmental Institute for Agricultural Research in Burkina Faso.

Details of the Intervention:

Researchers are carrying out a randomized evaluation in 165 villages in northern rural areas of Burkina Faso to evaluate the impact on farmers of providing a “micro-pack” of seeds and fertilizer, along with training on fertilizer “microdosing,” a technique that involves the application of small, affordable quantities of fertilizer using a bottle cap. Researchers are measuring impacts on the sorghum farmers’ productivity, and identifying the factors that prevent farmers from adopting new technology. Villages were randomly selected to one of the following seven groups. Households were randomly-selected in Group 1 only.

1) Free distribution of the micro-pack to randomly-selected households. (15 households in 80 villages)

2) Free distribution of the micro-pack, with households selected based on the degree to which a farmer is connected to other farmers. (15 households in 16 villages)

3) Free distribution of the micro-pack, with households selected based on the degree to which a farmer influences other farmers. (15 households in 16 villages)

4) Early commitment input fairs and training: Farmers were offered fertilizer at the market price and free seeds right after the harvest. (all households, 12 villages)

5) Late commitment market price input fairs and training: Farmers were offered the micro-pack at the market price of fertilizer, with free seeds, just before the planting season. (all households, 12 villages)

6) Late commitment subsidy input fairs: Farmers were offered the micro-pack with a 20 percent subsidy on the market price of fertilizer. (all households,12 villages)

7) Comparison group (20 villages)

Groups 1-6 are offered training in addition to the micro-pack.

The study design enables researchers to determine if and to what degree the micro-pack improves farmers’ productivity; estimate potential gains from adoption of new sorghum technology; and to estimate if targeting based on social network characteristics, in this case more connected or influential farmers, increases diffusion of fertilizer micro-dosing. In addition, the study design will allow researchers to determine whether the price of products or simply lacking cash (before the planting season) plays more of a role in preventing farmers from buying improved seeds and fertilizer. Furthermore, this study will measure different effects on male and female farmers and measure the presence of secondary effects of technology adoption, namely changes in household composition and adult and child labor supply.

Results and Policy Lessons:

Results forthcoming.



[1]Fuglie, Keith, and Nicholas Rada. "Resources, Policies, and Agricultural Productivity in Sub-Saharan Africa." USDA-ERS Economic Research Report 145 (2013).

[2]Druilhe, Zoé, and Jesús Barreiro-Hurlé. "Fertilizer subsidies in sub-Saharan Africa." Food and Agriculture Organization of the United Nations (2012): 2. 

Andrew Dillon

Contractual Partnerships for Bean Growers in Central Uganda

Small-scale farming accounts for over 90 percent of agricultural output in Sub-Saharan Africa, and agricultural productivity on these farms is low, on average.  Contractually linking farmers to buyers may improve farmer profits and stimulate economic growth, but more evidence is needed on how these agreements impact farmers’ livelihoods and the crops they grow. This pilot evaluation with bean farmers in Uganda measures the impact of contracts between farmers and buyers on income, beans sold, inputs used, and a variety of other outcomes.

Note: This is a pilot study.

Policy Issue:

Small-scale farming characterizes agriculture in much of Sub-Saharan Africa. More than two-thirds of holdings are less than one hectare on average and these small plots produce over 90 percent of agricultural output.1 Agricultural productivity in Africa is, on average, low.2 Transitioning from low productivity, semi-subsistence agriculture to high productivity, commercialized agriculture has been a core theme of development. Since poverty is concentrated in rural areas among small-scale farmers, reducing overall poverty is thought to start with these farmers. Beyond increasing farm incomes, growth in agricultural productivity may also stimulate linkages to the rural economy outside the agricultural sector, causing further economic growth.3

Programs that contractually link farmers to buyers have become popular in the development sector, as such programs may reduce intermediaries and increase farmers’ profits. However, more evidence is needed regarding the impact of these contracts on farming practices and farmers’ livelihoods.

Context of the Evaluation:

In Uganda, agriculture employs 70 percent of the labor force and accounts for 20 percent of GDP, making it the backbone of the economy.4 Ninety two percent of the poor live in the countryside, and 89 percent of the population is classified as rural.5  In 2010, Uganda was ranked second in production of beans after Tanzania in the East Africa.

Myanzi Area Cooperative Enterprises, a partner in this evaluation, is a Uganda-based agricultural cooperative that works to create market linkages for rural producers, gather and disseminate market information, bulk agricultural products, and promote technology use to increase production, among other objectives.

Details of the Intervention:

This pilot study aims to determine how access to improved markets, by contractually linking bean farmers to bulk buyers, impacts farming practices. Data collection for the study will be accomplished through household surveys carried out before contracting and after the harvest.

The study includes 500 bean farmers in the Central Region of Uganda randomly assigned to a treatment group or control group. The treatment households will receive a visit from project staff encouraging them to sign up for the contract that links farmers to the bulk buyer.

If a large enough proportion of the households in the encouraged or treated group sign up for beans contract, the analysis will proceed by comparing income, beans sold, inputs used, and a variety of other outcomes, on the group that signs up for the contracts relative to the one that is not offered the contracts. Differences in outcomes across groups constitute unbiased estimates of the effect of the intervention on outcomes at “complying” households, i.e., households that were motivated to apply for the program by the encouragement.

 
Results and Policy Lessons:

Results forthcoming.



[1] International Food Policy Research Institute. “Ending Hunger in Africa: Prospects for theSmall Farmer.” p. 2

[2] International Center for Trade and Sustainable Development. “Raising agricultural productivity in Africa: The energy challenge.” May 1, 2008.

[3] Haggblade, Steven, Peter Hazell, and James Brown. "Farm-nonfarm linkages in rural Sub-Saharan Africa." World Development 17, no. 8 (1989): 1173-1201.

[4]Feed the Future. Uganda, country profile. http://www.feedthefuture.gov/country/uganda

Muthoni Ngatia

Hidden Information and Market Failures for Crop Insurance in the Philippines

Farmers across the developing world face risk from hazards such as weather, pests, and crop disease, but largely lack insurance to manage these risks. One reason for this lack of viable insurance products may be that farmers know their plots and risks better than insurers, and react accordingly. In the Philippines, researchers offered insurance on randomly assigned plots to farmers, and found that farmers preferred to insure the plots that faced more risk. Farmers also invested less in fertilizer for insured plots, and those plots suffered from more preventable (pests and crop disease) than natural (flood and typhoon) damage. The findings suggest that information that is unavailable (at least in part) to insurance providers – the susceptibility of agricultural plots to damage and farmers’ effort to prevent damages – may be a substantial barrier to the functioning of crop insurance markets. 
 
Policy Issue
Farming households in developing countries face enormous risks from natural hazards such as pests, droughts, and floods. Not only are these constant threats to farmer livelihoods, but they can limit farmers’ access to credit, and lower their investment into planting. Despite the prevalence of these risks, insurance markets have largely failed to emerge, potentially because of information problems in the markets. 
 
This study examined two possible causes for this failure, associated with information asymmetries, or hidden information, when farmers know more about their plots and investments than insurers. The first, adverse selection, can occur when farmers choose to buy insurance on plots that are most likely to suffer losses (e.g., low-lying, flood-prone plots), but the associated risk characteristics of these plots may be difficult for the insurance company to identify. The second, moral hazard, is a result of insured farmers applying less effort to taking care of their farm when aware that it is insured against certain risks. 
 
This study was designed to test for these possibilities by using randomization to offer partial insurance to groups of farmers, first eliciting their preferences for which plots to insure, then measuring if having insurance changed the level of investment into different plots. Understanding how these asymmetries affect farmer behavior may be a crucial part of developing functioning insurance markets for farmers in the developing world.
 
Context of the Evaluation
Rural poverty accounts for 80 percent of the Philippines’ overall poverty rate, and agricultural production remains a major source of livelihood for the rural poor. Recognizing vulnerability to risk as a major constraint to agricultural productivity and improved welfare, the Philippine government created the Philippine Crop Insurance Corporation (PCIC) in 1989 to provide a “multi-peril” crop insurance product for rice and corn farmers, designed to help ameliorate the consequences of the many agricultural risks posed by typhoons, floods, droughts, and various pests and crop diseases. In a country that is affected by about 19 typhoons in a typical year, the need for such insurance is especially pertinent. However, take-up remains low, and no private market for crop insurance has developed. 
 
The study took place in the Bicol region of the Philippines, situated among a “typhoon belt” where risks to agricultural production are particularly high. The research focused exclusively on rice cultivation, which is the major agricultural activity of the region. 
 
Details of the Intervention
Over three consecutive farming seasons (two dry seasons and one wet season), the research team invited farmers tilling at least two irrigated rice plots to participate in the study. Participants could then enter a lottery where there was about a 70 percent chance that at least one of their plots would receive free crop insurance for that season. To see if farmers preferred to have certain plots insured over others, before the randomization, the farmers were asked to rank their plots in order of priority to receive insurance. Each farmer’s first-choice plot was allowed a slightly higher chance of receiving free insurance to motivate them to rank plots in accordance with their actual preferences. Farmers were then entered into a lottery and randomly allocated to one of three groups:
 
Group A (66.5%; Full Randomization): Received insurance on a random half of their plots.
Group B (3.5%; Choice): Received insurance on a first-choice plot and a random half of remaining plots.
Group C (30%; Comparison group): Received no insurance. 
 
The product paid out per hectare of insured land in proportion to the share of harvest lost to specific causes. As most farmers had limited or no experience with crop insurance, a member of the research team explained the product and claims process in person while providing informational materials, including an explanatory comic strip. The research team also followed up with insured participants through in-house visits and text message reminders throughout each season. 
 
Independent surveyors conducted three surveys throughout each farming season: a baseline before the randomization, a follow-up survey after planting, and an endline survey after harvest. 
 
Results
Damages from preventable causes (i.e. pests and crop diseases) were higher on randomly insured plots by about 25% when compared to non-insured plots. In contrast, there was no difference in typhoon and flood damage across insured and non-insured plots of the same farmer. This difference suggests that farmers may respond to risk-mitigating insurance cover by reducing effort to prevent damages (i.e. moral hazard). 
 
The findings also suggest that farmers used less fertilizer on insured plots. Taken together, these findings suggest innovations in monitoring that limit moral hazard while keeping transaction costs low may be necessary for insuring against preventable kinds of losses.
 
Moreover, farmers preferred insurance on plots that were low-lying and prone to floods, characteristics that are mostly unobserved by the insurance company. The plots selected by the farmers to be prioritized for insurance coverage had 20% higher damages from flooding than other plots in their portfolios, suggesting the presence of adverse selection as farmers preferred to insure their more vulnerable plots. This finding suggests that insurance companies may need better assessment tools to help them identify risk characteristics (e.g. more precise altitudinal data to assess flood risk) and vary premiums based on this information. 
 
The identification of both moral hazard and adverse selection at work help explain why insurance markets have failed to develop and point the way to creating more viable products for farmers in the developing world.
 

The Impact of Contractual Partnerships on Small-Scale Rice Growers in Ghana

In Ghana, and in much of sub-Saharan Africa, a large portion of the extreme poor live in rural areas and work in agriculture. Higher productivity in the agricultural sector could reduce extreme poverty, while improving food security and economic growth. This study measures the impact of an “out-grower scheme,” a contractual partnership between growers and agribusiness companies, on small-scale rice growers’ productivity, income, and quality of life, and intra-household dynamics. This study aims to contribute to agricultural development policy in Ghana and beyond, as well as to the body of evidence on how to close the gender gap in productivity.

