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Agricultural Subsidies, Savings, and Farm Reinvestment

Agriculture Kenya

Food grain prices in much of rural Africa are volatile, implying positive returns to storing maize for sale when prices are favorable and maize is needed in the hungry season. Yet maize storage is minimal and inefficient—typically a simple burlap bag at home, vulnerable to spoilage from moisture, pests and rodents. Researchers worked with existing Rotating Savings and Credit Associations (ROSCAs) to introduce a voucher-based subsidy program for random discounts on fertilizer purchases, cross-cut with a random selection of ROSCAs to start a Group Savings and Reinvestment Account (GSRA). Each GSRA identified a member to store group maize bags on a wooden stand in their home and received a ledger book to record deposits and withdrawals/sales. Researchers then measured fertilizer coupon redemption, GSRA savings, and fertilizer adoption to observe any effects on participants’ financial health and behavior. Results found a sizeable savings take-up: 96% of ROSCAs put some maize in the GSRA, while 49% of farmers participated in the GSRA. GSRA participants stored 27 kg more maize in total (13% increase), were twice as likely to sell at least some maize, and earned $5.90 (19%) more revenue. Researchers are pursuing funding to evaluate the program at scale. Further results forthcoming.

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