Targeting the Non-Poor: A Boost to Farm Yields in Malawi

The World Bank study on Malawi’s Farm Input Subsidy Program suggests that targeting non-poor farmers, who are more efficient in fertilizer use, could enhance agricultural productivity. Despite the crowding-out effect of commercial fertilizers, focusing subsidies on non-poor farmers could increase maize yields, aligning with the program’s productivity goals rather than solely poverty alleviation.

Should Subsidy Programs Focus on Non-Poor Farmers?

A groundbreaking study on Malawi’s Farm Input Subsidy Program (FISP), published by the World Bank, raises a crucial question: should farm input subsidies target non-poor farmers instead of the poor? The research, led by Francis Addeah Darko, dives deep into the impact of targeting strategies for farm input subsidies, particularly focusing on maize production and the effects of fertilizer efficiency. The findings challenge long-held assumptions about poverty-targeted agricultural policies and suggest a shift in focus could enhance productivity and national food security.

Fertilizer Efficiency: Non-Poor Farmers Shine

One of the core revelations of the study is the stark difference in fertilizer use efficiency between poor and non-poor farmers. Non-poor farmers, defined using both consumption expenditure and an asset-based wealth index, demonstrated significantly higher efficiency in using inorganic fertilizers. This is measured by how much maize yield is produced per kilogram of nitrogen fertilizer applied. The study’s data showed that non-poor farmers not only made better use of the fertilizers but also had access to better complementary inputs like labor and pesticides, which further enhanced their efficiency.

The poor, on the other hand, despite being the traditional beneficiaries of these subsidies, often lacked the resources to maximize the potential of the fertilizers. Their access to complementary inputs was limited, and as a result, their yields were consistently lower. This challenges the traditional approach that farm subsidies should primarily target the poor, as it reveals that such subsidies may not always lead to optimal productivity outcomes.

The Trade-off: Crowding Out Commercial Fertilizers

Another key factor in the debate is the "crowding out" effect, where subsidized fertilizers displace commercial purchases. According to the study, non-poor farmers were more likely to substitute commercial fertilizers with subsidized ones compared to their poorer counterparts. While this crowding out is seen as a downside, the overall efficiency and yield gains among non-poor farmers still outweighed the negative effects.

The study revealed that even with this crowding out, targeting non-poor farmers could result in an overall maize yield increase of 3.14 to 4.33 kilograms of maize per kilogram of nitrogen fertilizer used. This makes a compelling case for reevaluating the targeting mechanisms of farm subsidy programs to focus on productivity rather than just poverty alleviation.

Focus on Productivity

The findings of the World Bank report suggest that the productivity-enhancing goals of farm input subsidy programs like Malawi’s FISP could be better served by targeting non-poor farmers. While this may seem counterintuitive to traditional poverty-reduction strategies, the evidence indicates that non-poor farmers are more capable of maximizing the benefits of the subsidies, leading to better yields and improved food security for the country.

The study acknowledges that this shift in focus comes with trade-offs, particularly in terms of crowding out and the potential political and social implications of moving subsidies away from poorer farmers. However, the overall benefits to national food production and security make a strong case for such a transition. As Malawi and other Sub-Saharan African countries continue to grapple with agricultural productivity and food security, this report offers new insights that could reshape farm subsidy policies across the region.