Policy Issue:

Low agricultural productivity in sub-Saharan Africa has led to increasing food imports and the loss of competitiveness for domestic producers. Spending on agricultural research and extension in Africa, especially regional research, remains low, and links between farmers and agribusiness are weak.[i] Agriculture and rural development have been identified as priorities for reaching the Millennium Development Goals,and regional bodies have formulated agriculture development plans that prioritize sustainable land and water management, access to markets, and the reduction of hunger. Individual countries, such as Ghana, have also implemented programs to address these issues. Additionally, while almost half of the agricultural workers in Africa are women, productivity on their farms is significantly lower per hectare compared to men. [ii] Addressing the agriculture gender gap will help drive economic growth across Africa, but more evidence is needed on how best to do this. This study   evaluates a farm “out-grower scheme,” a contract between farmers and agribusiness companies with potential benefits to both parties. Evidence from the study aims to contribute to Ghana’s agricultural development program, and to similar programs in other parts of Africa and beyond.

 
Context of the Evaluation:

As part of Ghana’s strategy to increase food security and agricultural development, it has launched the Ghana Commercial Agriculture Project (GCAP). The program, which is funded by the World Bank and USAID, aims to promote agricultural productivity and livelihoods, specifically by linking small farmers into the agricultural value chain through encouraging large-scale commercial agricultural firms to establish outgrower schemes.[iii]  The study partner, a commercial rice producer, GADCO, is offering contracts to small-scale rice producers in the Accra Plains area. IPA and the World Bank are collaborating to evaluate the impact of the contracts on productivity, income, and general quality of life of the rice growers.

Thirty percent of the plot cultivators in this study are female. Of these, half are in male-headed households, and half are in female-headed households. And many of the rice plots being farmed in this study were distributed by the Government of Ghana to individuals who signed up for them, as part of the development of the Kpong and Weta Irrigation Schemes.

 
Details of the Intervention:

The study looks at the impact of the contracts, or out-grower schemes, on plot cultivators. Researchers will compare plot-cultivators who participate in the out-grower scheme to a comparison group of growers who do not participate.

Following completion of the baseline survey, 50 percent of the study sample farmers will be assigned to participate in the scheme, and 50 percent will be assigned to a comparison group that will not participate. The commercial rice producer will then offer contracts to farmers in the treatment group. A farmer who signs the contract receives inputs on credit for planting, fertilizer application, and crop protection as well as extension advisory services and mechanized harvesting. On harvesting the rice, GADCO buys the output, accounts for input costs, and then pays the farmer the difference between the value of output and input cost.

This evaluation will look at the impact of the contracts on farmers’ productivity, quality of life and intra-household gender dynamics. Researchers will measure, for example, crop production, yield, profits, sale price, extension, technology adoption, hired and family labor use, and market access. With regard to impact on the household, researchers will look at indicators such as labor and time use, employment, business activities, assets and household investments in education and health. In addition, the study will assess the impacts on male versus female farmers.

 
Results and Policy Lessons:

Results forthcoming.

 


[i] "Agricultural Development in West Africa: Improving Productivity through Research and Extension."World Bank, 2013. Available at: http://www.worldbank.org/en/results/2013/03/28/agriculture-development-in-west-africa-improving-productivity-through-research-and-extension

[ii] “Levelling the Field: Improving Opportunities for Women Farmers in Africa.” World Bank and One Campaign, 2014. Available at: http://www.worldbank.org/en/region/afr/publication/levelling-the-field-improving-opportunities-for-women-farmers-in-africa

[iii] "World Bank Approves $100 Million for Scaling Up Commercial Agriculture."  World Bank, 2012. Available at: http://www.worldbank.org/en/news/press-release/2012/03/22/world-bank-approves-us100-million-for-scaling-up-commercial-agriculture-in-ghana

Understanding Technology Adoption: Fertilizer in Kenya

Why do so few people use fertilizer even though it can considerably improve yields? This project measures the increase in yield due to fertilizer and hybrid seed use in Western Kenya. It found that fertilizer is profitable, and providing information goes part of the way towards increasing fertilizer adoption. Programs that help farmers commit when they have money to use fertilizer in the future have a very large impact on fertilizer adoption. 

Policy Issue:

By some estimates, approximately 1.4 billion people lived on less than $1.25 a day in 2005, and many of the poor are farmers. Identifying ways to increase agricultural incomes is crucial to alleviating poverty. Such strategies are especially important in sub-Saharan Africa, a region that has suffered decades of decline in per capita food production.

Context of the Evaluation: 

An estimated 50 percent of the population of Kenya’s Western Province lived below the poverty line around the time of this study, which often means they are unable to afford enough food to meet their basic calorie requirements as well as their non-food needs.The majority of Kenyan subsistence farmers grow maize as their staple crop, but many have only small amounts of land and are actually net buyers of maize, purchasing it when their own supply runs out immediately before a harvest. In such an environment, improving agricultural productivity could substantially benefit the farmers’ livelihoods. A potentially important input into increasing productivity is chemical fertilizer. Numerous agricultural trials on experimental farms suggest substantial returns to fertilizer, and improved fertilizer use has been associated with the increase in agricultural incomes during the Green Revolution in South Asia. However, only 37 percent of sampled farmers in the Busia district of Western Kenya report ever having used fertilizer. 

The overall goal of this research program is to understand why farmers do not invest in fertilizer. This part of the project first investigates whether the returns to fertilizer are actually substantial on real-world farms in real conditions.

Details of the Intervention:

In collaboration with International Child Support (ICS), an NGO, researchers set out to experimentally measure the returns to fertilizer amont area farmers. Farmers were selected from lists of parents at local schools, and ICS paid for fertilizer and hybrid seeds, delivered materials, helped these farmers apply fertilizer and seeds, and assisted them with the harvest. On each farm, a comparison plot was kept directly next to treatment plots, which was farmed using traditional methods. The type of seed and amount of fertilizer applied to each plant was varied by plot (see below), but farmers were instructed to tend all plots exactly the same.

Group

Fertilizer/Seed
Combination

Time of Application

# of Plots

A

¼ tsp Calcium Ammonium Nitrate

2 months after planting

112

B

½ tsp Calcium Ammonium Nitrate

2 months after planting

202

C

1 tsp Calcium Ammonium Nitrate

2 months after planting

274

D

Hybrid Seeds

1 tsp Di-Ammonium Phosphate

1 tsp Calcium Ammonium Nitrate

(the “full package” recommended by the Kenyan Ministry of
Agriculture)

At planting

At planting

2 months after planting

85

 

Results and Policy Lessons:

Impact on Crop Yield: All fertilizer treatments led to increases in yield, though in different amounts. Interventions A, B, and C led to yield increases of 28 percent, 48 percent and 63 percent respectively, relative to comparison plots. Intervention D, the Ministry of Agriculture recommended package, led to an average 91 percent increase in yield relative to comparison plots. These increases in yield are generally consistent with the results obtained in experimental farm trials.

Rates of Return:  Rate-of-return calculations suggest that Intervention B is highly profitable, with mean returns of 36 percent over a season and 69.5 percent annualized. Implementing Intervention B on a 0.93 acre area of maize cultivation (the average acreage under maize cultivation in this sample) would increase agricultural income net of fertilizer cost by about 1,100 Kenyan shillings (US$33 PPP) compared to traditional methods—this represents a 15 percent increase in net income and more than a month’s agricultural wages. This evidence demonstrates that fertilizer use can have substantial returns, even in the absence of any changes in other farming practices, on real-world farms. However, other levels of fertilizer use, including the official recommendations of the Ministry of Agriculture, are unprofitable for the average farmer in this sample. Thus, while fertilizer can be very profitable when used correctly, one reason why farmers may not use fertilizer is that the official recommendations are not adapted to their specific context. This also suggests that fertilizer is not necessarily easy to use correctly, and may not be profitable for many farmers who do not use the right quantity.

 

1 Shahua Chen and Martin Ravallion (2008). “The Developing World Is Poorer Than We Thought, But No Less Successful in the Fight against Poverty,” World Bank Policy Research Working Paper #4703.
2 National Coordinating Agency for Population and Development (NCAPD) [Kenya], Ministry of Health (MOH), Central Bureau of Statistics (CBS), ORC Macro. 2005. “Kenya Service Provision Assessment Survey 2004”. Nairobi, Kenya: National Coordinating Agency for Population and Development.

Selected Media Coverage:

The Impact of Food and Cash Loans on Smallholder Farmers in Zambia

Many farming households turn to off-farm work to make ends meet between harvests, reducing the amount of time they can invest in increasing their farms’ productivity. In ongoing work in Zambia, researchers are testing the relationship between scarcity, labor supply and agricultural productivity. Selected farmers receive access to either cash or food loans during they lean season that they are responsible for repaying at harvest. Researchers will track a variety of outcomes including yields, labor supply, food consumption and how impacts vary within the household and by loan type. In a pilot, already completed, food loans were shown to increase food consumption during the lean season, reduce the portion of households engaging in off-farm work, and increase wages. In the pilot, both take up and repayment rates were over 90 percent and results clearly established the relevance of hunger as a driver of labor supply decisions. 

Policy Issue:
Many farming households turn to casual day labor, typically on other better-off farms, to make ends meet between harvests, which often means that farmers do not have time to invest in  their own land. If farmers neglect on-farm activities that are important for production, such as weeding or application of fertilizer, then off-farm work can result in lower yields on farmers’ own fields. With a poor harvest, families are less able to set aside resources to last through the next season, increasing their reliance on off-farm work. Providing credit, either in the form of food or in cash, could allow farmers to spend more time on their farms. Farmers would not be forced to find off-farm income to feed their families between harvests, and would therefore be able to spend additional time applying fertilizer, weeding, or harvesting the crop, which would increase yields. In the long run, this gain in productivity might increase incomes by more than farmers could earn through casual labor. Although existing research looks at the impact of agricultural loans on crop productivity, this is one of the first studies to look at the impact of credit on how farmers allocate labor.
 
Context of the Evaluation:
Small-scale farming is the primary source of income in rural Zambia, and 72 percent of the work force is employed in agriculture. Most farmers are poor, and in Chipata District, where this evaluation takes place, the average income is less than US$500 per year for a household of six people. Sixty-three percent of households in rural Chipata are classified as “very poor” and almost all households lack electricity and piped water.
 
Zambia’s long dry season allows for only one harvest per year, which means that the harvest must generate income to last the entire year. Payments for input loans and other debts are often due at the time of the harvest, exacerbating the difficulty of setting aside resources for the next year. As a result, many households turn to off-farm, casual labor during the hungry season (January to March) to cope with short-term financial needs. In the study sample, 60 percent of young men reported engaging in casual labor during the previous season.
 
 
Description of Intervention:
Researchers are testing the effects of food and cash loans on labor supply and agricultural productivity. They have completed a preliminary, pilot study to establish the relationship between food shortages and labor supply. A larger study is ongoing.
 
Pilot study: In the pilot study, researchers tested the effect of  food loans on farming households’ food consumption, casual labor supply, and wages. The loan program offered households one 25-kilogram of ground maize flour per month during the lean season (January to March). Farmers were expected to repay the loan at harvest (in June) with three 50-kilogram bags of unground maize. Each bag of ground maize was worth about 45 Zambian kwacha (US$9) and each bag of unground maize was worth 50-65 kwacha (US$10-13), resulting in an interest rate of 11-44 percent over the loan period.
 
Researchers evaluated the loan program in 40 rural villages, each within a day’s drive of Chipata town and with 15-25 small-scale farmers. In 10 villages, all eligible households (those with 1-5 hectares of land) were offered the loan (“full treatment villages”). In 20 villages, households that expressed interest in the loan entered a lottery, through which half were selected for the loan program (“partial treatment villages”). Ten additional villages served as the comparison group and did not receive loans.
 
