The farm inputs pyramid
The farm inputs pyramid is the context from which the farmer derives her/his inputs for farming. It entails financial instruments such as investments, loans and insurance, logistics elements such as a distribution network with storehouses, as well as physical inputs such as seeds and farm tools.
Most smallholder farmers in developing countries have limited access to formal financing/credit for their activities. For example, it is estimated that only about 1% of bank lending in Africa goes to the agricultural sector (IFC, 2014). Even this 1% likely goes mostly to commercial farmers in high value chains, who earn income from the sale of their produce. For the category of smallholder farmers, the myriad risks associated with agricultural production such as floods, droughts, diseases and higher transaction cost are often hard to negotiate in the present financial setting. In recent years, collaborative service packaging schemes have been devised to leverage communal income from produce to allow better access to good markets (IFC, 2014).
For most smallholder farmers, however, options for such formal credit are virtually non-existent. This is especially the case for subsistence farmers who consume what they cultivate (AGRA, 2013). For them, there are no financial investment tools in land preparation, seeds, nutrient application, or labour. The harvested produce is either completely used for household consumption, or a small portion is sold on local market to raise revenue for paying school fees, buying clothes, or food during the dry season. Consequently, subsistence farmers are unable to participate and benefit from formal financial institutions since they receive very little financial income at the end of each season. These farmers often rely on family and friends, local cooperatives and other social networks to access support (e.g., farm inputs) for their farming activities. For example, in rural smallholder systems, farmers may take turns to provide labour on the farms of their neighbours in anticipation for a reciprocal support from other members in the network. In Ghana, for example, this system is called “nnoboa,” which literally means “mutual assistance in weeding” (Salifu and Funk, 2012). Smallholder farmers who do not readily have access to formal credit depend on these social systems to aid in the production process.
Anang et al. (2015) found that the factors that influence a smallholder farmer’s access to credit include household income, farm capital, gender, improved technology adoption, contact with agricultural extension officers, farm location and farmer awareness of lending institutions in the region of operation.
In recent years, a number of initiatives have been rolled out by private companies, NGOs, international aid agencies and national governments to improve low-end smallholder farmer access to credit and inputs (Collier and Dercon, 2014; Fischer and Qaim, 2012). For example, some fertilizer companies provide fertilizers to farmers at the beginning of the season and receive payment after farmers have harvested their produce. National governments have also embarked on fertilizer subsidies aimed at increasing food production and livelihoods (Banful, 2011; M. Ouedraogo et al., 2010).
Agricultural extension officers provide valuable information and support to smallholder farmers in many developing countries. These officers provide advice to farmers concerning
- planting times and methods,
- seed varieties,
- preventing/fighting pest and diseases,
- irrigation scheduling, and other matters of the farm production process.
Extension officers are mostly employed and trained by a country’s agricultural ministry and form an integral part of the farm inputs pyramid.