Comparing FISP to Alternative Programs
- 1. COMPARING FISP TO ALTERNATIVE PROGRAMS THAT HELP SMALLHOLDERS J. Ricker-Gilbert, PhD Department of Agricultural Economics, Purdue University 1 Presentation for the National Symposium “Eight Years of FISP – Impact and What Next?” Bingu International Conference Centre, Lilongwe 14 – 15 July 2014 Rodney Lunduka, PhD CIMMYT, Southern Africa Regional Office
- 2. We want to support smallholders • But how best to do it with limited resources? • Does everyone need the same intervention? Malawi’s FISP • Gives 100 kgs of fertilizer and 5-8 kg seed at subsidized rates. • Requires: land, labor, soil, knowledge. • Should be targeted to people who don’t buy (much) commercial fertilizer. Therefore, FISP is a production enhancing program first. Social protection to reduce poverty and vulnerability second.
- 3. Some households reduce vulnerability due to FISP The Intersection of Input Subsidies and Vulnerability. Source: Ellis, 2009; Ellis and Maliro, 2013 The extent of the overlap depends on how many households can make use of the fertilizer.
- 4. Different interventions have different objectives and intended beneficiary group Figure 1: Continuum of Policy Interventions, by Wealth Status of Intended Beneficiary No one program is superior, but all potentially compete for same scarce budget resources.
- 5. Cash Transfer • Provide money directly to recipients • Help survive shock and smooth out income and consumption. • Cash for work can help build productive assets in community to generate future income. – Good for households with available labor • Direct cash transfer for labor constrained households. • Not perfect, some of the same problems with FISP • Elite capture, corruption, etc • But administration costs should be lower than FISP.
- 6. Malawi’s cash transfer - MASAF • Has grown but still much smaller than FISP. • Evidence of positive impacts to help recipients meet basic needs. Ethiopia PSNP • Targeted geographically to vulnerable areas • Households sign up for 5 years • US $0.75 per day for pubic work projects in dry season. • Combined with extension, credit and irrigation services (not subsidized fertilizer)
- 7. Ethiopia’s PSNP seems to be more integrated approach than FISP. Lower administrative cost per beneficiary reached. 7 million reached. – PSNP ≈ US $30 per beneficiary – FISP ≈ US $90 per beneficiary currently If want to achieve more poverty reduction consider: – redirecting FISP funds – Scale up MASAF for people who can’t use FISP – Or Link FISP to MASAF, and extension for more comprehensive approach for fighting poverty and boosting production.
- 8. Flexible Input Voucher (FIV) is a more market based solution than FISP. Figure 1: Continuum of Policy Interventions, by Wealth Status of Intended Beneficiary Still need some land and labor to use inputs
- 9. FIV Benefits • FIV more flexible than FISP – let a household decide what inputs are best for its own situation. • FIV is a way to support and build the private input sector. - Could be a step towards subsidy graduation. FIV Challenges • May work better in less remote areas (Mazvimavi et al. 2013). • Monitoring is required to make sure necessary inputs are stocked and available to farmers. • Insurance for wholesalers and retailers incase inputs are not purchased. Currently limited evidence on FIV impacts. Malawi may consider FIV pilot to measure impacts.
- 10. Output price supports are likely not pro-poor Figure 1: Continuum of Policy Interventions, by Wealth Status of Intended Beneficiary Need to have enough surplus production to have something to sell. Hurts net-buyers of maize, who are likely to be poorer.
- 11. 11 FISP and other long run investments for Malawi Returns to Ag. GDP 1960’s 1970’s 1980’s 1990’s Rup. prod/Rup. spent Return rank Return rank Return rank Return rank Road investment 8.79 1 3.80 3 3.03 5 3.17 5 Education investment 5.97 2 7.88 1 3.88 3 1.53 3 Irrigation investment 2.65 5 2.10 5 3.61 4 1.41 4 Irrigation subsidies 2.24 7 1.22 7 2.28 6 NA 6 Fertilizer subsidies 2.41 6 3.03 4 0.88 8 0.53 8 Power subsidies 1.18 8 0.95 8 1.66 7 0.58 7 Credit subsidies 3.86 3 1.68 6 5.20 2 0.89 2 Agriculture R&D 3.12 4 5.90 2 6.95 1 6.93 1 Source: Fan et al. 2007 Returns in Ag Growth to Investments & Subsidies in India, 1960-2000 Compare with R&D investment in Africa (Fuglie and Rada 2013): • National research B/C = 1.6 for small countries; 4.4 for large countries • International CGIAR research B/C = 6.2 across Africa • Malawi investing just over 1% of agricultural GDP in R&D. Meets NEPAD goal but below leaders (Benitema and Gert-Jan 2013).
- 12. Conclusions: FISP is part of a menu of possible options • All programs compete for budget space. • FISP is a production enhancing program at its core. • To reduce poverty need a more integrated approach (May mean some redirection of FISP funds). – Cash for work and direct cash transfers for vulnerable. – Geographic targeting to appropriate areas. – Linking MASAF with FISP and extension activities. – Give participants time horizon when program will end. • Consider piloting flexible voucher program - Potentially link it to use of proper management practices.
- 13. • Other investments have high payoff in long run – R&D for new technologies – Roads/infrastructure – Education • Need to find ways to maintain funding for these over time. • Should not be compromised by FISP.
- 14. Thank you for your time! jrickerg@purdue.edu VIEW THE BRIEFS NOW ON THE IFPRI WEBSITE