Households that took up the loan could pick up the maize flour at one of ten distribution centers in January, February, and March. To repay the loan, households brought maize for repayment to a central point in each village in June.
 
Full study: Over the next two planting seasons, researchers will compare the in-kind maize loans with cash loans and test the impact on farmers’ labor allocation and crop yields. As in the pilot study, loans will be disbursed in January and repayment will be due in June. Regardless of loan type, borrowers will be able to repay with either maize or cash. In order to measure how the effect of receiving loans persists over time, some villages will not receive loans during the second year of the full study.
 
Results and Policy Lessons:              
Pilot study: There was high take-up of the loans, and villages where loans were offered saw an increase in food consumption, a decline in the number of households engaging in casual day labor, and an increase in wages for those who did engage in casual labor. The impacts were larger in villages where all eligible households could take out a loan.
 
Take-up and repayment: In full treatment villages, 90 out of 104 eligible households (87 percent) took out a loan. In partial treatment villages, all 104 households that were offered the loan program took out a loan. Ninety-eight percent of borrowers in full treatment villages and 95 percent in partial treatment villages repaid their loans in full.
 
Food consumption:In full treatment villages, the probability of missing a meal in the previous week was 16.5 percentage points lower than in comparison villages, where 36 percent reported that a family member had to miss a meal. In addition, the number of meals eaten in the previous 24 hours increased by0.2, from a base of 1.7 meals in comparison villages. The loans had no significant effect on the probability of missing a meal or the number of meals eaten in partial treatment villages.
 
Labor supply and wages: The share of households working in casual labor declined in both full and partial treatment villages. In comparison villages, 60 percent of households engaged in casual labor during the agricultural season, but this figure was 9 and 8 percentage points lower in full and partial treatment villages, respectively. Wages also increased in villages where lean season casual labor fell.
 
Full study: The study is ongoing. Results are forthcoming.
 

Ex-combatant Reintegration in Liberia

For post-conflict societies, the challenges of reintegrating ex-combatants and war-affected youth are likely to far outlast and outsize the formal demobilization, disarmament and reintegration (DDR) of ex-combatants. These programs, conducted in war’s immediate aftermath, form an important part of a policymaker’s post-conflict toolkit. While ex-combatants receive special policy attention, poor and underemployed men are also widely considered a threat to political stability.

Find a more in-depth policy report here. 

Context of the Evaluation:

In Liberia, where the bulk of the population is young, poor, and underemployed, many rural youth continue to make their living through unlawful activities, including unlicensed mining, rubber tapping, or logging. Many of them are ex-combatants, and some remain in loose armed group structures, doing the bidding of their wartime commanders. While the security situation has steadily improved since 2003, the government, the UN, and NGOs fear that these youth are a possible source of instability, particularly in hotspot regions where mining, rubber tapping, or logging and the allure of “fast money” attract young men from around the country. These youth may also be recruited into regional conflicts as mercenaries. Agriculture is and will continue to be a major source of employment and income for rural Liberians. The international NGO Landmine Action (LMA, now known as Action on Armed Violence) runs an innovative and intensive agricultural training program, targeting ex-combatants and other high-risk youth in rural hotspots.

Description of the Intervention:

The LMA program is broader and more intensive than most ex-combatant reintegration programs, and is designed to rectify some of the main failings of prior demobilization programs: it is oriented towards agriculture (the largest source of employment in Liberia); it provides both human and physical capital; and it integrates economic with psychosocial assistance. It also targets youth at natural resource hotspots that presented the most immediate security concerns.

LMA took youth selected for the program to residential agricultural training campuses, where they received 3-4 months of coursework and practical training in agriculture, basic literacy and numeracy training, psychosocial counseling; along with meals, clothing, basic medical care, and personal items. After the training, counselors facilitated graduates' re-entry with access to land in any community of their choice.  Graduates received a package of agricultural tools and supplies, valued at approximately US$200. The program's total cost is approximately $1,250 per youth, excluding the cost of constructing the campuses. The program was designed to give youth a sustainable and legal alternative to illegal resource extraction, ease their reintegration into society, reduce the risk of re-recruitment into crime and insurrection in the future, and to improve security in hotspot communities.

LMA recruited twice as many youth as it had space for in its programs, and researchers randomly assigned half of the youth to treatment (receiving the program), and half to a comparison group (not receiving the program). By comparing these two groups 18 months after the program, researchers can see the effect of the intervention on agricultural livelihoods, shifts from illicit to legal employment, poverty, social integration, aggression, and potential for future instability.  Despite massive migration, 93% of the youth were found at the time of the endline survey. The qualitative study included observation and a series of interviews with 50 of the youth.

Results and Policy Lessons:

Engagement in agriculture: More than a year after completion of the program, program participants are at least a quarter more likely than the control group to be engaged in agriculture, and 37% more likely to have sold crops. Interest in and positive attitudes toward farming are also significantly higher among program participants. 

Illicit activities:The program had little impact on rates of participation in illicit activities like mining, but those who participated in the program do spend fewer hours engaged in illicit activities, as agricultural hours seem to substitute somewhat for hours spent in illicit activities.

Income, expenditures, and wealth:  There was a sizable increase in average wealth from the program, especially in household durable assets, but no change in current income (last week and last month), savings or spending for the average program participant. Overall, the evidence suggests that cash cropping provides periodic windfalls from sales, and that these are mainly invested in durable assets (and not necessarily in agricultural inputs or equipment).  Qualitative observations also suggest that access to markets may have been an important constraint on success.

Social engagement, citizenship, and stability:  There were small but positive improvements across most measures of social engagement, citizenship, and stability. While not all of the estimated impacts are large enough to be statistically significant, they nevertheless suggest a small but broad-based reduction in alienation and some gains in stability. The evidence on aggression and crime, however, does not point to a significant reduction in illegal or aggressive behaviors among program participants.

Interest and mobilization into the election violence in Cote d’Ivoire:Conflict broke out in Cote d’Ivoire shortly before the launch of the program evaluation.  Self reported rates of interest in the violence and mobilization were fairly low among the sample population, but they were especially low among program participants – they tended to report a third less interest in or links to recruiters and recruitment activities. Given the difficulty of shifting such behaviors, these impacts of the program are regarded as extremely promising.

For a policy memo with detailed results, as well as recommendations for reintegration, livelihoods, and poverty alleviation programs in Liberia, please see here.

Savings, Subsidies and Sustainable Food Security in Mozambique

When smallholder farmers see how fertilizer increases their yields, they may continue using it. In this study in Mozambique, where very few farmers use agricultural inputs, researchers evaluate if giving farmers fertilizer subsidies encourages them to continue using fertilizer when subsidies run out. This study also measures the impact of coupling the subsidies with different types of savings accounts. Do subsidies, savings accounts, a combination of both, or none of the above, lead farmers to invest in their farms, grow more food, and earn more income?

Policy Issue:

Motivated by the recent escalation in food prices around the world, several countries, including Kenya, Malawi, Rwanda, and Zambia, have implemented large-scale fertilizer subsidy programs to boost food security and small farm productivity. If people are unaware of the benefits of using fertilizer, or do not know how to use it, then subsidies may be a useful tool to give people experience with using fertilizer, and promote adoption. However, a long-standing question is whether one-time or temporary provision of subsidized fertilizer can get households to adopt it long-term, or whether input use and farm production eventually return to previous levels after subsidies are phased out. The key to determining whether provision of subsidies can lead to long-term growth, even after the subsidies are no longer in effect, is to discover if farmer practices change fundamentally, or whether these practices change only (if at all) when subsidies are being offered.

Context:

Large-scale emigration, economic dependence on South Africa, and a prolonged civil war hindered Mozambique’s development until the mid 1990s. Agriculture accounts for almost 29 percent of the country’s GDP, however agricultural technology adoption has been slow in Mozambique compared to other counties in the region. Most of the farmers interviewed for this study had little or no experience with application of chemical fertilizers and other agro-chemical inputs.

Description of Intervention:

Researchers are investigating the impacts of fertilizer subsidies on smallholder farmers in rural Mozambique, and in particular, whether providing farmers opportunities for savings accounts can help subsidies achieve a greater sustainable impact. Vouchers for fertilizer were distributed randomly to a sample of farmers. In partnership with Banco Oportunidade de Moçambique (BOM), researchers also randomized offers of one of several different savings accounts interventions, to see how the subsidies and savings accounts complemented one another.

The sample comprises farmers with access to some type of agricultural extension service, either through an NGO or government entity, so that they have access to information on how to use fertilizer if they choose to use it. Researchers worked with two sub-groups of farmers. The voucher randomization (VR) sample is comprised of farmers randomly distributed (or not distributed) vouchers for fertilizer. The VR sample enabled researchers to examine the interaction between voucher receipt and savings incentives.

Treatment Groups:

 

No savings offered

Offered regular interest rates

Offered individual savings with 50% match

Offered group savings with match

Received voucher for fertilizer

Treatment Y-0

Treatment Y-1

Treatment Y-2

Treatment Y-3

Did not receive voucher for fertilizer

Treatment N-0

Treatment N-1

Treatment N-2

Treatment N-3

As shown in the table, the VR sample consists of three treatment groups which received different combinations of interventions, and a comparison group which did not receive an intervention. In treatment group one, farmers were offered a savings account with standard BOM interest rate. Treatment group two was offered “matched savings” accounts, where farmer received matched funds equal to 50 percent of his or her average savings balance (up to 3,000 MZN, or US$112) during a defined match period. (The match rate is the percentage of the average balance in the account that is contributed by the project at the end of the match period, not an annual percentage rate.) In treatment group three, farmers were offered a savings match with a group incentive, where the match rate rises or falls in accordance to the average account balance of the entire group. Farmers are not required to use the match for fertilizer, yet the match amount does allow each farmer to afford the inputs provided in the fertilizer package, which many farmers could not afford otherwise.

During meetings with farmer groups, project staff discussed the importance of savings and keeping part of one’s harvest proceeds for fertilizer and other agricultural inputs for the next season. Farmers were also given specific instructions about using the fertilizer package for maize, and information on BOM savings services and locations. After farmers completed the baseline survey, savings accounts were offered, and project staff assisted interested farmers in filling out the forms to open an account. Farmers then could make their initial deposit at a BOM branch or a Bancomovil, a mobile bank that services many of the sites.

During follow-up surveys planned for 2012 and 2013, researchers will collect data on per-capita income and expenditures, maize yields and use of seed varieties and fertilizers, and the creation and use of savings accounts.

Results:

Results forthcoming.

For more on Michael Carter's research, click here.

Insurance, Credit, and Technology Adoption in Malawi

Poor subsistence farmers often see adoption of new technologies, such as hybrid seeds, as risky because they fear the up-front investment will not pay off and they could be worse off, particularly in the case of drought. Yet new technologies can help farmers produce more food. So what happens if the risk of trying a new technology is removed? Few studies have evaluated whether providing insurance can increase the adoption of profitable agricultural technologies. In this study, researchers examined whether bundling rainfall insurance with a credit program–intended to finance adoption of a new crop technology—increase demand for credit.

Policy Issue:

The classic economic view of poor farmers is that their lack of a savings cushion causes them to prefer agricultural approaches with more reliable, but lower average returns. Farmers may see adoption of new technologies as risky, especially early in the adoption process when proper use and average yields are not well understood. Weather and environmental factors can also pose significant risks. Risk and uncertainty can lead to low levels of technology adoption, particularly where resources to help farmers deal with risk, such as insurance, are not available. However, few studies have evaluated whether providing insurance can increase adoption of profitable agricultural technologies.

