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Innovations in improving access to inputs to smallholder farmers in Ethiopia

October 17, 2014

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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

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3

0

0,5

1

1,5

2

2,5

0

100

200

300

400

500

600

700

800

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Tons/ha

Dap Urea total Yield

Year

Fertilizer use and crop yields in Ethiopia 2002-2013 Thousand MT

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Status of Ethiosis Soil Survey

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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 2015.

• 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

Outside view of one of the Fertilizer Blending

Plants inaugurated (June 2014)

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Internal view --- packaging.

Locally produce up to 500k ton of blends

8

50

214

458

524 524

0

300

600

2018 2014 2017 2016 2015

Production (kton)

Tigray, Amhara, Oromia(2) & SNNP

Production started in June 2014

Construction and equipment are

currently procured for other plants

The Fertilizer Blending initiative

100kton per plant (500kton total)

Expected production of local plants (kton)

Already for the first year, a production of 61kton of blended fertilizer is

expected

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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

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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

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Payment for default

Credit

Cash

Input Flow

Credit guarantee

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ATA and MoA have been working to diagnose problems in the current input credit system

Cash/credit flow Product flow

International supplier

Agricultural Input Supply Enterprise

(AISE)

Coop Union & Federations (Selected by

AISE)

Commercial Bank of Ethiopia (CBE)

(Loans for Cooperative Unions)

Regional Agricultural Bureaus

Primary Cooperatives

Smallholder farmers

Cooperative Unions

Source: IFPRI, 2012; stakeholder interviews

Commercial farms

CBE issues loans to cooperative unions via a regional

representative; funds are sent straight to AISE

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

Fertilizer value chain example

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Commercial Bank of Ethiopia (CBE)

Financial Institutions (such as MFIs, RUSACOs and commercial banks with local presence)

Primary Coops

Regional Government Guarantee

Coop unions Farmers

Voucher on credit

Farmer presents voucher for

input provision

Inputs provided to farmers

Voucher redeemed for credit against loans; additional cash payments as necessary

Loans for union fertilizer purchase / capital adequacy for farmer vouchers

Loan repayment

Payment for fertilizer

WORK IN PROGRESS

Output buyers2

E-voucher Cash Flow Input Flow Loan repayment Output Flow

Payment for produce with loan & fees deducted

Farmers aggregate & sell their outputs to buyers

Payment for farmers’ produce

Payment for inputs

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

Newly designed input credit delivery system

Agricultural input producers,

international suppliers, and importers

Agricultural inputs (improved seed, fertilizers and chemicals)

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Appropriate risk mitigation mechanisms are necessary

• 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)

Risk mitigation mechanisms include…

Some results from the 2013 pilot in Amhara Region

Expected average yield per hectare (qt/ha)

20

63

36

23

66

39

70

40

60

maize

50

30

10

+3

+3

+3

teff wheat

20

2006

2005

Number of farmers engaged in 2006

193,000

148,500

2005

200,000

100,000

2006

50,000

+30%

150,000

Dap

100

37

75

170

39

90

180

+15

Improved seed

50

200

150

Urea

2005

2006

Average input use per hectare (Kg/ha)

Total amount of fertilizer distributed (quintals)

Source: RFS project MLE survey, September 2014

33,856 156,000

Total cash credit

122,144

+6

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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

Innovations to help our country grow