Encouraging fertilizer adoption through risk free sales offer: A randomized control trial in Uganda. (September 2020) - Adong, Annet
Highlights: We test a risk- free sales offer that addresses - constraints to -- fertilizer uptake. Farmers test out a small sample of fertilizer before paying at harvest if profitable. Farmers who pay at harvest place a second order with upfront payment with delivery. Acceptance rates increase by 40 percentage points relative to the traditional sales. 34 % full repayment is promising, consider incorporating crop insurance in future. Abstract: Small farmers in sub-Saharan Africa tend to use few purchased inputs, such as fertilizer. Candidate explanations include farmer's lack of liquidity and risk aversion, limited availability of fertilizer in the market, lack of training of farmers in fertilizer use, and the risk of farmers purchasing counterfeit fertilizer. We tested a risk-free sales offer that addresses all of these constraints, and that allows for learning through farmer experimentation. Farmers received a small amount of fertilizer, and only paid if their harvest increased more than the cost of fertilizer. Farmers who paid would have the opportunity to place a second order with an upfront payment and free delivery. Results from our randomized trial in Mityana district in Uganda, showed that the risk-free sales offer increased acceptance rates for fertilizer use by over 40 percentage points relative to the control group that received a traditional sales offer. Partial and full payment increased by 15 and 8 percentage points, respectively. But we find small and statistically insignificant effects of the risk-free sales offer on farmer repurchase of fertilizer, perhaps due to the drought and armyworm infestation in 2016. The 8% full repayment rate we saw is not enough to make this sales offer profitable, but it substantially increases the usage of fertilizer by farmers initially. Also, 34% full repayment (among those with profits) is promising enough; the offer deserves another test (ideally, with crop insurance built-in).