Alexandra Snelgrove and Lemmy Manje. (June 2009) Enterprise Development and Microfinance Journal. Volume 20 Number 2.
The decision to purchase new productive technologies, however promising, presents great risks for the rural poor. Saving even relatively small sums involves difficult choices and sacrifice. The result is that farmers are disinclined to purchase new technologies and manufacturers, wholesalers and retailers are unwilling to invest in inventory and supply. This predictable cycle is one of the greatest challenges for developing sustainable markets. In response, NGOs often try to ensure equitable access for rural farmers through free distribution of pumps, seeds, or other technologies. To break this chain, smart subsidies can be used to accelerate demand and supply for critical production technologies. Properly administered incentives can attract commercial suppliers to actively address the needs of rural, underserved smallholder farmers without creating dependency. This paper presents the case of smallholder farmers in Zambia to highlight how incentives can play a role in developing weak agribusiness service markets.