Presented by Rodney Lunduka Presented at 2015 ECAMA Research Symposium Malawi Institute of Management (MIM), Lilongwe, 4-5 June, 2015

1. Case study of smallholder farmers in rural
Malawi

2. Is poverty an issue in Malawi?
• Poverty levels still very high despite investments.
– Example :Even with huge investment in FISP poverty levels
only reduced by two percentage points.
• Majority of population in Malawi rely on Agriculture.
– Policies have favored reducing food security and increasing
agri. Productivity.
• How can poverty level be reduced with Agriculture as a
base?
• The livelihood framework provide some insights.

3. Social
Capital
Political
Capital
The Livelihood framework.
Investments
in crop
prod.
High yield
(Qp>Qc)
Increased
output sales
Increased
income
purchase of
other
capitals
Natural
Resources
Capital
Financial
Capital
Physical
Capital
Human
Capital

4. Objectives of the paper
• Linking the livelihood framework through market
participation.
• Purchase of physical items is a result of selling
agricultural output (maize) on the market.
• We use three items:
– Ownership of cell phone.
– Ownership of electrical equipment.
– Ownership of at least two pairs of new clothes by
household members.

5. Data and sources
• Sample: 607
households
– Karonga: 196
– Salima:200
– Chikhwawa:211
• 2013/14 growing
season.
• CIMMYT DTMA
project

6. Descriptive statistics
Variable Households did not sale
maize in 2013/14 season
(N=621)
Household sold Maize
on 2013/14 season
(N=168)
Mean Std. Dev. Mean Std. Dev.
Total maize harvested (kg) 381.49 495.39 832.94 677.10
Total labor cost(MKw) 57,06.18 20,005.95 84,34.52 19,712.49
Total land endowment (acres) 3.57 2.52 4.21 3.22
Age of purchased seed (years) 2.98 3.28 2.72 3.07
Fertilizer applied (kg) 19.04 25.05 37.18 39.03
Total household size 5.79 2.31 5.36 2.12
Number of household
dependents
4.01 2.24 3.56 1.98

7. Descriptive statistics
Variable No Yes
total maize
harvested
(kg)
Total
maize sold
(kg)
total maize
harvested
(kg)
Total maize
sold (kg)
household owning a cell Phone 471.72 34.83 541.88 123.35
(597.5358) (110.4071) (559.2854) (749.9935)
Own and electric asset 372.59 24.37 558.32 84.88
(371.9603) (114.0142) (662.4301) (537.618)
Own at least two pairs of clothes 360.02 16.33 565.61 88.71
(555.2711) (113.2879) (589.5379) (535.886)

8. Analytical framework
• Do households that sale maize on the market
have a higher probability to purchase physical
items for the household?
• Probit Model
• Where parameters reflects the impacts of
changes in (maize sold) on the probability of
the household purchasing physical items .
   
   

,10Pr
,1Pr
mm
mm
QFQPc
QFQPc



mQ
Pc

9. Analytical framework
• 1)OLS on Production function (Cobb-Douglas)
• 3)Instrumental variable probit (ivprobit) with
control function
 
VeQQ
uXQPc
vppm
m





01
 ClSZVarXXAfQ lafp ,,,,,

10. The production equation
Total Maize production (kg)
Standard Error Coefficient
Log Fertilizer applied (kg) -0.04 0.137****
Log total labor cost (MKw) -0.01 0.0000
Log manure applied (kg) -0.02 0.104****
Log plot size (Acres) -0.09 0.448****
Age of seed (years) -0.03 -0.015
Total household size -0.15 0.270*
Number of dependents in the
household
-0.16 -0.308**
irrigated -0.19 0.515***
Number of observations. 807
R-squared 0.123

11. Factors affecting households ability to
purchase physical items
Clothes
(2 pairs)
Electric
item
cell
phone
Log Maize sales 0.359**** 0.325**** 0.200**
(0.06) (0.06) (0.10)
Household head age (years) -0.006* -0.002 -0.005
(0.00) (0.00) (0.00)
Number of schooling of household head
(years)
0.030 0.021 0.099****
(0.02) (0.02) (0.03)
Age of maize seed -0.011 -0.013 -0.049**
(0.02) (0.02) (0.02)

12. Discussion
• Accessing other capitals is the root to reduce
poverty (the livelihood framework).
• Accessing markets is good to transform
agricultural products into other assets.
• Other assets can be used to increase
productivity.

13. Conclusion
• Therefore, food security policy objectives are
necessary, but not sufficient to reduce poverty.
• Policies that allow fungibility of agricultural
outputs, can ensure that reduction of poverty
in the rural Malawi.