Consulting the stakeholders on pro-poor market segmentation of maize seed in Africa

Market segmentation, while popular in the pharmaceutical industry, is rarely used in agricultural technology dissemination, where beneficiary targeting is preferred. Market segmentation, while easy and cheap, tends to generate leakages, while beneficiary targeting, is typically associated with high administrative costs and distortionary effects. To achieve a better understanding of the potential for using market segmentation to improve the adoption of agricultural technology, a consultation was organized in Kenya in May and June 2008 with stakeholders from the seed sector, NGOs, Ministry of Agriculture, agro-dealers and researchers. The consultation included individual visits to 9 stakeholders, a formal meeting with 39 stakeholders, and a formal questionnaire filled in by 18 respondents. Results indicate that indirect identification of the poor is difficult, since poor and non-poor live in the same areas and use the same technologies. The consultations show that several organizations in Kenya, including government agencies, non-governmental organizations, and seed companies, supply reduced-cost inputs to the poor, and they commonly use direct identification of the poor. The costs of such exercises seem to be high, but no data are available on costs or the accuracy of the identification. There seems is no experience with tiered pricing, although stakeholders generally find it interesting. Most stakeholders showed an interest in experimenting with pro-poor market segmentation for maize seed. The two main market segmentation strategies that are viable are direct targeting, which is likely to be expensive but with limited leakage, and tiered pricing, which is likely to be a lot cheaper but with higher leakage, and which would need a control mechanism to avoid beneficiaries coming back for a second tier. To compare the costs and the benefits of both methods, as well as of different implementation options, a pilot study is needed. The main product of such a study should be maize seed at reduced prices (between 20% and 50%), up to a given quantity per farmer, provided at a discount (between 2 and 15 kg/household). The main tool would be cash vouchers, to be distributed by an independent agency based on direct identification of the target group, or the tiered pricing system, where each farmer receives vouchers for a specified amount. The agro-dealers will redeem their vouchers at an independent financial institution.

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Paper accepted for presentation at the 27th Conference of the International Association of Agricultural Economists (IAAE), Beijing China, August 16-22, 2009, (Ref 690)
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Contributed Paper

 Record created 2017-04-01, last modified 2017-08-22

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