Context of the Evaluation:

Nearly all Malawian households (97 percent in 2004-2005) are engaged in maize production, but only 58 percent use hybrid maize varieties. Hybrid maize adoption in Malawi has lagged behind adoption in Kenya, Zambia, and Zimbabwe. Aversion to risk, credit constraints and limited access to information are among the most cited reasons why hybrid seeds and other technologies have failed to take hold in Malawi. Within Malawi, varying rainfall risk is by far the dominant source of production risk, followed by pests.

Description of Intervention:

Researchers conducted a randomized evaluation in the field to determine whether bundling rainfall insurance with a credit program (intended to finance adoption of a new crop technology) increased demand for credit. Researchers randomly selected 16 localities in central Malawi where farmers were offered credit to purchase high-yielding hybrid maize and groundnut seeds for planting in the November 2006 crop season. In another 16 localities, farmers were offered a similar credit package, but if taking the loan were also required to purchase (at actuarially fair rates) a weather insurance policy that partially or fully forgave the loan in the event of poor rainfall.

The microfinance institutions Opportunity International Bank of Malawi (OIBM) and Malawi Rural Finance Corporation (MRFC) offered loans for the hybrid seeds based on group liability contracts for clubs of 10-20 farmers. Take-up of the loan was an individual decision, but the subset of farmers who took up the loan were told that they were jointly liable for each others’ loans.

The weather insurance policy was customized to each of the four project regions (Lilongwe North, Kasungu, Nkhotakota, and Mchinji). Payouts were based on the rainfall readings at the closest weather station to the individual in question, and premiums were lower in places where the likelihood of a bad rainfall shock was lower. Compared with the annual interest for the uninsured loan (27.5 percent), a farmer taking out an insured groundnut loan faced an effective interest rate ranging from 37.8 percent to 44.4 percent, depending on the area.

All farmers in the study were administered a household survey that covered income, education, assets, income-generating activities (including detailed information on crop production and crop choice), measures of risk aversion, and knowledge about financial products such as credit and insurance.

Results and Policy Lessons:

Loan Take-Up:Take-up was 33 percent among farmers who were offered the basic loan without insurance. Take up was lower, at only 17.6 percent, among farmers whose loans were insured against poor rainfall. A potential explanation is that farmers already were implicitly insured by the limited liability inherent in the loan contract, so that bundling a loan with formal insurance (for which an insurance premium is charged) is effectively an increase in the interest rate on the loan.

It is also possible that farmers may have been uncertain about the risks associated with the hybrid seeds. For those in the treatment group, the fact that they were offered insurance may have served as a signal that the seeds were a risky investment. Lower take-up of the credit plus insurance product would then be a rational response.

Analysis indicates that farmers who are wealthier and more educated were more likely to take up the insured loan. By contrast, there is no indication that farmer education, income, or wealth is related with loan take-up in the uninsured loan group.

Xavier Giné, Dean Yang

Promoting Sustainable Farming Practices in Malawi

Policy Issue:

Low productivity in agriculture is a pressing challenge in the developing world.  The compound effects of farming with mechanized soil tillage, climate change, and increasing urbanization are adversely affecting the long-term productivity of soil worldwide.  As a result, crop yields in developing countries are often many times lower than those that could be achieved using readily available technologies and farming techniques. Improving food security and agricultural incomes therefore depends on farmer adoption of these tools and techniques. A critical determinant of new technology adoption is the learning process through which information on these techniques is disseminated, understood, and applied. Although the importance of information flow through existing village and social networks in developing countries is well-documented, to what extent these networks can be used to disseminate new information from public sources—such as agricultural extension officers—remains unclear.

Context:

A lush climate and rich soil make Malawi well suited for agriculture, which is central to the country's economy and national life, making up 36 percent of its GDP[1] and occupying more than 80 percent of its workforce.[2] Tobacco is the leading export crop, followed by tea, sugar and cotton. The staple food crops are maize, cassava and millet, grown by smallholder farmers mostly at the subsistence level. Most rural families have too little land to produce sufficient food and too little income to buy extra. According to some reports, a quarter of the population runs out of food only five months after the harvest.[3]

Description of the Intervention:

Researchers investigate how new information on agricultural technology from outside sources, such as government-employed agricultural extension agents, is transferred through existing village and social networks. Understanding how gender and relationships affect communication between extension officers and farmers, as well as between farmers is crucial to designing effective information-based interventions to promote technology adoption. Both the technologies and methods for disseminating information are evaluated in the context of the Malawi Agricultural Development Programme Support Project (ADP-SP). This project is intended to support the efforts of the Malawi Ministry of Agriculture to achieve sustainable productivity growth in smallholder maize production systems.

Each village assigned to receive the intervention will be randomly assigned a dissemination method as well as a farming technique that is to be promoted. The two techniques for dissemination are:

(1)   Fertilizer Nutrient Management (FNM), which includes the use of efficient combinations, timing, and spatial concentration of fertilizer application and results in short-run increases in land productivity.

(2)   Conservation Agriculture (CA), which includes pit planting, minimal tillage, and mulching. CA is associated with long-run returns, as CA practices increase the biodiversity of farm ecosystems, allowing non-chemical organisms to take a role in soil maintenance.

The randomly varied dissemination methods are:

(1)   Extension officers, working through their existing channels and provided with incentives based on the adoption of the techniques in their areas.

(2)   Extension officers collaborating with lead farmers in each village, whom they select in consultation with the community. Lead farmers will be provided with incentives based on the adoption of the techniques in their villages.

(3)   Extension officers collaborating with peer farmers, selected through focus groups in each village and representing average farmers spatially dispersed throughout the village. Peer farmers will receive incentives based on adoption in their neighborhoods.

Across all three types of dissemination methods, incentives were sometimes randomly assigned to the communicators.  In the lead and peer farmer villages, the gender composition of the message sender will be varied. The random variation in the technology promotion agent and in the technique being promoted will allow researchers to determine the potentially differing outcomes of various components of information dissemination programs.

Results:

Results forthcoming.


[1] US Department of State, Bureau of African Affairs. “Background Note: Malawi.” January 11, 2011

[2] World Vision. “Country Profile: Malawi.” http://worldvision.com.au/Libraries/3_1_2_Country_Profiles_-_Africa/Malawi.sflb.ashx

[3] ibid

Making Networks Work for Policy: Evidence from Agricultural Technology Adoption in Malawi

In Malawi, most of the population works in agriculture and many people grow just enough food to survive, sometimes less. Agricultural technology can enable farmers to grow more food, but questions remain about how to get farmers to adopt new technologies and more efficient farming methods. Researchers in this study examine if certain established social networks can break down information barriers and increase adoption of new agricultural technology in Malawi. 

Policy Issue

Crop yields in developing countries are often many times lower than those that could be achieved using readily available technologies and farming techniques, and food security can be a serious problem. Agricultural incomes and food security can depend on farmer adoption of these tools and techniques. Despite a long-standing awareness that adoption of agricultural technologies is low, and that information on using new technology can flow through social networks, there has been little research on how best to harness social networks to promote technology adoption.<--break->

Context of the Evaluation

Agriculture is central to Malawi’s economy and national life, comprising 36% of its GDP1 and occupying more than 80% of its workforce2. Tobacco is the leading export crop, followed by tea, sugar and cotton. The staple food crops are maize, cassava and millet, grown by smallholder farmers mostly at the subsistence level. Most rural families have too little land to produce sufficient food and too little income to buy extra. According to some reports, a quarter of the population runs out of food only five months after the harvest.

Details of the Intervention

This study is a follow-up to Promoting Sustainable Farming Practices in Malawi. In partnership with the Malawi Ministry of Agriculture and Food Security, researchers investigated how social networks can be used to overcome information barriers that may prevent farmers from adopting profitable technologies. The project will promote pit planting, a method of planting that has been shown to increase agricultural productivity in many regions of Africa. Malawi has a widespread system of agricultural extension workers  to spread information about agricultural methods and technologies. In this evaluation, well-connected “seed” farmers are partnered with agricultural extension workers to promote adoption of the pit planting technology.

Using a social network census, researchers identified individuals in the community who would be the most effective “seed” farmers based on their positions in their village networks. Which farmers are optimal depends on how much exposure to information is needed to motivate adoption. Villages are randomly divided into one of several treatment groups, with comparison villages receiving the existing extension practices in Malawi.

The first treatment group (“simple contagion”) will utilize four “seed” farmers from within the village, who have the greatest number of social contacts. The second group (“complex contagion”) will select “seed” farmers based on connections to other “seed” farmers. A third treatment group will use geographic location within the village to proxy the social network and mimic the “complex contagion group”, assuming that the network is perfectly correlated with geography. Comparisons of treatment and comparison villages will estimate the potential of social networks to enhance technology adoption, and whether extension efforts need to allow for multiple information sources.

Results and Policy Lessons

Results forthcoming.

1 US Department of State, Bureau of African Affairs. “Background Note: Malawi.” January 11, 2011
2 World Vision. “Country Profile: Malawi.”http://worldvision.com.au/Libraries/3_1_2_Country_Profiles_-_Africa/Mala...

Technology Adoption and Diffusion through Social Networks – Evidence from a Coffee Training Program in Rwanda

Policy Issue:

In sub-Saharan Africa, a significant proportion of the poor are small-scale farmers with productivity levels among the lowest in the world. Agronomic practices, such as the correct combination of organic and inorganic fertilizer or pruning of tree crops, have the potential to substantially increase yields. However, application of such practices, and adoption of productivity-enhancing agricultural technologies in general, remain infrequent in most of sub-Saharan Africa. Assuming that knowledge deficits are the main hindrance to the adoption of best agronomic practices, training on agricultural technologies could promote the take-up of these practices, increase productivity, and improve economic outcomes for these poor farmers. This project aims to evaluate the impact of agronomy trainings on small-holder productivity and adoption of best agronomic practices. The study will also measure the diffusion of the program’s effects, if any, within farmers' social networks, by linking each grower to the people with whom they might share the information provided in the trainings.  

Evaluation Context:

According to Rwanda's Ministry of Agriculture, the main reason why the country is currently falling short of the coffee sector targets for 2010 is an insufficient level of cherry production[1]. In Rwanda, one of the most densely populated countries in sub-Saharan Africa, land parcels are extremely small – averaging only a few acres. Most farmers live off subsistence agriculture, and therefore usually give priority to food crops, allocating only a small fraction of their land to coffee. Since their revenues from coffee sales are limited by production levels, finding ways to improve their yields could make coffee a more attractive crop choice and help small-scale farmers shift out of subsistence farming into more profitable activities.

TechnoServe, an agri-business NGO aiming to provide business solutions to those in rural areas, is conducting agronomy trainings in several coffee growing regions in Rwanda and other East African countries. IPA is conducting a randomized evaluation of one of TechnoServe’s agronomy training programs in Nyarubaka, a rural sector (a geographical unit covering thirty villages) in the Southern Province of Rwanda. Similar to other coffee farming regions in Rwanda, the majority of farmers in Nyarubaka live off the food crops they grow and few households have electricity.

Description of the Intervention:

In Nyarubaka, the agronomy training evaluation sample is composed of the 1600 farmers (from 27 villages) who signed up for Technoserve’s agronomy trainings. As Technoserve only had resources to train a limited number of farmers, households in the sector were randomly assigned to a treatment (50%) or comparison (50%) group after receiving a baseline survey. The baseline survey collected crop production and profit information (across all crops), information on consumption, household demographics and assets, and a detailed social network map (including information on who farmers talk to about coffee).

Villages in the treatment group were then randomly assigned to different intensity levels: in some villages ¼ of registered households received treatment (i.e. ¾ comparison), others ½, and others ¾.

