Risk-Free Sample Purchase for Inorganic Fertilizer

Study Context

Despite the well-documented benefits of fertilizer on crop yields, take-up among smallholder farmers in Uganda remains low due in part to liquidity constraints, limited information, lack of training and risk aversion.

Study Design

This pilot aimed to overcome these challenges by introducing an innovative payment mechanism: a risk-free sample purchase. Randomly selected farmers were offered fertilizer to use on a select portion of their plot thereby allowing them to directly compare fertilized versus non-fertilized maize yields. The farmers only paid for the fertilizer if their harvest increased more than the cost of fertilizer. At the time of repayment, farmers were also offered the option to purchase fertilizer for the next planting season with free delivery. The comparison group were provided the traditional fertilizer sales offer.

Results and Policy Lessons

Results from this study show showed that the risk free sales offer increased acceptance of take up for fertilizer by ~45 percentage points relative to the control group. However, during the time of this study a very serious drought and army worm infestation led to very low harvest, which likely led to the small increase in repurchase of fertilizer by farmers in the treatment relative to those in the control. While it is unclear how normal yields would have affected repayment and repurchase decisions, researchers suggest future projects could consider incorporating insurance to help farmers mitigate risk.