October 17, 2011

We first suggested “nudges for development” as a replacement for Malawi’s renowned, but costly, farm input subsidy program (FISP) back in December.  It looks like the idea could be even more relevant now that the program is shrinking.

We look to what research results can offer as a potential alternative– one that is sustainable and won’t be as costly for the Malawian government, which spent about 20 billion kwacha (currently US$121 million) on FISP during the 2010/11 fiscal year. This figure made up a sizeable 6.7% portion of Malawi’s total budget of 297 billion [Source: Malawi Budget Statement (pdf)].  Donors, too, are seeking alternatives: "We are currently considering options for new support to agriculture in Malawi," Andrew Massa, a communications officer for UK’s Department for International Development (DFID), stated to IRIN. DFID backed 5% – half of donor support – of the program’s overall cost of 23 billion kwacha, and may be looking for more effective strategies.

Maize is the main food crop for Malawians

Maize is the main food crop for Malawians, over 80% of whom are subsistence farmers

How about a free one? The gains from a farm input subsidy can be mimicked for next to nothing with well-timed nudges to purchase unsubsidized fertilizer vouchers. Offering vouchers shortly after harvest, when farmers have more cash on hand, can help them commit to purchasing fertilizer for the next season.

A study implemented by Esther Duflo, Michael Kremer, and Jonathan Robinson showed that such a program was very popular in Kenya, increasing fertilizer usage to an extent similar to that achieved by a 50% fertilizer subsidy – but at a much lower cost. The intervention was so successful that IPA has included it in our Proven Impact initiative as a trusted program for development. Read about the study and check out the evidence.