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Potential of Input Vouchers as a Potential of Input Vouchers as a Mechanism for Integrating the Non-Mechanism for Integrating the Non-Commercial and Commercial Input Commercial and Commercial Input

Markets: The Case of MalawiMarkets: The Case of Malawi

ByByRichard Kachule and Thabbie ChilongoRichard Kachule and Thabbie Chilongo

Centre for Agricultural Research & DevelopmentCentre for Agricultural Research & DevelopmentBunda College of AgricultureBunda College of Agriculture

Paper Presented at FANRPAN Stakeholders Regional Policy Dialogue Paper Presented at FANRPAN Stakeholders Regional Policy Dialogue and AMG Crossroads Hotel, Lilongwe, 2-5and AMG Crossroads Hotel, Lilongwe, 2-5thth September, 2008 September, 2008

Presentation OutlinePresentation Outline

• BackgroundBackground• Purpose and Objectives of the StudyPurpose and Objectives of the Study• Major FindingsMajor Findings• ConclusionsConclusions• RecommendationsRecommendations

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BACKGROUNDBACKGROUND

Malawi has had recurring food deficits Malawi has had recurring food deficits from mid 1990s from mid 1990s

Contributing FactorsContributing Factors Disasters such as droughts and floodsDisasters such as droughts and floods Lack of and/or inadequate use of Lack of and/or inadequate use of

improved technologies due to povertyimproved technologies due to poverty The impact of HIV/AIDSThe impact of HIV/AIDS Poorly managed liberalisation of the Poorly managed liberalisation of the

marketsmarkets Insufficient arable land, Insufficient arable land,

poor/declining soil fertilitypoor/declining soil fertility

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Interventions to alleviate the suffering of those Interventions to alleviate the suffering of those affected by the declining agricultural productivity: affected by the declining agricultural productivity:

Emergency relief programmesEmergency relief programmes The programmes have involved distribution of The programmes have involved distribution of

agricultural inputs agricultural inputs principally seeds of various crops and principally seeds of various crops and fertilizers fertilizers Inputs Interventions: Starter Pack Scheme , Inputs Interventions: Starter Pack Scheme ,

Targeted Input Program, Input subsidy, Seed Targeted Input Program, Input subsidy, Seed Fairs Fairs

• Funded by: The Government of Malawi, The Funded by: The Government of Malawi, The European Union (EU) and The Department for European Union (EU) and The Department for International Development (DFID)International Development (DFID)

• Some of the NGOs involved in input interventionsSome of the NGOs involved in input interventions– Canadian Physicians for Aid & Relief (CPAR), Canadian Physicians for Aid & Relief (CPAR),

Catholic Relief Services (CRS), CADECOM, etc.Catholic Relief Services (CRS), CADECOM, etc.

BACKGROUND (cont’d)BACKGROUND (cont’d)

• Thus the input market has roughly been Thus the input market has roughly been dualistic in nature with both non-dualistic in nature with both non-commercial (the interventions/distortions) commercial (the interventions/distortions) and commercial markets (minus and commercial markets (minus interventions/distortions) running side by interventions/distortions) running side by side. side.

• However, there has been poor integration However, there has been poor integration of commercial and non-commercial input of commercial and non-commercial input supply systems. For instance, there was an supply systems. For instance, there was an outcry in the 2005/06 subsidy programme outcry in the 2005/06 subsidy programme that the private sector was not fully that the private sector was not fully involved.involved.

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BACKGROUND (cont’d)BACKGROUND (cont’d)

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PURPOSE & OBJECTIVES OF STUDYPURPOSE & OBJECTIVES OF STUDY

Purpose of the studyPurpose of the study To demonstrate the potential impacts of To demonstrate the potential impacts of

integrating the inputs delivery systems integrating the inputs delivery systems through an input voucher system which can through an input voucher system which can be used to enhance the purchasing power of be used to enhance the purchasing power of the poor while the commercial sector can the poor while the commercial sector can expand their distribution networks. expand their distribution networks.

Objectives of the studyObjectives of the study To test the potential benefits of using voucher To test the potential benefits of using voucher

systems to integrate the commercial and non-systems to integrate the commercial and non-commercial input distribution channels. commercial input distribution channels.

To establish the nature of fraud and to To establish the nature of fraud and to determine anti-fraud measures so that the determine anti-fraud measures so that the system is not abused.system is not abused.

• Improved household and national food security Improved household and national food security (0.5million metric tonnes and 1.3 million metric (0.5million metric tonnes and 1.3 million metric tonnes surpluses in 2005/06 and 2006/07 tonnes surpluses in 2005/06 and 2006/07 respectively)respectively)• Increased yield from <1 ton/ha up to 2.04 tons/ha.Increased yield from <1 ton/ha up to 2.04 tons/ha.

