Risk Free Fertilizer in Tanzania

Study Context

Low use of modern agriculture inputs such as fertilizer is a major contributor to low crop yields in sub-Saharan Africa. A possible inhibitor of take-up is fragmented markets that raise transport costs and allow middlemen to charge high markups. This study evaluated an intervention addressing this issue in a predominantly agricultural area in northern Tanzania.

Study Design

This study took place over two consecutive growing seasons, one short and one long. To determine if lower prices would stimulate demand, the study randomly allocated vouchers to farmers allowing them to purchase fertilizer at 10-100% of market prices prior to the first growing season. This price randomization was cross-cut with two interventions: i) agricultural extension services and ii) a savings product to measure if farmers reinvest additional profits generated by fertilizer use. In the second growing season, farmers were revisited and re-offered subsidies.

Results and Policy Lessons

Preliminary results show that doubling transportation costs to the primary regional market is associated with an 8% increase in the delivered price for fertilizer and a reduction in fertilizer adoption by 25%.