Subsistence farmer preferences for alternative incentive policies to encourage the adoption of conservation agriculture in Malawi: A choice elicitation approach

Abstract

Land degradation in most sub Saharan Africa is a widely recognized problem and is due in large part to poor land management practices. To address this problem, several policy-based incentives to increase the adoption of better land management practices have been proposed, including fertilizer subsidies, cash payments and, more recently, subsidized or commercially offered weather index-based insurance contracts. However, little is known about farmers’ preferences among these policy alternatives, their relative effectiveness, and their likely fiscal implications. Using survey and choice elicitation data from 271 farmers in Central Malawi, this study examines smallholder farmers’ preferences among four major policy options that provide incentives for adopting agroforestry based conservation practices. Our results suggest that even when the expected value of an ideal insurance contract which has no basis risk was 25 percent higher than the cash payment option, sixty percent of the sample preferred the cash payment. Further, the empirical results indicated that cash flow or liquidity constraints may limit farmers’ willingness to use crop insurance as a risk management tool. We conclude that the potential scope for increasing the use of improved land management techniques through fertilizer subsidies, or cash or insurance incentives payments may be substantial, although fertilizer subsidies and cash payments may be less costly approaches than subsidizing insurance contracts.