Sustainable Financing of EAS, by Paul McNamara


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Sustainable Financing of EAS, by Paul McNamara

  1. 1. Modernizing Extension and Advisory Services Sustainable Financing of Extension Services in Developing CountriesMEAS Global Learning Exchange Dr. Paul E. McNamaraon Best Fit Approaches inExtension and Advisory Services Associate Professor, Department of AgriculturalWashington, D.C., June 7, 2012 & Consumer Economics, University of Illinois at Urbana-Champaign; Project Director, Modernizing Extension and Advisory Services Project (MEAS); and, Extension Specialist, University of Illinois Extension.
  2. 2. Sustainable Finance -- Quotes• “The quality of spending to agriculture is more important than the overall level of spending.” Akroyd and Smith, 2007, “Review of Public Spending to Agriculture,” p. 20• “…most donors have a strictly ahistorical view of development and they lack an institutional memory.” Eicher, 1989, “Sustainable Institutions for African Agricultural Development,” p. 12
  3. 3. Sustainable Finance -- Motivation• Extension represents a very substantial investment in agriculture in many countries. • 100,000 extension agents in India (Eicher 2007) • 15,000 public sector extension agents in Vietnam• Many countries have committed to mobilizing more funds in their budgets for agriculture • 10% target of CAADP countries• For this investment in extension to yield agricultural development, agricultural productivity gains, and reduced poverty, it must be financed in ways that promote efficiency and impact • Enhance likelihood of demand-driven services, build support for funding of services, promote good performance
  4. 4. Outline• The Financing Challenge• Conceptual Framework• Best Fit Approaches• Knowledge Gaps -- Research Needs• Conclusions
  5. 5. The Financing Challenge – Key Issues IdentifiedSustainable finance question – – How should funds flow? – Who should pay? – Who can pay? – Why invest in this activity? – How to ensure control of spending? – How to measure impact of spending and performance of activities?
  6. 6. The Financing Challenge – Key Issues Identified 1. Low level of support for agriculture in government budgetsSource: Akroyd and Smith, 2007
  7. 7. The Financing Challenge – Key Issues Identified2. Projectization of finance for extension – Sometimes →no extension program, rather a series of projects – MOA becomes about being involved in a project – Without projects to fund transport, training, etc. little happens
  8. 8. The Financing Challenge – Key Issues Identified3. Recurrent cost problem in extension – Budgeting for staff but not for transport, programming materials, in-service training, coordination, M&E – Longstanding issue in development finance • Budget vulnerability of transport and programming funds versus staff salary funds
  9. 9. The Financing Challenge – Key Issues Identified4. Politicization of finance in extensionservices – Political favors within the extension bureaucracy – Corruption – “…unique fiduciary risk” – Civil service rules and procedures
  10. 10. The Financing Challenge – Key Issues Identified5. Broken link between budgeting andperformance – Often farmers and farmer groups have very little input into extension programming – Often hires and placements are made centrally or by District level leaders – Farmers report not seeing an extension agent after the project has ended – Little transparency on flow of funds – Lack of link discourages active field staff
  11. 11. Definition – The Pluralistic and Varied Nature of EAS• Extension is human capital enhancing education and training, usually delivered in non-formal settings for adult learners• Includes a wide variety of activities – T&V, extending technologies and methods – Advisory services to answer farmer questions – Non-formal education such as FFS – Facilitation extension – organizing groups and then into associations and then businesses
  12. 12. Conceptual Framework – Public Goods and Toll Goods• Much of the economic discussion of extension appears to ignore facilitation extension and domains like NRM• Public goods – Non-excludability – is it possible to keep non-payers from benefitting from the service? – Non-rivalness – does one person’s consumption reduce another person’s consumption or chance to consume? • Difference between calculus and being taught calculus• Toll goods – think toll road – Economies from scale, network economies – Regulated – Excludability
  13. 13. Conceptual Framework –The Economic Nature of Extension Services• Different types of extension services display different economic characteristics – Pure information is a public good • However, the act and process of teaching/extension is not a public good• Extension services as toll goods – Farm specific information – soils, drainage advice – Farmer group specific work• Wide variety of extension services – A continuum from broadcasting information and messages to highly interactive, personalized, services delivered by a trusted intermediary• Extension services necessarily involve face-to-face or personal communication with farmers, a high degree of discretion – Challenges for ensuring performance and quality (Pritchett and Woolcock, 2004)
  14. 14. Conceptual Framework – Market Failures• Lack of information – Failure of many producers to have accurate expectations about gains in production or profits that can be realized• Market power – In input markets and output markets, reinforces gains to farmers from organization • Cotton Uganda, Sugar Nigeria – Raises the case where farmers are efficient technically but they do not realize significant gains in profits due to market power
  15. 15. Conceptual Framework – Merit Good Aspect of Extension• In many countries extension has a targeting dimension of a merit good – Terms like “poverty reduction” and the “rural poor”, “marginalized groups” all are evidence of merit good type targeting – Chile, an upper middle income country, differential efforts to reach poorer farmers in a contracting scheme
  16. 16. Conceptual Framework – Value Perspective, Rates of Return• Social investors (donors, governments) need to know what sort of benefits relative to costs extension programs could generate• Birkhauser, Evenson, & Feder report a range of rates of return, most between 13% to 80%• Alston et al. estimate a median rate of return on extension of 62.9% – Focus: staple crops extension• Econometric questions remain: causality, counterfactuals, selection, omitted variables, etc.• Need impact studies and research – With stronger econometric and experimental designs – On broader set of extension practices: NRM, Facilitation extension, targeting strategies, ICT approaches, etc.
