Bundling Genetic and Financial Technologies for More Resilient and Productive Small-Scale Farmers in Africa

Abstract

Using a multi-year, spatially-diversified randomised controlled trial spanning two African countries, this paper explores whether a complementary bundle of genetic and financial technologies can boost the resilience and productivity of small-scale farmers. The analysis shows that both moderate droughts and more severe yield losses undermine the resilience of control group households, and that these shocks have long-lasting effects as farmers invest and produce less following shocks. Severe yield shocks also increase hunger and food insecurity. The genetic technology—drought tolerant seeds—provides economically significant protection against mid-season drought and mitigates the long-term drop in farm productivity seen in the control group. The financial technology—satellite-based index insurance—offsets the long-term consequences of severe yield losses that are not mitigated by the drought tolerant seeds. Finally, the analysis shows that treatment group farmers who experienced shocks and saw the technologies in action subsequently increased their agricultural investment beyond pre-shock levels, an effect we call the resilience dividend. Unfortunately, this apparent experiential learning cuts both ways. Farmers who did not experience the efficacy of the risk management technologies backed away from using them. Our findings thus showcase how genetic and financial risk mitigating technologies can offer farmers more complete protection, as well as the challenge of inducing sustained uptake of technologies that are midway between experience and credence goods and only infrequently reveal their benefits.