– Increased sales volume by commercial agenciesIncreased sales volume by commercial agencies– Program provided an assured market for input Program provided an assured market for input

dealersdealers– Increased per capita use of inputs (fertilizer and Increased per capita use of inputs (fertilizer and

hybrid seed)hybrid seed)• Small agro-dealers were marginalized because most of Small agro-dealers were marginalized because most of

them did not participatethem did not participate

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MAJOR FINDINGSMAJOR FINDINGS

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MAJOR FINDINGSMAJOR FINDINGS1.1. Registration SystemRegistration System

There was no systematic procedure on registration There was no systematic procedure on registration of beneficiariesof beneficiaries Identification of beneficiaries by VDC Identification of beneficiaries by VDC In some case VDC & Subsidy CommitteeIn some case VDC & Subsidy Committee

Most chiefs registered all the people in the villageMost chiefs registered all the people in the village

2.2. Types of inputs and couponsTypes of inputs and coupons

FertilizerFertilizer 23:21:0 +4S (NPK + S) and Urea for maize23:21:0 +4S (NPK + S) and Urea for maize D. Compound and C.A.N for the tobaccoD. Compound and C.A.N for the tobacco

Maize SeedMaize Seed Hybrid (2kg) and OPV (4kg)Hybrid (2kg) and OPV (4kg) Farmers asking for a minimum of 5kgFarmers asking for a minimum of 5kg

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3. 3. Quality of inputs and distributorsQuality of inputs and distributors Quality for all inputs was generally said Quality for all inputs was generally said

to be goodto be good Distribution networksDistribution networks - There were a - There were a

number of outlets, namely: SFFRFM, number of outlets, namely: SFFRFM, ADMARC, Farmers World, Kulima Gold, ADMARC, Farmers World, Kulima Gold, Chipiku Stores, Individual small-scale Chipiku Stores, Individual small-scale agro-dealers, agro-dealers, NASFAMNASFAM

4.4. Logistical problemsLogistical problems Mismatch between # of coupons and Mismatch between # of coupons and

inputsinputs Much publicity on fertilizer and not seedMuch publicity on fertilizer and not seed Mismatch between qty of fertilizer and Mismatch between qty of fertilizer and

seed (50kg vs. 2kg)seed (50kg vs. 2kg) Lengthy coupon redeeming processLengthy coupon redeeming process

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4.4. Logistical problemsLogistical problems cont’dcont’d

More paperwork involved (for More paperwork involved (for suppliers, donors)suppliers, donors)

Late planning for the program Late planning for the program resulting in late coupon and input resulting in late coupon and input distributiondistribution

Lack of supplier identification on the Lack of supplier identification on the couponscoupons

Few input distribution points Few input distribution points Conflicting information on who are the Conflicting information on who are the

intended beneficiariesintended beneficiaries Pan-territorial input distribution (e.g. Pan-territorial input distribution (e.g.

CAN vs. Urea in Lower Shire)CAN vs. Urea in Lower Shire)

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5.5. Fraud/CorruptionFraud/Corruption Some companies not registered as Some companies not registered as

input suppliers were offered tendersinput suppliers were offered tenders Bribes being given at various levels Bribes being given at various levels

(registration, issuance of coupons (registration, issuance of coupons and at distribution points)and at distribution points)

Ghost names registeredGhost names registered Suspected selling of coupons by Suspected selling of coupons by

chiefschiefs Vendors found with couponsVendors found with coupons

• Despite some of the mentioned challenges, the Despite some of the mentioned challenges, the program was generally a success.program was generally a success.– Food security at national levelFood security at national level– Increased use of inputsIncreased use of inputs

• Input vouchers had shown great potential of Input vouchers had shown great potential of integrating commercial and non-commercial input integrating commercial and non-commercial input supply systems as demonstrated by:supply systems as demonstrated by:– Growth and expansion of private sector businessGrowth and expansion of private sector business– Increased per capita use of fertilizerIncreased per capita use of fertilizer

• Still more room for improvement of integrating Still more room for improvement of integrating commercial and non-commercial systems as the commercial and non-commercial systems as the programme favoured large and well-established programme favoured large and well-established input suppliers at the expense of small-scale agro-input suppliers at the expense of small-scale agro-dealers.dealers. 12

GENERAL CONCLUSIONSGENERAL CONCLUSIONS

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RECOMMENDATIONSRECOMMENDATIONS

Timely planning of activities:Timely planning of activities:– Beneficiary identification by JuneBeneficiary identification by June– Issue of coupons by AugustIssue of coupons by August– Issue of inputs by SeptemberIssue of inputs by September

Need to have a clear targeting criteriaNeed to have a clear targeting criteria The subsidy package to consider ecological The subsidy package to consider ecological

zoneszones Coupons to identify suppliersCoupons to identify suppliers Government must ensure that unauthorized Government must ensure that unauthorized

and unregistered companies and individuals and unregistered companies and individuals do not trade in fertilizers and seeds to do not trade in fertilizers and seeds to enhance quality and prevent corruptionenhance quality and prevent corruption

• Small-scale agro-dealers to be supported Small-scale agro-dealers to be supported with capital by their respective with capital by their respective association (e.g. AISAM and CNFA) in association (e.g. AISAM and CNFA) in order to participate in the programme. order to participate in the programme. This will:This will:– Assist in expanding the distribution network;Assist in expanding the distribution network;– Eventually reduce distances the beneficiaries Eventually reduce distances the beneficiaries

travel to input distribution points; andtravel to input distribution points; and– Assist in building capacity of the agro-Assist in building capacity of the agro-

dealers. dealers.

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RECOMMENDATIONS (cont’d)RECOMMENDATIONS (cont’d)

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THANK YOU FOR THANK YOU FOR YOUR ATTENTIONYOUR ATTENTION