Economics & Public Policy
5 mins read

What Will Make Farmers Invest More in Agricultural Inputs

Featuring Shilpa Aggarwal
Farmers are more likely to invest in agricultural resources when they have both cash and are closer to markets.
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Shilpa Aggarwal
Associate Professor of Economics and Public Policy. As a development economist, her research explores market linkages in developing countries, with a current focus on agricultural supply chains in India and East Africa. She also studies domestic trade, microfinance, and food policy.
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In Malawi, a landlocked country in Southern Africa, agriculture is the lifeline for over 80% of the population. Ideally, investing in high-quality seeds and fertilisers should be the natural choice for rural farming households to improve their productivity. However, these critical inputs remain out of reach for many.

The challenge goes beyond financial resources. Markets which supply these inputs are often distant, inaccessible, or unreliable. The nearest agro-retailer is usually located miles away, leaving farmers unsure if these essential inputs will be in stock. High transportation costs further make these supplies unaffordable.

To ease these burdens, Malawi introduced the Farm Input Subsidy Program (FISP). Central to the country’s food security strategy, the scheme aims to provide heavily subsidised agriculture supplies to farmers. However, in practice, FISP has been plagued by delays and inefficiencies. Consequently, farmers are left uncertain of when–or if at all–they will receive their allocated share of agricultural inputs, making it harder for them to plan investment ahead of the planting season. 

 

The role of cash in hand 

Research has shown that one-time, unconditional cash transfers to low-income households boost immediate consumption. However, the impact of these transfers on long-term investment, particularly in agriculture, has been unclear. Many farmers still struggle to invest in productive farm inputs despite receiving financial support.

To understand what holds them back, my co-authors and I studied whether this happens because of a lack of cash or poor market access. In the study, we also examined what happens when both constraints are lifted simultaneously.