Voucher programs help smallholder farmers obtain agricultural inputs, such as fertilizers and improved seeds, while simultaneously building business for rural agro-dealers. IFDC recommends that vouchers be used instead of government programs that subsidize inputs and disrupt or discourage private sector efforts. Vouchers are often called “smart subsidies” because they supply inputs to farmers – generally at a lower cost to government – while encouraging commercial markets to be established and/or grow.
Vouchers act as coupons to transfer purchasing power to targeted smallholder farmers either by reducing the price of the input below market cost or by providing liquidity as production credit, with repayment expected at some later date. Farmers redeem the value of the vouchers for inputs through agro-dealers. The dealers then receive payment for redeemed vouchers from the program sponsors together with a pre-determined market margin to cover operating expenses and profit.
Successful voucher programs must be designed specifically for a particular country and the circumstances present at the time the voucher program begins. IFDC uses security measures such as watermarks, expiration dates and serial numbers to protect against fraud and program abuse.
IFDC voucher programs also provide benefits that direct subsidies cannot – training and technical assistance to both farmers and agro-dealers. Agro-dealers are trained to introduce new technologies and teach their farmer- customers how to correctly use inputs. This sets farmers on the road to increased productivity – the route out of the poverty trap.
IFDC voucher programs have been implemented in Afghanistan, Malawi, Mozambique, Nigeria and Rwanda.
An IFDC Core Competency: Fertilizer Voucher Programs (Taken from IFDC Report Volume 36, No.1)