Running Without Shoes: Plight of the Smallholder Farmer
Imagine you had to run a 10-kilometer race without running shoes. Certainly you would make do with what you had, but you would probably end up blistered and near the back of the pack. In a simplistic way, this is what smallholder farmers in Africa experience every day. But in their case, their lives depend on it.
Most smallholder farmers in Africa are farming without the tools and knowledge they need. They don’t have access to inputs like quality seed and fertilizer that would allow them to produce more. Some countries have tried to solve this problem by subsidizing inputs with the intention of making them more affordable. In the end, though, the result is like giving the runner one shoe to run the race.
Subsidies are fraught with problems. Often the administration is so poor that the inputs don’t arrive in time for the season. Those who benefit most tend to be less poor, more highly-educated, well-connected and men. Subsidies tend to “crowd out” private sector supply, and they often drive farmers to over-produce the subsidized crop, such as maize, which can lead to negative changes in diet and nutrition as production of other crops like legumes is reduced.
Even when smallholder farmers are able to procure subsidized inputs, the product is often still too expensive for them. In Ghana, for example, a bag of fertilizer on the open market costs 120 Ghanaian cedi, or about $30. The government subsidy reduces the price to 90 cedi, or about $23. While the lower price certainly helps, it is still out of reach for many smallholder farmers, who have little cash at the time that they need to purchase the inputs.
This is the main problem: It’s often not a question of overall income for farmers, but rather of cash flow. Farmers may well be able to afford inputs right after harvest, but they are often out of cash just prior to the planting season. And most of these farmers can’t borrow money to bridge the gap because, as we know, most banks won’t lend to them. One of the few options left is to borrow informally at very high interest rates, which eats into their profits at harvest time.
In order to break this cycle, farmers need to accumulate financial assets from production surpluses. In other words, they need to put some of the money they earn during harvest time into savings in order to purchase quality inputs for the next season.