Savings, Subsidies and Sustainable Food Security: A Field Experiment in Mozambique
University of Michigan
IFDC (Mozambique); Banco Oportunidade de Mocambique
Michael Carter; Rachid Laajaj; Dean Yang
Several sub-Saharan African countries have implemented large-scale fertilizer subsidy programs in an attempt to boost the productivity and food security of small farmers. With the recent global escalation in food prices, other countries in Africa and around the world are considering similar fertilizer subsidies. This is a key moment to quantify the short-term impacts such programs have on farm output, and also to investigate if there are ways to ensure that longer-term impacts endure after subsidies are phased out. Do farmers continue to invest in and utilize the improved technologies and the higher-yield inputs that were available to them under subsidies? The key to determining whether provision of subsidies leads to long-term growth, even after the subsidies are no longer in effect, is to discover if farmer practices change fundamentally or whether these practices change only in direct reaction to the availability of subsidies.
The recent implementation of a program that provides input support to smallholder farmers in rural Mozambique offers BASIS the opportunity to examine whether household wellbeing improves under subsidies, and if this improvement can be made sustainable. BASIS researchers implemented a field experiment among farmers in the program’s target regions to result in recommendations to help make this and similar programs more effective in improving household consumption over the long term, as well as revealing alternative approaches to subsidizing farmers that might prove more effective in improving farmer knowledge, practices and output. Importantly, the BASIS research also looks at whether providing farmers opportunities for savings plans through a local financial provider will help subsidies achieve a greater sustainable impact.
What are the short- and long-run impacts of fertilizer subsidies on smallholder farmers? Do subsidies have greater long-run impacts when they are provided in combination with savings facilities? Are savings matches effective at motivating farmers to begin saving, and do farmers continue saving on their own once matches end? How do group-based incentives for savings differ in their effects from individual-based incentives? This research seeks to shed light on these questions using a field experiment among farmers in rural Mozambique. Vouchers for fertilizer were distributed in a randomized fashion to a sample of farmers in rural Mozambique. In partnership with a local financial institution, we will randomize offers of savings accounts to farmers. Some savings accounts will be ordinary accounts with standard interest rates, while others will be matched savings accounts with match rates of up to 50%. To examine the impact of group incentives, another treatment group will involve savings matches that rise in group-level savings balances. A random lottery will be used to determine the specific savings intervention offered to each farmer group.