Training sessions took place once a month for 11 months in the first year of the program and an additional 5 review training sessions were done over the course of the second year. These trainings covered a number of coffee best practices: rejuvenation and pruning; nutrition (organic and inorganic); pest, disease and weed management; mulching; soil and water conservation (water traps, terracing); shading; and record keeping. Trainings were attended by groups of around 30 farmers and took place on the plot of a designated "focal farmer" who was generally chosen because of the accessibility of his/her plot.

Farmers in the 1600 farmer sample were surveyed every few months to gather data on their coffee yields, sales and practices, as well as their harvests of other crops during the two rainy seasons. In addition, there is a consumption survey administered once a year. Take-up of the agronomy practices taught in the trainings is monitored closely through bi-yearly plot inspections. Farmers in both treatment and comparison groups were given scales for weighing their coffee harvests and calendars to record their harvests and sales.

All the coffee farmers in the sector who are not part of the direct agronomy training evaluation are also surveyed at least once a year to collect data on their own coffee practices. Annual follow-up of these additional 1400 coffee farmers in the region allow us to identify their “coffee friends” (individuals who they talk to about coffee) to assess the diffusion of these practices through the social networks of trained farmers. This context is a particularly interesting one to learn about diffusion, as there is variation in the type of technologies included in farmer training. Some of the best practices result in outcomes that are visibly evident (i.e. coffee trees just look much better/healthier) whereas others are less visible. So, we may see differences in the relative speeds of diffusion of these various practices (with some diffusion even outside the social networks, but within geographical space).

Both geographic and social network mapping of all coffee farmers in Nyarubaka is carried out regularly to understand how geographic and social infrastructures affect adoption and diffusion of the agronomic practices.

Results and Policy Lessons:

Results forthcoming.

 



[1]Ministry of Agriculture and Animal Husbandry and Ministry of Trade and Industry, “Rwanda National Coffee Strategy 2009-2012.” December 2008.

Esther Duflo, Tavneet Suri

Contract Farming, Technology Adoption and Agricultural Productivity: Evidence from Small Scale Farmers in Western Kenya

Researchers study how cash advances and information delivered via text messages can encourage farmers to adopt efficient agricultural practices and new crop varieties.

Policy Issue:

Many farmers in the developing world practice subsistence farming, a mode of agriculture in which a plot of land produces only enough food for personal consumption. Moving from pure subsistence crops to high-value cash crops can help poor farmers gain income, by enabling them to sell their produce in markets. However, a number of obstacles may prevent subsistence farmers from adopting high-value crops. First, long lag times between effort and rewards may reduce farmers’ willingness and ability to grow certain crops (sugarcane, for example, has an 18 month average harvest cycle in Kenya, the country targeted by the study). Second, it can be costly to diffuse information about high-value crops.

Context:

The Mumias Sugar Company (MSC), a leading sugar producer in Kenya, is located in Mumias District, in Kenya’s Western Province. MSC has the largest sugarcane factory in Kenya, and works with approximately 70,000 out-grower farmers, whose plots encompass an area of 400 square kilometers, in several districts in the province. The company is strongly dedicated to innovation and experimentation. Over the past decade, the MSC agronomy department has been active in testing new cane varieties, fertilizers, and herbicides.

Description of Intervention:

Researchers partnered with the Mumias Sugar Company (MSC) to work with smallholder farmers who, as out-growers, sell sugarcane to the firm. Working with the company management, researchers will explore two interventions: (i) cash advances conditional on farmers' performance at intermediate stages of the harvest cycle, (ii) cell-phone text-message reminders.

The first intervention will introduce rewards for intermediate outcomes for a subsample of farmers. MSC field assistants will assess fertilizer application and weeding accuracy. If credit constraints play a large role, anticipated payments tied to intermediate outcomes should increase farmers’ effort and plot management quality.

The second intervention will aim to reduce costs and information problems related to extension services. Researchers will exploit the large number of cell phones in the area of study (MSC estimates that 70 percent of farmers have access to a cell phone) and use them to deliver information about agricultural practices. Together with MSC agronomists, researchers will develop an SMS reminder system. Reminders will concern planting, weeding, fertilizer and herbicide application, cane fire prevention, and harvesting.

The evaluation will assess the impact of the treatments on plot management quality,  good agricultural practices knowledge, yields and crop variety adoption.

Results:

Results forthcoming.

 

Providing Collateral and Improving Product Market Access for Smallholder Farmers: A Randomized Evaluation of Inventory Credit in Sierra Leone

 
Policy Issue:

Inter-seasonal fluctuation of agricultural prices is widespread throughout the developing world. For many crops, prices decrease at harvest season, owing to the availability of large quantities of crop, while prices increase in the lean season.  However, small farmers are often unable to benefit from this price increase due to a lack of proper storage facilities and credit constraints. Inventory credit products address both storage and credit constraints by allowing small farmers to store their harvest in a secure warehouse as collateral for a loan. Such products have had successful small-scale test cases in West Africa, including Ghana (Technoserve), Niger (Food and Agriculture Organization) and Mali (World Bank). Yet, to date there have been no rigorous evaluations to assess inventory credit’s cost-effectiveness and sustainability.

Context of the Evaluation:

In Sierra Leone, palm oil is an essential component of rice consumption and exhibits large and predictable seasonal price changes, creating inter-temporal arbitrage opportunities, which remain largely unexploited by small farmers. Pilot data shows 72% of farmers sell a majority of their output within two months of harvest, despite an expected price increase of over 70% within six months.

The Sierra Leone National Program Coordinating Unit (NPCU) at the Ministry of Agriculture plans to implement a palm oil inventory credit scheme in collaboration with three Rural and Agricultural Banks (RABs). IPA will use the rollout of this program to conduct a randomized evaluation of the intervention.

 
Details of the Intervention:

The three participating RABs identified 120 communities that would be eligible to receive the inventory credit product. These communities will be randomly assigned to three groups with 40 communities each: The first will receive the inventory credit product, the second will receive assistance with management of a community storage space, but no access to inventory credit, and the third will serve as a comparison group.

In inventory credit communities, farmers will receive harvest time loans in exchange for storing their palm oil as collateral. The loan amount will be 70% of the palm oil’s harvest-time value, or around $5.50 per 5 gallon container of palm oil. The bank will store the collateral in a secure room provided by and located within the community, which will have two locks: the key for one will be controlled by the community; the key for the other will be controlled by bank staff. The banks will provide containers for the storage space, in which the palm oil will be stored. In the lean season (nine months later), when prices are typically more than 50% higher, the banks will assist the farmers with selling the collateral. The bank will recoup its loan and interest. The farmer will keep all additional revenue.

In storage communities, farmers will receive storage containers for the community store space and assistance with management of the space: NPCU staff will control the key to one lock, while the community will control the key to a second one. However, no inventory credit will be offered.

The study seeks to rigorously evaluate this intervention to examine the relation between storage, credit and access to markets for small farmers. The questions it seeks to answer are: a) Do farmers’ take-up the credit product? b) To what degree do farmers modify their sales patterns when using the credit product? c) Does inventory credit affect prices received by farmers in different seasons of the year?

 
Results:

Results forthcoming. 

Lorenzo Casaburi

Encouraging Adoption of Rainwater Harvesting Tanks Through Collateralized Loans in Kenya

Policy Issue:
Over the last decade, billions of dollars have been invested in the development of new agricultural technologies, which have the potential to contribute to economic growth and poverty alleviation amongst the poor. However, in Sub-Saharan Africa, the adoption of these promising agriculture technologies has been limited. Low adoption rates may be explained in part by credit constraints, which prevent many smallholder farmers from making the often large, initial investment in a new technology. A sizeable initial deposit or a guarantor is often required to receive a loan, restricting access for most. In developed countries, guarantor requirements are uncommon; instead, loans for purchase of houses, vehicles, and small business equipment often use the assets themselves as loan collateral. Using assets as collateral is rare in developing countries, where credible and efficient institutions and processes to seize collateral may be lacking. But in certain environments or for certain products—like water tanks, which are large and difficult to hide or relocate, making repossession feasible—can asset collateralization expand access to credit without affecting repayment rates?
 
Context of the Evaluation: 
Almost 80 percent of the Kenyan population lives in rural areas, where many suffer from significant water constraints. About 96 percent of cropland in Kenya is rain-fed and the rains are both seasonal and unpredictable. In recent years, much of rural Kenya has been hit by extreme droughts, which can be particularly problematic for dairy cattle, which require a consistent and regular water supply. Dairy farming is common in Kenya’s Central and Rift Valley provinces, the sample area for this study. The smallholder dairy farmers in the study sample had an average herd size of two cows, but 32 percent of households reported loosing at least one cow to drought in the year prior to the study, and 52 percent of households had a cow get sick. Without easy access to water, sample farmers reported spending a considerable amount of time (ten hours per week) taking cows to a water source. Technologies, such as rainwater harvesting tanks, that help to give dairy farmers reliable and convenient access to water, could improve their productivity and other economic outcomes.
 
Details of the Intervention: 
Researchers used a randomized evaluation to examine the effect of asset collateralized loans on the take-up of rainwater harvesting tanks and any subsequent impacts on dairy production, time use, or girls’ enrollment in school.
 
In partnership with a local dairy cooperative, researchers offered smallholder dairy farmers in central Kenya a loan to purchase a durable, 5,000-liter rainwater harvesting tank. The market price of the tanks at the time of the study was Ksh 24,000 (US$320), or roughly 13 percent of annual total household consumption in the sample. A full tank would last between 17 days and 6 weeks depending on whether the water was used for livestock, domestic use, or both.
From a sample of 3,000 farmers who sold milk to a local dairy cooperative, researchers randomly assigned 1,804 to receive one of four initial loan offers. The value and terms of the loan were the same for all four offers: the loan could only be used to purchase a water tank, the value of the loan was set equal to the market price of the tank (US$320), and all borrowers had to make a minimum deposit of Ksh 1,000 (US$15).
 
The four different loan offers varied in the deposit and guarantor requirements, and whether the asset was pledged as collateral. 
 
(i) 100 percent secured joint-liability loan - required borrowers to make a deposit equivalent to one-third of the value of the loan in their savings account. Three guarantors were also required to insure two-thirds of the loan amount through savings or shares in the dairy cooperative. This offer was essentially the same as the standard contract used by the cooperative when it gave out loans.
(ii) 4 percent deposit loan - used the water tank asset as collateral but carried no other up-front requirement apart from the small, Ksh 1000 (US$15) deposit, equivalent to 4 percent of the loan amount, required of all borrowers.
(iii) 25 percent deposit loan – used the water tank asset as collateral and required a larger deposit of Ksh 6,000, equivalent to 25 percent of the loan amount.
(iv) 25 percent guarantor loan – used the water tank asset as collateral and also required a single guarantor to pledge 21 percent of the loan amount (Ksh 5,000), in addition to the Ksh 1,000 deposit from the borrowing farmer.
 
Researchers anticipated that take-up rates would vary across these groups due to differences in the perceived profitability of borrowing under the given terms, differences in access to guarantors, and differences in farmer productivity and characteristics. In order to distinguish between these factors, farmers in groups iii and iv were randomly divided into two subgroups. Half of the farmers who received offer iii or iv had the requirements waived after the loan contract was signed; in group iii, the deposit amount in excess of the minimal 4 percent deposit was returned, and in group iv, the guarantor was absolved of any responsibility for the loan and his deposit was returned.
For all six resulting treatment groups, the timeline for the loan was 24 months and monthly repayments consisted of a fixed amount (Ksh 1,000) plus interest (1 percent per month) on the declining principal balance.  
 
