A Study of the Relationship Between Farmer Savings and Sustainable Food Security
According to the World Bank, only one in five Africans has a bank account, and those who do typically reside in urban areas where access to banking facilities is more convenient. This leaves the majority of rural farmers without accounts, and thus, without savings to invest in agricultural inputs or basic household necessities. The “Savings, Subsidies and Sustainable Food Security” pilot project studies the relationship between farmers’ savings and their ability to improve their quality of life through better agricultural practices.
Specifically, the experiment studies the effects of incentives such as savings matches on smallholder farmers’ willingness to create and sustain bank-held savings. If a farmer is successful in the experiment, he or she will have ensured that personal funds are available for agro-inputs purchases before the next cropping season. Key assessments of the experiment include farm output, household consumption and other short- and long-term household indicators such as nutrition, health and child schooling.
The pilot project includes approximately 400 households in the villages of Chua, Penhalonga and Chadzuca in the Mozambican administrative post of Machipanda. The villages were chosen because of the area’s widespread irrigation of maize, making these farms less susceptible to the effects of recent droughts, and eliminating potential anomalies in the study data. The villagers’ access to existing Banco Oportunidade de Mocambique bank branches was also a determining factor.
For this study, village farmers are divided into two test groups. The first group receives individual matched savings of 50 percent of savings for farmers who deposit over 300 meticais (US $8.82) during a three-month period. Each farmer can receive up to 3,000 meticais in savings matches (US $88.20). The second group receives a group matched savings that combines 25 percent of the individual’s savings and 25 percent of the group’s savings. The participants are encouraged to increase their savings through the matched savings, and are provided with training and follow-up. The objective is to provide the means for farmers to self-finance their investments in fertilizer and improved seeds, thereby creating sustainable increases in crop production and living conditions.
Following the pilot project, the full-scale field experiment (to be implemented in the next cropping season) will involve 2,000 farmers and will study the impact of fertilizer subsidies; the interaction of fertilizer subsidies and savings; and the impact of savings facilities and savings matches. This experiment will test whether access to financial services can allow farmers increase the initial benefits of a fertilizer subsidy.
The pilot is a collaboration among IFDC, the BASIS Assets and Market Access Collaborative Research Support Program (University of Wisconsin) and the University of Michigan. The project is funded by the U.S. Agency for International Development (USAID).
Savings, Subsidies and Sustainable Food Security Information
Articles
Farmer Savings and Sustainable Food Security in Mozambique (Taken from IFDC Report Volume 35, No.2 in English and French)