Impact Of Agricultural Market Reforms On Smallholder Farmers In ...

ecause reforms have also been accompanied by the elimination of input subsidies, better-off farmers
were probably more capable of weathering the higher costs of inputs. This is not to say that fertilizer
subsidies in the past benefited the poor necessarily. In fact, there is a lot of evidence that fertilizer
subsidies were not very effective because subsidized fertilizer was often rationed, of the wrong type,
arrived late, and was not targeted to the poorest farmers. In many instances, subsidized fertilizer was
leaked to the estate sector.
6.6 Policy Implications for Malawi
Find institutional solutions to provide rural credit. The market failure in the provision of rural
credit has negative consequences on household consumption and the adoption of technology with direct
consequences on food security and agricultural productivity. The existing credit institutions in Malawi
have serviced some segments of the population (such as SACCO, MRFC, NABW, DEMATT) but
obviously no universal solution has emerged to service the small and poor farmers with no collateral.
Contract farming and out-growers schemes could provide some remedy by linking the supply of input on
credit with crop buying. However, interlocking transactions are usually more successful under certain
circumstances such as when there are a few buyers and market demand for the crop is strong.
Furthermore, these schemes are more applicable to export crops than to non-tradable domestic crops.
Both the private and the public sector should come up with solutions to supply rural credit to farmers on a
sustainable basis.
Promote the development of farmers’ organizations, clubs, or cooperatives. Farmers that
organize themselves into groups (such as tobacco clubs) have usually better access to credit and inputs.
This is mainly because credit institutions such as MRFC are more willing to lend to a group of farmers.
Farmer groups are also able to benefit from economies of scale in marketing their crops (such as
marketing tobacco at the auction floor) and obtaining information on agricultural production and
marketing.
Encourage the production of cash crops. Tobacco growers have more access to cash to smooth
their consumption needs and to buy inputs such as fertilizer. They are also more likely to use fertilizer on
their food crops. The production of cash crops should therefore be encouraged because of its positive
spill-over effects on food production and cash-income generation.
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