Free Access | 2024-04-12

Encouraging fertilizer adoption through risk free sample purchase: A randomized control trial in Uganda

Authors/Editors: Swaibu Mbowa (PhD) ,  Tony Odokonyero

Abstract:

Small farmers in sub-Saharan Africa use very few farm inputs such as fertilizer. Candidate explanations include lack of liquidity, present bias, risk aversion, limited availability of fertilizer, lack of training, and the risk of purchasing counterfeit fertilizer. We tested a “risk free sample purchase” sales offer that addresses all of these constraints. Farmers received a small amount of fertilizer, and only repaid if their harvest increased more than the cost of fertilizer. Farmers who repaid would have the opportunity to place a second order with upfront payment and free delivery. Results from our randomized trial in Mityana district in Uganda showed that the risk free sales offer increased acceptance of take up for DAP and UREA fertilizers by 44 and 45 percentage points relative to the control group that received a traditional sales offer. Unfortunately, a very serious drought and army worm infestation led to very low (and sometimes zero) harvest. In spite of the drought, the risk free sales offer increased partial and full time repayment by 17 and 9 percentage points. Also (probably due to the drought), there was only a small (and marginally statistically significant) increase in repurchase of fertilizer by farmers in the treatment relative to those in the control. It is therefore unclear how normal yields would have affected repayment and repurchase decisions under the risk free sales offer. Future projects could consider incorporating insurance for yields (and perhaps crop prices) to help farmers mitigate risk.