Innovations in improving access to inputs to smallholder farmers in Ethiopia

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1 Innovations in improving access to inputs to smallholder farmers in Ethiopia October 17, 2014 ATA is currently engaged in major initiatives to improve access to fertilizer Developing a digital soil map for Ethiopia - Ethiosis Developing evidence based fertilizer application recommendations Establishing fertilizer blending plants Large scale demonstration of new fertilizers IVR based extension system on proper fertilizer application Streamlining the fertilizer distribution system and providing input credit 2 1

2 Thousand MT 800 Fertilizer use and crop yields in Ethiopia Tons/ha 2, Dap Urea total Yield , , Year 3 Status of Ethiosis Soil Survey 4 2

3 Status of Ethiosis Soil Survey So far, EthioSIS has accomplished soil fertility survey in 277 woredas in the country, of these, 35 are woredas in Tigray have been completed; and will reach about 501 by end the of July Soil inventory for fertility purpose now stands at >31,000 soil samples, Of the 277 surveyed woredas, soil analysis completed for 170, Fertilizer recommendation for at least 170 woreda is completed hence impacting the national fertilizer procurement decision 5 Outside view of one of the Fertilizer Blending Plants inaugurated (June 2014) 3

4 Internal view --- packaging. Locally produce up to 500k ton of blends The Fertilizer Blending initiative Expected production of local plants (kton 600 Production (kton) Tigray, Amhara, Oromia(2) & SNNP 100kton per plant (500kton total) Production started in June 2014 Construction and equipment are currently procured for other plants Already for the first year, a production of 61kton of blended fertilizer is expected 8 4

5 Blended fertilizer demonstration on farmer s plot in East Wollega, Guto Gida woreda, Demeksa kebele---october 8, 2013 Teff variety Kuncho row-planted 15 days later than the adjacent plot and that received blended fertilizer 2 (NPSZn) plus urea showed good crop stand with green color The same tef variety (Kuncho) planted 15 days earlier as broadcast and with DAP and Urea didn t perform well compared to the other adjacent plot Why input finance? The economics of fertilizer use in Ethiopia demonstrates a clear value proposition for usage across most crops and regions however, fertilizer usage has increased only marginally over the years These low adoption and application rates of fertilizer can be in part explained by absence of access to input credit, a key determinant of fertilizer use as well as seed purchase ATA and MoA has therefore focused significant effort in the past few months on improving Ethiopia s input credit system 10 5

6 ATA and MoA have been working to diagnose problems in the current input credit system International supplier Agricultural Input Supply Enterprise (AISE) Coop Union & Federations (Selected by AISE) Commercial farms Product flow CBE issues loans to cooperative unions via a regional representative; funds are sent straight to AISE Commercial Bank of Ethiopia (CBE) (Loans for Cooperative Unions) Cash/credit flow Cooperative Unions Primary Cooperatives Smallholder farmers Regional Agricultural Bureaus Fertilizer value chain example Input Flow Cash Credit Credit guarantee Payment for default If coop unions default, regional government covers the balance Regional government credit is no longer passed on to farmers, but some primary coops offer loans to members from their own funds Source: IFPRI, 2012; stakeholder interviews 11 Newly designed input credit delivery system Agricultural input producers, international suppliers, and importers Payment for inputs Regional Government Guarantee Loan repayment WORK IN PROGRESS Commercial Bank of Ethiopia (CBE) Loans for union fertilizer purchase / capital adequacy for farmer vouchers Financial Institutions (such as MFIs, RUSACOs and commercial banks with local presence) Agricultural inputs (improved seed, fertilizers and chemicals) Coop unions Voucher redeemed for credit against loans; additional cash payments as necessary Payment for fertilizer Primary Coops Voucher on credit Farmer presents voucher for input provision Inputs provided to farmers Farmers Payment for produce with loan & fees deducted Farmers aggregate & sell their outputs to buyers Payment for farmers produce Output buyers 2 Input Flow Cash Flow E-voucher Output Flow Loan repayment 1 May not be required if risk mitigation mechanisms are put in place, particularly a designated buyer of farmer output 2 Purchasing arrangement will vary by crop and region but could include letters of intent to purchase or more formal contract agreement 12 6

7 Appropriate risk mitigation mechanisms are necessary Risk mitigation mechanisms include Use of vouchers and other electronic transfers to reduce cash management Technical assistance for financial institutions on risk management / monitoring Financial literacy campaigns for farmers flyers, radio, TV, drama Farmer collateral groups Separation of the input retailing responsibility of coops from credit disbursement and collection Crop insurance solutions are being developed Establishment of guaranteed markets for produce (e.g., purchase contracts with producers) 13 Some results from the 2013 pilot in Amhara Region Number of farmers engaged in ,144 33, ,000 Average input use per hectare (Kg/ha) cash credit Total Total amount of fertilizer distributed (quintals) +30% 200, , , , ,000 50,000 Dap Urea Improved seed Expected average yield per hectare (qt/ha) wheat maize teff Source: RFS project MLE survey, September

8 Next steps on systemic input credit interventions Scale up the input credit system in Amhara from 5 to 90 woredas Start pilot in three other regions: Tigray, SNNP and Oromia Automation of the system using technology to bring efficiency and to scale up Start a weather index insurance bundled with credit 15 Innovations to help our country grow 8