The default procedures were the same across all treatment groups. When a farmer fell two months behind, he received a letter warning him that he was pending default and had two months to pay off the late amount. If the payment was still outstanding after 60 days, the cooperative applied any deposits held to the balance. If a balance still remained, the farmer was given an additional 15 days to clear it, after which the cooperative would repossess the tank and sell it to cover the farmer’s loan obligations. 
 
Results and Policy Lessons: 
Take-up rates: Take up of the 100 percent secured joint-liability loan was low, with only 2.4 percent accepting the offer. Asset collateralization significantly increased take up—nearly 28 percent of those who received the 25 percent deposit loan offer accepted, 23.5 percent of those who received the 25 percent guarantor offer accepted, and 44 percent of those who received the 4 percent deposit offer accepted.
 
Loan repayment rates and timing: About 63 percent of the farmers who took out a loan were late on their payments at least once during the course of the loan, but repayment performance did not vary significantly between treatment groups. The only major difference was the time taken to repay the loan: the average time taken to repay the 100 percent joint-liability loan was only nine months, while the other loans took between 17 and 22 months to pay off. No farmers defaulted on their loans and no tanks were repossessed. These preliminary results suggest that access to credit can be improved at little cost to lenders.
 
Impact on economic and welfare outcomes: Preliminary results show that access to asset-collateralized loans (through the 4 percent deposit offer) improved milk production specifically for those without access to piped water before the start of the study. In addition, it reduced the time girls in treatment households spent fetching water by 35 percent, and increased the probability that girls were enrolled in school by 4 percentage points. This latter effect is striking because enrollment rates in the sample area were already high—girls’ enrollment at baseline was 94.6 percent. This was not the result of households being able to borrow to pay school fees (a common use of microfinance loans), but rather the ability to invest in an asset that reduced the demands on girls’ time.

Examining Underinvestment in Agriculture: Returns to Capital and Insurance Among Farmers in Ghana

Risk, rather than a lack of capital, appears to drive underinvestment in agriculture in Northern Ghana - when farmers were provided with weather insurance they spent more on inputs such as chemicals, land preparation, and labor.

Policy Issues:

Underinvestment in agricultural inputs such as fertilizer, hybrid seeds, or labor is thought to drive low crop yields in Africa and other parts of the developing world. Several factors may help explain why farmers fail to invest in such potentially profitable inputs. It is possible that they are wary of the riskiness of adopting new agricultural methods or tools—if they invest and their crops still fail, they will have even less money than if they had not invested at all. Farmers may also lack the capital necessary to purchase these inputs, and be unable to obtain credit to finance investment in their farms. Because the returns to using new technologies can be so high, encouraging use among farmers has the potential to greatly improve their welfare, but financial institutions and policymakers need to first understand what factors are truly driving underinvestment in agriculture.

Context:

The climate of northern Ghana’s savannah region has a single short wet season, with high annual variation in rainfall. This kind of weather pattern creates great risk for farmers who depend on the weather for their livelihood, particularly when agriculture is primarily rain-fed, as it is in this area. There is strong evidence that shocks in the amount of rainfall translate directly into consumption fluctuations for farmers, and so investment in new agricultural technologies or methods has the potential to significantly affect welfare. Throughout Ghana, the average farmer uses only 7.4 kg of fertilizer per hectare, while in South Asia fertilizer use averages more than 100 kg per hectare. Initial surveys in northern Ghana revealed that the median farmer participating in this study did not use any chemical inputs on their crops, often citing lack of money or concerns regarding weather risk as key obstacles preventing investment.

Description of the Intervention:

In the first year of the study, researchers tested the relative importance of capital and risk in driving farmers’ investment behavior. From a total of 502 households, 117 were randomly selected to receive a cash grant to fund agricultural inputs; these farmers received GHC 60 (approximately US$45) per acre for up to 15 acres, delivered at a time of their choosing. Another 135 randomly selected households received a grant for an insurance scheme that paid roughly GHC 100 (US$75) per acre of maize if rainfall at a local weather station went above or below specified thresholds. Ninety-five households received both the cash grant and the insurance grant, while 155 households received no additional services and formed the comparison group.

In the second year, researchers tested different prices for rainfall insurance among the original sample households, plus households in an additional twelve communities. Households were visited up to four times by marketers: during the first visit they were informed about the product, during the second visit they were asked to sign the contract and pay premiums, during the third visit the marketer issued a policyholder certificate, and during a fourth visit an auditor verified their understanding of the product. The price that people were offered for insurance was randomly assigned at the community level: households in the original sample would be offered rainfall insurance at a cost of either 1 GHC or 4 GHC (approximately US$0.75 or US$3), while in the newly added communities, households would be offered insurance at either the market price of GHC 12-14, or the actuarially fair price of GHC 8-9.5.

In year three, the pricing experiment continued in collaboration with the Ghana Agricultural Insurance Programme (GAIP), to market their drought-indexed insurance. Because this product was more complex, scripts used at the four marketing visits were updated to make it more understandable. Pricing of the insurance was again randomized at the community level, with 23 communities receiving the market price, 23 communities receiving the actuarially fair price, and 26 communities receiving a subsidized price.

Results:

Importance of Capital vs. Risk: Results from the first year suggest that risk, rather than capital, was the major constraint on investment among farmers in this sample. Farmers who received the insurance grant increased their expenditure on farm chemicals, and also brought more acres of land under cultivation. If the primary constraint on investment was a lack of capital, then the insurance product, which offered no up-front payouts, would not have affected their ability to purchase materials. Many farmers appeared to recognize the value of the insurance product, with a significant proportion choosing to purchase insurance in years two and three. Take-up of the insurance product did not change when a token price of GHC 1 per acre was charged, and even at the actuarially fair price of almost GHC 10 per acre, 40-50 percent of farmers purchased insurance.

Impacts of Weather Insurance: Farmers with weather insurance invested more in agricultural inputs, particularly in chemicals, land preparation, and hired labor. Total cultivation expenditures were more than GHC 250 (US$188) higher for farmers with insurance, representing a 33 percent increase relative to the comparison group. These impacts were even larger among farmers who received both insurance and a capital grant. Despite the increases in production, it is not clear that investments were actually profitable for farmers: the additional expenditures may have increased by more than the value of the additional output, depending on how household labor is valued.

Trustworthiness of Insurance: Results suggest that how much farmers trust the insurance scheme has a large impact on their take-up and response to rainfall insurance. Take-up of insurance was considerably higher among farmers who also received a capital grant, but it was not higher among households who were wealthier. This suggests that farmers might not have been entirely confident that the promised insurance payouts would be made when trigger events occurred, and so they were more willing to take the risk of purchasing when they had been given extra cash. Similarly, individuals who were familiar with others who had received insurance payouts in previous years were significantly more likely to take-up insurance themselves.

Click here for a Q&A with researcher Chris Udry

Read about the new agricultural insurance product launch as a result of this study here, and about its' 2012 payout to farmers here.

Promoting Adoption of New Rice Varieties: Addressing the Costs of Early Adoption in Sierra Leone

Can improved seed varieties benefit poor farmers in Sierra Leone? Can price subsidies and agricultural extension training lessen the costs of early adoption?

Policy Issue:

Agricultural productivity has stagnated in much of sub-Saharan Africa, while many other regions of the world have seen dramatic productivity improvements in recent decades. New agricultural technologies, such as high-yielding crop varieties, offer the promise of improving productivity and hence the welfare of farmers. But adoption of these technologies has often been low in countries where dissemination programs have been conducted. First adopters of new technologies play an important role in the spread of technology as they take on the burden of experimentation—testing whether and how a new variety works in local conditions. This is particularly important in much of sub-Saharan Africa where a multiplicity of micro climates within a small area means that experimentation is essential for farmers to learn which crop varieties are best for their particular land. There is also concern that early subsidization to increase adoption of new technologies will lead to expectation of continued subsidies, depressing demand at market prices.

Details of the Intervention:

Researchers sought to test whether improved seeds are beneficial for the poor in Sierra Leone and how best to promote uptake given the high costs of early adoption. Early adopters generate a positive externality to surrounding farmers and communities by delivering information on the effectiveness of new varieties and how to make the most of them in local conditions.

Two types of incentives will be tested: (1) a price subsidy scheme allowing farmers to purchase new seeds at a price lower than the market price; and (2) targeted agricultural extension work involving community demonstration plots and practical advice on how to use these seeds. Two types of new seed varieties will be used in the intervention. The first is one of the NERICA varieties and the other is a local variety developed by the Rokupr station, ROK-16, which has proven popular in early participatory variety selection tests.

The first stage of the intervention will pilot the agricultural extension training and subsidy incentives. One treatment arm will receive free seeds and training, and take up and yields will be compared to a comparison group. In the second year, researchers plan to test a more complex set of alternatives involving six treatment arms, each with approximately 35 communities, under three different schemes:

Pricing Scheme:

  • T1: Farming households offered ROK-16 variety at 0 percent subsidy (market price).
  • T2: Farming households offered ROK-16 variety at 50 percent subsidy.
  • T3: Farming households offered ROK-16 variety at 100 percent subsidy (free).

Training Scheme:

  • T4: Farmers receive a targeted training program without a formal opportunity to purchase the new seeds.
  • T5: Farmers receive a targeted training program and are offered the chance to purchase ROK-16 seeds at one of the three subsidized prices.

NERICA Scheme:

  • T6: Farmers are offered one upland variety of NERICA rice (NERICA-6) for free (as is currently the practice of the government’s NERICA project) as well as the targeted training program.

The pricing scheme aims to test the hypothesis that a one-time subsidy can reduce the adoption cost for early-adopters and have a long-lasting effect both on the beneficiary and their neighbors. The training scheme aims to reduce the cost of learning by providing information on how well the seed works in the community (through a demonstration plot) and on how to cope with some of new features of the rice. Both ROK-16 and NERICA are included because there is little information on the relative productivity of each variety of seed in upland conditions.

Key outcome variables measured at endline include: (1) the amount of improved rice variety seeds (NERICA and ROK-16) purchased and planted; (2) planting of other rice varieties and other crops; (3) amount of family and hired labor used on the farm; (4) consumption and food security.

Results and Policy Lessons:

Study in implementation, results forthcoming.

Community Based Rangeland Management in Namibia

We conduct an impact assessment of the Community Based Rangeland and Livestock Management (CBRLM) program in Namibia.  This program is part of a larger set of interventions in the agricultural sector designed to reduce poverty among the population of the northern regions of the country.  Many people in the area rely on cattle production for their economic livelihoods, however overuse of the communal grazing areas and suboptimal grazing practices threaten the long-term viability of the land and contribute to persistent poverty.  

To increase the productivity of livestock and other animals using the land, the Namibia Millenium Challenge Compact funds a pilot program designed to help communities improve their livestock practices, address rangeland degradation, and improve market access.  

The evaluation is designed to test the impact of the various activities within the CBRLM intervention on household income, cattle productivity, and the condition of the rangeland. The intervention targets both inadequate information about appropriate cattle production practices and the social or other behavioral preferences of farmers.  At the moment, there is a collective action or “tragedy of the commons” problem – individual farmers are hesitant to reduce their herd’s impact on the rangeland because they are fearful that others will not follow suit which often results in overuse and degradation of the land.

