Market Based Solutions to Input Supply

Market-based solutions for input supply: making inputs accessible for smallholder farmers in Africa.

John Belt, Wouter Kleijn, Pauline Ancella Chibvuma, Elton Mudyazvivi, Morgen Gomo,Chola Mfula, Erastus Mkojera, Michael Opio, Isaahaku Zakaria and Kofi Boafo. SNV, 2015.For agriculture to prosper, farm inputs need to be available, affordable, accessible, and goodquality. This paper introduces what market-based input supply is, explains seven principles for the promotion of market-based input supply in Africa, and outlines three approaches to support market-based input supply.1 Agro-dealer approachIn this approach, which is implemented in Zimbabwe, Zambia and Ghana, input provision is driven by profit-seeking agro-dealers. The agro-dealers must serve a minimum number of farmers with a certain amount of buying power, whilst providing a stable supply of inputs on reasonable terms. Additional revenue streams, such as output marketing, transport, selling solar panels, cement, and animal feed, often strengthen the business case of the agro-dealers and complement the sale of inputs.2 Chain Leader ApproachThis approach, implemented in Uganda and Tanzania, typically focuses on one commodity only, and on a value chain that is organised around a powerful actor, a ‘chain leader’. The input supply is driven by a remunerative market for farmers, while the chain leader assures the product is bought. The leader is willing to work with agro-dealers, to provide inputs directly or indirectly to the farmers.3 Local traders approachIn this approach the value chain does not have a ‘chain leader’, but is characterized by many buyers, low value addition, large transaction costs, high demand and an unregulated market. This is the reality in many agro chains. Investment from buyers into input provision for farmers is too risky because of side-selling. Also, buyers are hesitant to finance technical support to optimize input use as they are not sure the produce is sold to them. These buyers, sometimes small-scale processors or retailers, work through local traders, the main players in the value chain, to secure supply.