BACKGROUND
Driving agricultural innovation through incentives
AgResults is a multi-donor, multi-country effort to engage the private sector in solving some of the world’s most stubborn challenges. AgResults uses pull mechanisms—combined pay-for-results and prize challenge approaches—to catalyze distribution of commercial innovations that reduce food insecurity, improve household nutrition and health, and boost livestock productivity.
For over a decade, Abt Global partnered with the UK Foreign, Commonwealth and Development Office to evaluate AgResults’ activities, completing seven evaluations of challenge projects.
Our findings showed that a results-based prize approach can effectively engage the private sector and help create markets that benefit smallholder farmers. Yet the success and sustainability of pull mechanisms depend heavily on a strong underlying business case and a supportive enabling environment.
WHAT WE'RE DOING
Can pay-for-performance be a catalyst for private sector engagement?
The promise of pull mechanisms as a development tool is based on this hypothesis: With the proper incentives, the private sector can leverage its knowledge of suppliers and consumers to creatively overcome market constraints, develop and scale new technologies, and support sustainable markets that deliver impact for smallholder farmers.
AgResults implementers offer cash prize awards that incentivize commercial firms and entrepreneurs to see the potential in emerging markets. Since 2013, AgResults has supported the development of new seed varieties, improved farming methods, and better post-harvest storage techniques.
As the external evaluation partner, Abt used innovative and adaptable methods to identify AgResults’ contributions to changes in the target market and estimate their impacts on smallholder farmers. We generated evidence for implementers to adapt their programs, improve performance, and optimize effectiveness and efficiency. Our work also contributed to the global evidence base on private sector engagement and pull mechanisms.
IMPACT
Important lessons, clear wins
Abt’s evaluation team helped synthesize lessons around program effectiveness and efficiency. Evaluation findings supported decisions on whether to scale successful approaches, modify approaches, or stop those that were unsuccessful.
Pull mechanisms can successfully engage the private sector. AgResults catalyzed private sector engagement in three of the six projects Abt evaluated in Nigeria, Kenya, and Vietnam. In these cases, multiple independent companies participated in the pay-for-results program, met eligibility criteria for prize awards, and received prizes.
Results-based prizes are most successful when the private sector expects a strong business case beyond the length of the project. AgResults competitors who generated sustained market impact saw the competition and incentive as motivation to invest in the market at scale. But they were also keenly interested in the underlying potential of the market, independent of the AgResults incentive.
Engaging the private sector in pay-for-results can successfully include smallholder farmers through explicit project rules or by leveraging the smallholder farmer-inclusive nature of the underlying markets. In all AgResults projects, contest rules specified that only procurement from, sales to, or technology adoption of smallholder farmers would qualify competitors for prizes. For example:
- In Kenya, the project rewarded sales of smaller storage containers used primarily by smallholder farmers.
- In Nigeria, prizes were awarded to competitors who sourced maize from farmers with fewer than 10 hectares.
Pay-for-results projects can enhance smallholder farmer incomes and generate non-financial benefits. Several AgResults projects improved farmer income, farmer satisfaction with food storage, and/or farmers’ market integration. However, most projects found that farmer knowledge of proper technology use and/or health benefits lagged their acceptance of the new technology.
- Among households working with AgResults competitors in Nigeria, average net revenue from increased 16 percent, largely due to price premiums for maize.
- In Kenya, farmers partnering with AgResults found that the use of improved storage devices reduced the need for pesticides, leading to improved taste. The storage devices also led to labour savings on stock management and improved peace of mind.
- In Vietnam, engaging in AgResults increased the likelihood that a farmer sold rice and increased their average net revenue from rice production.
Pay-for-results can be a cost-effective approach to development. Across the completed projects, the average cost to the donor of influencing smallholder use of a new technology was relatively low. However, the cost-effectiveness of these activities was mixed.
WHY IT MATTERS
Incentivizing innovation can unlock solutions that benefit farmers and businesses.
These findings help policy makers, donors and governments understand ‘what works’ in agricultural interventions to inform future programs. Pay-for-results continues to be an approach of donor interest: When done right, it empowers the private sector to leverage its local knowledge of suppliers and consumers to develop and scale new technologies. Its focus on creating self-sustaining markets contributes to widely shared goals around value generation.
PROJECT
AgResults
CLIENT
UK Foreign, Commonwealth and Development Office