  17. 17. Conceptual Framework – Value Perspective, Rates of Return• If rates of return are as robust as 20% to 80% then why the lack of support for extension spending among policy makers and many donors?• Benefit/Cost analyses can incorporate welfare of disadvantaged groups with varying welfare weights to address distributional concerns• A severe need for quantitative and rigorous evidence about the variety of impacts of extension
  18. 18. Conceptual Framework – Value Perspective, Rates of Return• Long tail of success: when assessing the impacts of facilitation extension that develops new farmer groups, farmer business associations, cooperative marketing associations, etc. examine the long tail of impact from the successes
  19. 19. Conceptual Framework – Willingness to Pay, Ability to Pay• What would farmers be willing to pay for extension and advisory services if they are not provided for free?• Holloway and Ehui find that 65 of 168 farm households studied would be willing to pay a fee equal to the cost – A significant fraction would not be wtp the cost• Keynan, Olin and Dinar studied farmer payments of bonuses designed to increase quality and responsiveness of extension – All the 17 farmer groups paid the bonuses and continued with the program the following year• Access of poorer farmers to extension, coupons, subsidies
  20. 20. Conceptual Framework – Political Economy• Recurrent cost problem• Projectization of extension• Derived nature of extension policy in practice (Bates, political economy framework) – Important groups include: civil servants, small-scale farmers, large scale and commercial farmers, agro-industries, political parties
  21. 21. Best Fit Approaches• Public sector financed and delivered – Important approach• Decentralized -- funds going to local level• Can introduce co-pays/user fees, bonuses, coupons, prizes to strengthen farmer voice in programming• Explore performance reporting, e-tracking, i-M&E• Need to examine performance-contracting approaches to decentralization – Recent work on public health and primary care relevant to ag extension
  22. 22. Best Fit Approaches• Public sector financed and contractor delivered• Common in projects• Role for INGOs, local NGOs, private sector contractors, independent extension agents• Performance contracting• Coupons• Need to ensure access for poor farmers and targeting• Public sector needs capacity building to contract and to serve coordinating role
  23. 23. Best Fit Approaches• User-financed and private provider delivered• Underway in East and Southern Africa• Private farm advisor model• Need to examine targeting and access for poor farmers• Can be combined with coupons• Registration/certification role for national association or public sector
  24. 24. Best Fit Approaches• Marketing margins financed and private provider delivered• Common in export crops and outgrower schemes• Often combined with inputs and financing• Usually not offering advice on other crops and livestock – very focused• Impact on farm productivity and incomes needs careful study• Targeting and poverty impact?• Importance of competitive policy and infrastructure so farmers receive benefits
  25. 25. Research Needs• Rigorous evaluations to provide evidence concerning the impact and value of extension – Randomized experiments, natural experiments, benefit/cost analyses, cost-effectiveness analyses – Systems, alternatives, slight modifications, financing approaches, etc.• Research on performance and quality• Impact of NRM and farmer group formulation extension• Evaluations of private sector approaches including poverty targeting and sustainability
  26. 26. Recommendations• Focus on quality and performance• Information and control and reporting systems to match financial flows• Evidence on value, return, impact, poverty reduction, and agricultural productivity increasing outcomes• Research and experimentation on alternative forms of contracting, coupons, prizes• Research on extension provided through agro/vets, outgrower schemes, export marketers
  27. 27. This presentation was given by: Dr. Paul E. McNamara Associate Professor, Department of Agricultural & Consumer Economics, University of Illinois at Urbana-Champaign; Project Director, Modernizing Extension and Advisory Services Project (MEAS); and, Extension Specialist, University of Illinois Extension. on behalf of MEAS at the Global Learning Exchange on Best Fit Approaches in Extension and Advisory Services Washington, D.C. on June 6, 2012
  28. 28. Terms of Use: © MEAS project. This work is licensed under a Creative Commons Attribution 3.0 Unported License.Users are free: • to Share — to copy, distribute and transmit the work • to Remix — to adapt the workUnder the following conditions: • Attribution — Users must attribute the work to the author(s)/institution (but not in any way that suggests that the authors/ institution endorse the user or the user’s use of the work).
  29. 29. Disclaimer:This presentation was made possible by the generous support ofthe American people through the United States Agency forInternational Development, USAID. The contents are theresponsibility of the author(s) and do not necessarily reflect theviews of USAID or the United States