Can Intermediary Incentives Improve Product Quality? Supply Chains and Fertilizer Quality in Sub-Saharan Africa

This project seeks to investigate how and why fertilizers’ quality degrades as it makes its way from urban ports to rural farmers.

Considerable evidence exists that increased use of fertilizer by smallholder farmers in Africa could improve productivity. Yet despite long exposure to fertilizer and access to affordable supplies, use of this and other modern inputs by smallholders remains detrimentally low. One possible explanation is that available supplies in Sub-Saharan Africa are of unreliable quality. Largely unregulated, the agricultural inputs supply sector in Tanzania is comprised predominantly of small rural shops with limited access to capital. As yet, no research has established why fertilizer quality problems – in appearance as well as in actual content – exist in these markets; nor have researchers focused on the important role of agro-inputs dealers in sourcing quality fertilizer and preserving its quality as it makes its way from port to farmer. How and why does fertilizer quality degrade as it makes its way from urban ports to rural farmers? What is the role of agricultural inputs dealers in preserving quality as fertilizer moves through supply chains and how can these small firms be induced to make investments to protect and improve product quality?

The project will implement a randomized control trial to (1) analyse the source of quality problems in fertilizer supply chains and (2) establish the scope for product quality improvements by supply chain actors in fertilizer markets in East Africa. The researcher will randomize quality incentives across the 225 agro-input dealers selling fertilizer in Morogoro Region of Tanzania.

Possible reasons for missing nutrients in fertilizers are broad and include adulteration by dealers, importation of poor quality inputs or some degradation along the supply chain. Distinguishing between these hypotheses matters critically for policy. For example, evidence of malfeasance would warrant more regulatory enforcement while degradation due to weak supply chains with limited credit access would suggest the importance of promoting sectoral investment. Uncertainty among consumers and agro-dealers regarding fertilizer quality could have widespread consequences for the functioning and growth of markets for fertilizer in the region. Such problems could hamper efforts to increase adoption of fertilizer as a means of raising regional agricultural productivity and improving household and national food security.