Barriers to Fertilizer Use: Evidence from a Field Experiment in Kenya

Policy Issue:

Agricultural outputs in Africa have stagnated over the past decades: although total output has risen, food production has not kept up with the increase in Africa’s population. The number of chronically undernourished people in Africa has increased to 200 million in 1997-99.1 When used correctly, chemical fertilizer can substantially raise agricultural yields, yet usage of fertilizer remains low in Sub-Saharan Africa. Past studies suggest that usage is low because farmers have difficulty saving harvest income to purchase fertilizer for the next growing season, have limited information on the benefits of using fertilizer properly, and the fact that knowledge about fertilizer is not passed from one farmer to another. This project attempts to address all three issues.

Context of the Evaluation:

This project focuses on small-scale subsistence farmers in rural Western Kenya, many of whom grow maize as their staple crop. All farmers in this population are extremely poor subsistence farmers, earning on the order of $1 per day. Previous research in this area has shown that when used correctly, top dressing fertilizer can increase yields by about 48%, amounting to a 36% rate of return over just a few months. However, only 40% of sampled farmers in the Busia district of Western Kenya report ever having used fertilizer.

Details of the Intervention:

This experiment looks at a complex intervention with several components meant to increase fertilizer use and dissemination of knowledge. Farmers were recruited to the study through meetings at primary schools and randomly divided into four groups.

The first group received small, time-limited discounts which were valid within a 3 week window right after harvest, redeemable at a local shop. Farmers received coupons for a discount of about 15% of the price of fertilizer, for up to 25 kilograms.

The second group was encouraged to form farmers’ cooperative with their friends and neighbors to talk about fertilizer and agricultural practices. The researchers organized the groups and coordinated the first few meetings, but did not provide any direct information to the groups.

The third group participated in both the coupon scheme and the cooperatives.

A fourth group received none of these services, and served as a comparison.

Researchers will examine the changes in fertilizer usage between the different groups and whether farmers in the treatment groups talk to each other about agriculture more than others.  

A separate intervention was designed to investigate the spread of information and technology when provided only to a subset of farmers in the treatment and comparison groups. The research team visited the randomly selected farmers and provided them with ½ teaspoon measuring spoons, as well as information about the returns to using ½ teaspoon of fertilizer per plant. To enable diffusion of this technology to others in the community, the spoons were made available in nearby fertilizer shops to other farmers for a nominal fee. In addition, when distributing the measuring spoons, the farmers were given vouchers for spoons which they could give to their friends. This intervention will test the hypothesis that the fertilizer discount intervention and the cooperative intervention could lead to greater diffusion of information about fertilizer.

Results and Policy Lessons:

Results forthcoming.

 

1 Ernest Harsch, “Agriculture: Africa’s Engine for Growth”, available at http://www.un.org/ecosocdev/geninfo/afrec/vol17no4/174ag.htm.

2 Duflo, et. al., “Nudging Farmers to Use Fertilizer: Experimental Evidence from Kenya”, available at http://www.povertyactionlab.org/sites/default/files/publications/99_Understanding_Technology_Adoption.pdf

Paying for Environmental Services: An Experimental Study in Bolivia

Can financial incentives and information influence farmers to account for spillover effects of their cattle management practices?

Policy Issue

Some agricultural and farming practices create spillovers that affect others or the environment. These spillover effects, known as externalities, can create a wedge between the benefits a farming practice has to individuals and the effects it has on society as a whole. Although adoption of agricultural technologies that reduce the production of negative externalities, such as pollution or deforestation, is beneficial to society, such technologies will not be adopted if they don’t bring benefits to individual users. The standard policy solution in the face of such externalities is to change incentives so that private individuals benefit from use of socially responsible practices. In recent years, policymakers have advocated payments for environmental services as an incentive-based approach to internalizing the externalities of land use decisions, but there is little empirical evidence on the impacts of such programs.

Context of the Evaluation

This study takes place in Bolivia’s Rio Grande Protected Area, where cattle are both a  source of private income, and of negative agricultural productivity, health and environmental externalities. Most participants in the study area own both cattle and forest land. Through forest clearing for pasture and free range grazing in the forest, local cattle management practices generate significant negative externalities at local (watershed) and global (biodiversity, carbon) scales. Free range grazing cattle spend a significant amount of time standing in streams, where much of the best vegetation grows. This causes erosion of the stream banks, and contributes to landslides that close roads and block access to markets.

Details of the Intervention

Researchers partnered with Fundación Natura Bolivia, an organization that has worked in the study area for six years implementing payment for environmental services projects. This study will evaluate interventions designed to increase the adoption of more environmentally friendly cattle management practices, including the establishment of pastures with trees and water troughs, which reduce negative externalities related to health, productivity and environmental processes by reducing the time cattle spend grazing near streams.

In half of the eligible villages, financial incentives will be introduced in the form of conditional contracts for cattle management. The other half of the villages will be provided only with information about the harms associated with poor cattle management. In addition to evaluating effectiveness of incentives for conservation outcomes, data collection will focus on ancillary measures that help shed light on the process of collective action within the community.

In the short run, adoption of these management technologies will be costly to individual users, but has the potential to create benefits for everyone in the village by reducing erosion. In the long run (>5 years), the technology is expected to be both privately and socially beneficial, as the reductions in land degradation bring benefits to individual users. By varying the price incentives for adoption and the information about the externalities, the intervention will offer insights into whether incentives and information can help farmers adopt technologies that prevent negative externalities.

Results and Policy Lessons

Results forthcoming.

Agricultural Microfinance in Mali

Agriculture is a way of life for most people in Mali. The vast majority of cultivated land is used by small farmers for subsistence agriculture. Previous research has shown that returns to agricultural investment are high, but in practice many farmers do not take on profitable investments. Can microfinance help alleviate constraints to investment among small farmers?

Policy Issue: 

Underinvestment in agricultural inputs such as fertilizer, hybrid seeds, or labor is thought to drive low crop yields in Africa and other parts of the developing world. Several factors may help explain why farmers fail to invest in such potentially profitable inputs. It is possible that they are wary of the riskiness of adopting new agricultural methods or tools—if they invest and their crops still fail, they will have even less money than if they had not invested at all. Farmers may also lack the capital necessary to purchase these inputs, and be unable to obtain credit to finance investment in their farms. Microfinance services are intended to address such constraints, but microfinance institutions often emphasize small business clients and do not structure products to target or facilitate agricultural lending. Can microfinance help alleviate constraints to investment among small farmers?

 
Context of the Evaluation: 

In Mali, agriculture represents 80 percent of employment and about 37 percent of Gross National Product. However the agricultural sector is dominated by subsistence farming supporting single households. This study takes place in the region of Sikasso, within the ‘cercles’ of Bougouni and Yanfolila. In these areas, cash crops like cotton, maize, sorghum, millet and groundnuts are most frequently cultivated. To generate additional income, women in the area often work in the production of shea butter and men in gold-mining.

 
Details of the Intervention: 

Soro Yiriwaso is a Malian microfinance institution whose mission is to increase economic opportunities for poor Malians, especially women, by offering durable financial services. At the start of the study, Soro Yiriwaso did not offer financial services in any of the study villages. Out of the main 200 study villages, Soro Yiriwaso began operations in 90 randomly selected villages. In these villages, officers promoted the ‘Prêt de campagne’ product, a group agricultural loan offered to women who form an association specifically for the purpose of receiving and managing the money. The loans averaged around 32,235 Francs CFA (65 USD), and were offered at the start of the planting season, to be repaid with interest after harvest.

Grants Treatment: A randomly selected group of farmers from the villages that were not offered the ‘Prêt de campagne’ product, as well as those from the ‘loan’ treatment group who did not receive a loan were provided with a grant of 40,000 Francs CFA (80 USD). These grants were given to both men and women before the planting season, with no restrictions on how and when they could spend the money.

Savings Treatment: Another randomly selected group of farmers from the villages that were not offered the ‘Prêt de campagne’ product were offered a savings product designed jointly by Soro Yiriwaso and IPA. The savings product required women to decide on a target savings amount and deposit plan immediately after the harvest season, but they were only allowed to withdraw savings at the beginning of the next planting season. A small non-cash bonus was given to women to incentivize adherence to the savings plan.

Fertilizer Treatment: In order to evaluate the returns to fertilizers, and why small-holder farmers do not use more fertilizers on their plots, 23 separate villages were randomly selected to receive grants of different amounts of fertilizer. Women farmers who cultivated rice in these villages were assigned to receive one of three different quantities of fertilizer: no fertilizer, the officially recommended quantity, or half of this recommended quantity.

Results and Policy Lessons: 

Project ongoing; results forthcoming.

Farmer Decision-Making and Technology Experimentation in Indonesia

Policy Issue: 

Despite regularly making decisions that affect their crop yields, farmers in the developing world may lack information about how to appropriately use farming inputs or techniques. For instance, a farmer must decide on the optimal timing of planting, the depth and spacing of seeds, the amount of fertilizer to use, and the timing of fertilizer use, among other things.  Farmers may be reluctant to engage in potentially risky experimentation on their own plots, which prevents them from gathering new information about efficient agricultural practices. And even when farmers have information available to them about ways to increase their yields, they may not adopt optimal agricultural practices. One explanation for this is that farmers fail to notice certain details about the cultivation process simply because they may not believe that information to be useful. This suggests that it could be possible for farmers to learn about optimal farming techniques if they are presented with information that helps them notice new or previously neglected dimensions of the production process. 

Context of the Evaluation: 

Seaweed farming has been prominent in Nusa Penida district in Bali, Indonesia since it was introduced during the 1980s. Most seaweed is cultivated by taking raw seaweed and cutting it into pods, which are then planted at intervals along the ocean floor. The size of the pods and distance between them is determined by the farmer. Due to its relatively short crop cycle of 35 to 40 days, seaweed cultivation provides farmers with ample opportunity to learn through experimentation and implement new techniques. However, 86 percent of seaweed farmers sampled were unable to provide information about the pod size they used on their plots or what they believed to be the optimal pod size for seaweed cultivation.

Details of the Intervention: 

From a group of 232 seaweed farmers, researchers randomly selected 117 to participate in an experimental trial to determine the optimal pod size for seaweed cultivation on their plots. Farmers in the treatment group assisted an agricultural extension worker to vary the seaweed production methods on one of their plots and received the trial results afterwards. The remaining 115 farmers served as the comparison group and received no new services. 

The farmers in the treatment group were randomly assigned to one of two sub-groups that varied the size and weight of seaweed pods.

  • Pod Size Treatment: Researchers collected data on the variation in pod size within each farmer’s plot to understand whether farmers could achieve a higher yield by systematically planting pods of a specific size. 
  • Pod Weight Treatment: Researchers collected data on how variation in the weight and distance between pods affected the yield. In both cases, farmers observed as enumerators planted the seaweed pods. 

All farmers in the treatment group received compensation for their participation in the form of farming inputs, a guaranteed income from the plot they cultivated as part of the trial, and a small gift worth US $1.  

Researchers conducted a follow-up survey from April to May 2008 to test whether farmers changed any of their methods after participating in the trial. After the first follow-up survey, farmers were given summarized trial results, which included information on the returns from different farming methods and highlighted which pod size and pod weight produced the highest yields, respectively. Enumerators talked through the results with the farmers, in addition to providing them with a written summary. Two months after the results were distributed, researchers conducted a second follow-up survey to determine whether farmers had changed their methods as a result of having received the trial results. 

Results and Policy Lessons: 

Researchers found that farmers neglect certain dimensions of seaweed cultivation and fail to use the optimal level of inputs along those neglected dimensions. For instance, while most farmers are attentive to the optimal distance between seaweed pods, very few farmers had consciously experimented with pod size prior to the trial. 

