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May 12, 2009

Maize in Kenya: The search for a successful subsidy

It is a common dilemma for non-profits and assistance programs: how to deliver benefits to the needy without creating dependency or disrupting markets.

Addressing this problem, Maize Seed for the Poor (MSP), a pilot project in Kenya, is exploring ways to offer farmers subsidized agricultural inputs to boost farm productivity, while also energizing local seed markets.

Gathered together under the bright sun and clear Kenyan skies highlands, several hundred farmers in Kavuturi, a village in the Embu district, wait in line to receive coupons for discounts on improved maize seed. Maize, the most important food crop in Kenya, provides more than a third of the calories and proteins consumed in the country. Yet many smallholder farmers lack the cash to purchase improved seed, an input that can greatly enhance crop yields and farm families’ food security, and if only a few farmers are willing or able to purchase seed and fertilizer, then the markets necessary for the supply of these products will never develop.

Maize Seed for the Poor (MSP) hopes to help change this. The recently-launched project targets farmers in Kenya’s Embu and Kisii regions and includes partners from CIMMYT, the Seed Trade Association of Kenya, the Kenya Agricultural Research Institute (KARI), and the International Food Policy Research Institute, and receives funding from the USAID and the American Seed Trade Association.

Working together, these organizations have distributed 16,200 coupons between mid-March and the beginning of April. The coupons can be used to purchase seed at a discount from selected agro-dealers, who then cash the coupons at Equity Bank in Kenya where MSP has opened a Ksh 1.5 million (about USD 19,350) account. All coupons are printed with security features such as watermarks and UV-readable images to prevent fraud.

A worthwhile mission
“We are trying to determine the most cost-effective way to bring affordable inputs to the poor farmer,” says Hugo De Groote, a CIMMYT agricultural economist based in Kenya. To do this, MSP is using a randomized coupon system that, with later follow-up, will show which amounts and distribution methods provide the best benefits. But the trick is to help farmers without harming the local private seed industry. “We don’t want to diminish demand by giving seeds away. Seed companies need incentive to stay in business and provide these areas with agricultural inputs,” De Groote says. Economic liberalization in the 1990s led to the abolition of many state-led agricultural interventions—including input subsidies—in developing countries. This aid cutback contributed to stagnating crop yields and reduced food security in many rural households. Hoping to reverse these unintended consequences, several governments are now considering a return to input subsides, but in a carefully targeted form. A recent, successful example is Malawi, where a government program distributed coupons to farmers so they could purchase maize seed and fertilizer at reduced prices. With the added benefit of a good rainfall, maize production in Malawi doubled in 2006 and almost tripled in 2007. De Groote hopes that if MSP proves successful, the localized experiment can be used as a model for a national Kenyan program, similar to the one in Malawi. How it works
The MSP project uses two classification methods: one in which all farmers of the community are invited to participate, and a direct identification system that is designed to target only resource-poor farmers. Direct identification is done by a committee of village elders and other knowledgeable people who create a list of characteristics that define a family as resource-poor. Local households that fit the description are then asked to participate. All participating farmers are randomly assigned a coupon valued at 60 or 120 Ksh (1 USD=78 Ksh). Each farm family has the possibility of receiving two or five of these coupons. As an experimental control, some will receive no coupons at all (these farmers will be given either a kilogram of cooking fat or sugar for their troubles). However, this is not a give-away program. Participants can use only one coupon per 2 kg bag of seed, regardless of how many coupons they initially receive. Since a 2 kg bag of improved maize seed from the Kenya Seed Company typically costs 240 Ksh, a coupon will not cover the full cost. The farmer must pay the remaining amount to experience the program’s benefits. “The idea is that farmers need to contribute to part of the cost. The use of multiple coupons is so farmers can buy different varieties, or buy them at different times,” De Groote says. "Farmers are also not allowed to sell coupons, but can use them to buy seed for family or friends."
Farmers like the seed
“This maize is stronger than other maize,” says farmer Catherine Njura, who lives in Kawathi Village, Runyenjes, Embu district with her husband and three children. She received five coupons from MSP worth 60 Ksh each; she used one to buy a bag of Duma seed, priced at 360 Ksh and marketed by Seed Co. “We’d heard it was early-maturing and that it grew well when there was not much rainfall,” she says. Njura helps farm a 0.5 acre homestead which provides her family’s livelihood. They grow a diverse assortment of fruits and crops such as sugarcane, beans, and maize. Although Njura used no fertilizer with her new seed, her three-week-old maize plantlets appear to be growing well; previously Njura only planted recycled seed of a local variety. Analyzing the impact
Njura’s story shows how the program can achieve important aims like encouraging resource-poor farmers to learn about improved maize varieties, to use them, and to purchase quality seed from local providers. This benefits individual businesses like the agro-dealers and the bank, as well as assisting the region's economy. Njura also echoes feedback from farmers and other project participants, with regard to what can be improved. “(The instructions) were a bit confusing. Some people didn’t understand that they’d have to pay (anything for the seed),” Njura says.

The agro-dealers were generally very pleased with the coupon system, in that it increased their clientele, provided free publicity, and fostered a productive relationship with the bank (which offers a range of services from which they can benefit). But they also suggested simplifying the coupon redemption process, offering coupons for fertilizer, and ensuring that farmers receive the coupons well before sowing time. Targeting smallholders
“Women from our group said that if the coupons had been for one kilogram bags, they would have gone further,” says Madrime Nthiga, maize agronomist with KARI-Embu. “Some farmers are very poor—they work with as little as an eighth of a hectare of land, so with two kilograms, seed will go to waste.” Typical sowing rates for monoculture maize are 20-25 kg of seed per hectare, but farmers in Kenya often sow at far lower densities, and intersperse the maize with other crops in the same field, partly as protection against food insecurity. This strategy of diversification paid off for Njura and her family the previous year, when a severe drought made it difficult to get food or to feed livestock, and they drew upon fruit trees on their small homestead to avoid starvation. "All the crops dried up," she says. "We survived by eating bananas, mango, and avocado, which we sometimes boiled together. We couldn't afford to purchase maize at the market." The MSP coupons expired on 30 April 2009. Now the project researchers will analyze the costs of the approach, as well as which farmers participated and how they have benefited. The best elements from this experimental project will be incorporated into subsequent initiatives. "Ultimately, the best options will be those that are most reliable in targeting low-income farmers, delivering noticeable benefits to these farmers, and minimizing both direct administrative costs and the cost of 'leakage' to higher-income farmers," says De Groote. "This can only be ascertained from on-the-ground experience, which is what we're obtaining in this project."


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