This story was cross-posted from the IFPRI website and was originally written by Kwaw Andam, a research fellow with the Ghana Strategy Support Program (GSSP). It also appears on the GSSP blog.
Could targeting ensure that the poorest farmers receive subsidies and at the same time reduce administrative costs? A recent IFPRI study published in the Journal of Development Studies set out to answer this question, exploring the feasibility of targeting using a method called, 'proxy means tests' or PMTs.
The study, led by IFPRI's Strategy Support Program in Ghana, first examined how well existing mechanisms fare in terms of reaching the right beneficiaries in Ghana, given that Ghana’s 2012 subsidy reached only 11 percent of poor farmers nationwide, while benefits leaked to 72 per cent of non-poor farmers. A targeting approach improves pro-poor coverage, ensuring that the subsidy reaches about 70 percent of poor farming household in Ghana’s northern regions.
The study also examined whether a targeting approach could work in practice, specifically evaluating how well and for how long a PMT method could perform in correctly identifying the intended target group. Finally, the study considered whether a targeting approach is worth the cost. It found that, in terms of cost effectiveness, GHS9.55 ($1.91) is spent for every cedi ($0.20) worth of fertilizer transferred to a poor farmer under the universal approach due to the leakage costs, while only GHS1.1 ($0.22) per cedi of fertilizer is needed under a targeted approach.
Ghana’s government has been providing input subsidies in a resource-constrained environment. This study shows the possibilities and limits for using improved targeting to achieve objectives related to helping support poor farmers.
For the full story and more findings from the study, please see original post on the IFPRI website and GSSP site.