Participation in the trial alone did not induce a significant change in farming techniques, which suggests that learning through observation and experience does not always guarantee effective use of technology. However, farmers in the treatment group report making large and significant changes in their production techniques after receiving summarized trial results and specific recommendations about which pod size or weight improved yields. The number of farmers who reported changing their techniques increased by 16 percentage points between the first and the second follow-up surveys.  Similarly, pod size increased by approximately 7 grams in the pod-size treatment sub-group relative to the comparison group. This was consistent with the average change in pod size recommended by enumerators. 

Thus, while farmers did not appear to consider pod size to be an important part of the production process prior to the trials, providing summary information on the optimal pod size appeared to change their use of this production input. This suggests that farmers who fail to notice may not learn even when they are actively experimenting and, as a result, may not notice the very features of a technology that make it profitable. Training programs for farmers may be useful, not only for new technologies, but also for existing technologies that individuals may have had prior experience with.  

 

Finding Missing Markets: An Agricultural Brokerage Intervention in Kenya

Policy Issue: 

In much of the developing world, farmers grow crops only for local or personal consumption, despite export options which are thought to be much more profitable. There are several plausible reasons why farmers might choose to grow crops for local markets, forgoing the opportunity to make more money through export crops. There may be information gaps about profitability of export crops, lack of access to the capital needed to make the switch to export crops, inadequate infrastructure to bring crops to urban centers, concern over risky export markets, or misinterpretation by researchers as to the true profit opportunities. 

Context of the Evaluation: 

Kenya’s horticultural sector, which includes fruit and vegetable production, has received a great deal of attention over the past decade due to the rapid and sustained growth of its exports to Europe. Although Europe’s appetite for Kenyan agriculture exports has been great, small farmers have largely failed to cash in on this opportunity. Many farmers instead receive below-market prices for their crops by selling them at the local market or to intermediaries, who then resell the produce at regional market centers or to export firms. In the study sample, about half of the household income came from agriculture, and most owned the land they cultivated, which was usually about one acre. Farmers grew subsistence crops (beans, maize, potatoes, and kale) 50 percent of the time and cash crops (coffee, bananas, and tomatoes) 34 percent of the time. Only 12 percent of farmers grew any export crops.  

 
Details of the Intervention: 

In collaboration with DrumNet, a Kenyan NGO, researchers evaluated whether a package of services could help small farmers adopt, finance, and market export crops, and thus make more income. DrumNet tried to link smallholder farmers to commercial banks, retail farm suppliers, transportation services, and exporters. To be a member of DrumNet, a farmer had to be a member of a registered self-help group (SHG), express interest in growing export crops marketed by DrumNet (i.e. French beans, baby corn, or passion fruit), and have irrigated land. 

In 2003, researchers randomly divided the 36 active self-help groups (SHGs) in the Gichugu area into three equal groups: the first treatment group received all DrumNet services; the second treatment group received all DrumNet services except for credit; and the third served as the comparison.

All individuals in the two treatment groups received a four-week orientation course, which explained the financing and selling process, and good agricultural practices. In additional, all treatment individuals opened a personal savings account with a local commercial bank to accommodate possible future business transactions. Individuals in the credit treatment group also contributed the equivalent of a week’s labor wages to an insurance fund, which would serve as partial collateral for a line of credit. After being organized into groups of five, which were jointly liable for individual loans taken out, individuals in the credit treatment group received an in-kind loan from a local agriculture supply store.

At harvest time, for individuals in both treatment groups, DrumNet negotiated prices with an exporter and arranged a produce pickup. Once the produce was delivered to the exporter, the exporter payed DrumNet who, after deducting any loan repayments, credited the remainder to the individual savings accounts that each farmer opened when they registered. 

 
Results and Policy Lessons: 

Impact of the DrumNet Program: One year after the program began, treatment individuals were 19.2 percentage points more likely to be growing an export crop, but there were no significant gains in income for the full sample. However, among first-time growers of export-oriented crops, program participation led to a 31.9 percent increase in income.

Out of the twelve SHGs in each treatment group, ten decided to take advantage of DrumNet services when credit was offered, compared to only five of twelve when it was not, implying that farmers perceived credit as an important factor for cultivating export crops. However, access to credit had no effect on income gains compared to no-credit SHG groups. 

Long-term Consequences: Unfortunately, one year after the evaluation ended, the exporter refused to continue buying from the DrumNet farmers since none of the SHGs had obtained EU export certifications. This led to DrumNet’s collapse as farmers’ export crops were left to rot and loans went into default. Farmers returned to growing for local markets, underscoring the original concerns over export market risk. 

 

Irrigation and Property Rights for Farmers in Mali

Farmers face many challenges as they try to grow and sell enough crops to support their families. Uncertain rainfall, potential crop failure due to natural distasters or disease, unpredictable crop prices, and shaky land tenure all contribute to the difficulties and risks inherent in farming. Improvements in the production processes and productivity of farmland could help many poor families achieve a better life. The Alatona zone is one of the most disadvantaged zones in Mali. The main livelihood sources of the population in the zone are rain-fed agriculture, pastoralism, and wage labor in the Office du Niger.

The Alatona Irrigation Project is a component of the MCC Compact in Mali, and like the larger mission of MCC, the AIP seeks to reduce poverty through economic growth. The AIP is focused on increasing production and productivity, increasing farmer's income, improving land tenure security, modernizing irrigated production systems and mitigating the uncertainty from subsistence rain-fed agriculture. AIP seeks to develop roughly 14,000 hectares of net irrigated land in the Alatona perimeter, representing an almost 20% increase of "drought-proof" cropland and a 7% increase of the country's total stock of fully or partially irrigated land. The AIP will introduce innovative agricultural, land tenure, and water management practices, as well as policy and organizational reforms aimed at realizing the Office du Niger's potential to serve as an engine of rural growth for Mali.

The AIP project will create an additional 14,000 hectares of irrigated land in the Office du Niger (ON) zone. Project affected people currently residing or tending land in the project zone will be given 5 hectare plots and new settlers wishing to move to the area will be required to purchase plots of 5 hectare or greater. Women will have access to 500 m² market gardens. Institutions and management processes will be improved relative to comparable institutions in existing ON areas. One such example is land titles: all farmers in the Alatona will be given full land titles for their land, including rights to sell the land. This feature of the intervention will increase property rights and security for AIP farmers in contrast to the short or longer-run lease system currently used by the ON. Farmer organizations will also be encouraged and supported to maximize local capacities.

Additionally, water management and the collection of water fees will be administered through local farmer associations; whereas in existing ON areas, the ON is directly responsible for the collection of water fees. Financial services including starter kits (fertilizer, seeds) for the PAP concessions and agricultural credit will also be developed in the area. Finally, since AIP land is sold to beneficiaries, the land revenues may provide opportunities during and most likely after the Compact period for subsequent development of the zone.

Lori Beaman, Andrew Dillon

Nudging Farmers to Use Fertilizer: Experimental Evidence from Kenya

Use of inorganic fertilizer has the potential to dramatically increase yields and, if used correctly, is a highly profitable investment. So why do so few farmers in sub-Saharan Africa use it? Is it lack of information about profitability, lack of money to purchase the product, or an inability to save for the purchase? Researchers designed an intervention to offer farmers the ability to save harvest income for future fertilizer purchase. An ICS officer visited farmers immediately after the harvest, and offered to sell them a voucher for fertilizer, at the regular price, with free delivery later in the season. The program was popular, and in the first season increased usage by 14 percentage points. In the second season, the increase was even bigger, increasing usage by 18 percentage points. These effects are comparable to those obtained from a 50% price subsidy.

Policy Issue:

By some estimates, there are approximately 1.4 billion people living on less than $1.25 a day,1many of whom are farmers. As such, identifying ways to increase agricultural incomes is crucial in meaningfully alleviating poverty. Such strategies are especially important in sub-Saharan Africa, a region in which agricultural yields have been low and remained stagnant for many years. Use of inorganic fertilizer has the potential to dramatically increase yields and, if used correctly, is a highly profitable investment. Why do so few farmers in sub-Saharan Africa use fertilizer- is it lack of information about its profitability, lack of money to purchase the product, or an inability to save for the purchase?

Context of the Evaluation: 

An estimated 66% of the population of Kenya’s Western Province lives below the poverty line2where the majority of small farmers grow maize as their staple crop. Improving agricultural productivity through increased use of inorganic fertilizers could have substantial benefits for the livelihoods of these subsistence farmers. Numerous agricultural trials on experimental farms, as well as experiments where farmers were given full fertilizer, showed that adding fertilizer once the plants had sprouted (as top dressing) generated a 70% annualized return in Western Province. However, only 40% of sampled farmers in the Busia district report ever having used fertilizer. The overall goal of this research program is to understand why farmers do not invest in fertilizer. This part of the project investigates whether difficulty in saving harvest income until the time that inputs are needed is a significant barrier to adoption.

Details of the Intervention:

In collaboration with the NGO International Child Support (ICS), researchers designed an intervention to test if providing mechanisms to save harvest income for future fertilizer purchase could be effective in increasing usage. The intervention was called the Savings and Fertilizer Initiative (SAFI). The design of the experiment allowed researchers to test the impact of the SAFI program against various other strategies to improve usage, in particular fertilizer subsidies.

The following interventions were tested over two seasons among a sample of farmers:

  1. Basic SAFI: An ICS officer visited farmers immediately after the harvest, and offered to sell them a voucher for fertilizer, at the regular price, with free delivery later in the season. The farmer had to decide during the visit whether or not to participate in the program, and could buy any amount of fertilizer.
  2. SAFI with ex ante Choice of Timing: An ICS officer visited the farmers before the harvest and offered them the opportunity to decide when, during the next growing season, they wanted the officer to return to offer them the SAFI program. They were then visited at the specified time, and offered a chance to buy a voucher for future fertilizer use (as in the Basic SAFI program, as described above).
  3. Free Delivery Visit Later in the Season: Same as SAFI program, but farmers were visited later in the season. An ICS officer visited farmers 2-4 months after the harvest (when it is time to apply fertilizer as a top-dressing to the next crop), and offered them the opportunity to buy fertilizer, at the regular price, with free delivery. This program was identical to SAFI, except that it was offered later.
  4. Subsidy Later in Season: An ICS officer visited the farmers 2-4 months after the harvest (when it is time to apply fertilizer to the next crop) and offered to sell them fertilizer, at a 50% subsidy, with free delivery.

 

Results and Policy Lessons:

The SAFI program was very popular. The basic SAFI was offered in two seasons. In the first season, the program increased usage by 14 percentage points, on a base of 23 percentage points. In the second season, the increase was even bigger, increasing usage by 18 percentage points. SAFI with ex ante timing choice was also successful, increasing usage by 22 points.

These effects are comparable to those obtained from a 50% subsidy offered later in the season: the subsidy increased usage by 14 points. They are also larger than an undiscounted offer later in the season: the free delivery visit later in the season had no significant effect on usage.

Consistent with a savings problem, enrollment in the SAFI program did not cause farmers to use fertilizer in subsequent seasons (as would be predicted if farmers were learning about fertilizer through the program). This suggests that it was the lack of commitment mechanism that was preventing farmers from purchasing and using fertilizer.

Overall, the results suggest that offering farmers small, time-limited discounts on fertilizer may substantially increase usage without inducing overuse among farmers who are already using fertilizer, at relatively low cost.

1 Shahua Chen and Martin Ravallion (2008). “The Developing World Is Poorer Than We Thought, But No Less Successful in the Fight against Poverty,” World Bank Policy Research Working Paper #4703.
2 National Coordinating Agency for Population and Development (NCAPD) [Kenya], Ministry of Health (MOH), Central Bureau of Statistics (CBS), ORC Macro. 2005. “Kenya Service Provision Assessment Survey 2004”. Nairobi, Kenya: National Coordinating Agency for Population and Development.

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