Analysis of Adoption, Return on Investment and Cost-effectiveness of Improved Potato Seed System Interventions in Malawi

Abstract

Governments, researchers, and development partners implement agriculture projects in sub-Saharan Africa to increase productivity, income, and welfare. Over the years, empirical research has made enormous efforts to assess the impact of such projects on desired outcomes. Despite these efforts, the financial efficiency of investments in agricultural interventions has received little attention, and there is a growing concern about the potential economic benefits such interventions generate. This study, therefore, examined the economic benefits and returns on investment (ROI) of the International Potato Center seed system interventions in Malawi with financial support of 3.425 million Euros from Irish Aid. With household data collected from 277 farmers in Ntcheu and Dowa districts and secondary data, the study applied a probit model to analyze the determinant of adoption of improved varieties. The study used a combination of endogenous switching regression with treatment effects estimation and economic surplus to evaluate the welfare impact of adopting improved varieties. Cost-benefit analysis was used to assess the return on investment, while cost-effectiveness analysis was used to identify the least cost-effective approach. The results showed that adopting improved varieties positively and significantly affected yield, which was evaluated at 1,099 kg per acre. On the other hand, adopting improved varieties reduced the cost of production by 24,761 MWK per acre. Furthermore, adopting improved varieties resulted in a total economic gain ranging from US$191.50 million to US$ 194.45 million. The study also found that Malawi’s potato seed system interventions produced positive results, with a ROI of US$ 34 for every US$ 1 invested. Furthermore, the net present value (NPV) was determined to be US$ 82.6 million, the benefit-cost ratio (BCR) to be 3.77:1, and the internal rate of return (IRR) to be 44.59%. Additionally, with a cost-effectiveness ratio (CER) of US$ 28, an average fixed cost of US$ 16 per farmer, and a marginal cost of US$ 11, training was the most cost-effective approach, and the analysis showed that US$ 100 could train four farmers. Increased partnerships with key stakeholders, continuous capacity building of extension workers, farmer-to-farmer extension, diversification of technologies dissemination pathways, a decentralized seed multiplication system, and the establishment of effective regulatory interventions on seed quality assurance, according to the analysis, are critical to sustaining the economic gains realized.