The benefits and limitations of agricultural input cooperatives in Zambia

Abstract

• Cooperative-affiliated households use more fertilizer and hybrid seeds, and achieve higher yields, even when controlling for a nationwide input support program. • Across all selected productivity and input variables we find greater average treatment effects from cooperative membership than FISP participation. • Cooperative-affiliated households have more assets, more land, and higher yields than households without cooperative membership. • Zambian agricultural cooperatives most often provide collective benefits by decreasing transportation costs. • Poor households that are unable to join cooperatives miss out on direct benefits from subsidized inputs and benefits through collective action. Policymakers in Southern Africa have long viewed agricultural cooperatives as a way to reach rural households more easily, but because not all rural households can afford to join cooperatives, this raises questions about membership inclusivity and whether cooperatives advantage some smallholders over others. Agricultural cooperatives can serve as an institutional vehicle for policymakers to deliver direct benefits to smallholder farmers in the form of subsidized agricultural inputs, usually improved seed varieties and fertilizers. They can also serve as platforms for collective action through which smallholders can reduce transportation and transaction costs or disperse the costs of marketing. In Zambia farmers are required to join a cooperative to qualify for seed and fertilizer support through the national Farmer Input Support Program (FISP), which is a structural incentive for cooperative membership and makes it complicated to determine if cooperative membership increases use of inputs and yields on its own. Using the Inverse Probability Weight Regression Adjustment (IPWRA) technique, we find Zambian smallholders participating in cooperatives achieve significantly higher maize yields and use significantly more hybrid-maize seed and fertilizers, even when controlling for FISP eligibility. Furthermore, across all selected productivity and input variables we find greater average treatment effects from cooperative membership than FISP participation. Cooperative membership is also associated with more assets, more land, and higher maize yields, which suggests that the poorest rural households are often not cooperative members. Cooperatives can be a powerful poverty policy tool to deliver direct benefits to small farmers, but not including the poorest households likely widens the rural poverty gap, both in terms of limited direct benefits of input support programs and in terms of farmers missing out on cooperative-specific benefits.