Access to products and services enhances productivity and revenues

This page summarises evidence that access to better and/or cheaper products and services by the poor, or businesses working with the poor, increases their productivity and revenues.

Note that this page focuses on products and services that are delivered in a lasting and sustainable manner by the private sector, rather than the short-term provision of products and services by donor and government programmes. In addition, the role of publicly-funded road infrastructure for productivity is considered.

Productivity/ revenues increase following business or market systems development interventions

A particularly rich body of evidence exists on the postive role of information and communication technologies (ICTs) in delivering information to businesses or small farmers and enhancing their productivity and revenues.

  • FIT SEMA, a market systems develoipment project of the ILO, worked with Ugandan radio stations to establish small enterprise-focused programmes. As of 2004, 12 radio stations had started to broadcast at least one programme about good business practices due to FIT’s activities and 7 million adults listened regularly to the programmes. FIT-SEMA (2004) interviewed 1111 individuals to assess the impact, and 96% interviewees stated that the information had benefited their businesses, mainly because their business had expanded after putting into practice what they had learnt on the radio.
  • Access to Information and Communications Technology can also provide firms with market information which allows them to adjust their behaviour to increase profits. The World Bank’s 2012 Information and Communications Technology Report reviews the  evidence on the impact of ICTs on poor farmers and traders. Many – though not all – studies find that the dissemination of market information through radio or SMS helps farmers increase incomes by improving their bargaining power or choices in their markets.
  • According to Svensson and Yanagizawa (2008), radio programmes set up by the Market Information Service Project in Uganda, which reach about seven million people per week, have increased farm-gate prices for maize by 15%.
  • In Sri Lanka, a randomised controlled trial by Lokanathan, de Silva and Fernando (2011) investigated the effect of receiving real-time price information via mobile phones, combined with the provision of training and phone credit (approx. 1.8 USD per month). The treatment group of farmers increased their daily prices by 23 per cent, 19 per cent more than the control group. Similarly, by comparing 300 farmers who received information on market prices via SMS through the Esoko Platform in Ghana with 300 control farmers, Subervie (2011) establishes that the service has enabled users to receive 10% higher prices for three crops.
  • Other studies have find that use of mobile technologies increases the profit margins of traders. A study by Aker (2008) exploits the quasi-experimental nature of the phased introduction of cell phone coverage in Niger, concluding that cell phone access enabled traders to achieve 29% higher profits than traders in non-cell phone markets.

There is also evidence that market systems interventions have enabled farmers to access new services that allow them to achieve higher incomes.

  • One example is a livestock programme in Zimbabwe: In 2005, Practical Action launched a 30-month project to increase the uptake of veterinary services amongst cattle farmers in Guruve District, Zimbabwe. The programme initiated new commercial relationships between farmers and suppliers of veterinary drugs and a public-private partnership to train skilled farmers as paravets. The quality of cattle for sale in the region increased, and its price rose 8% in real terms over the course of the programme (Practical Action 2008).

Productivity/ revenues increase due to better road infrastructure

Various studies strongly suggest that road connectivity and quality are positively correlated with, or a determinant of, agricultural production and incomes.

  • Dercon (2008) test the welfare implications of road improvements in Ethiopian villages and find that access to all-weather roads increases consumption growth in these villages by 16.3%. These results are robust to changes in model specification and estimation methods.
  • Dorosh et al. (2010) find that agricultural production is highly correlated with proximity (as measured by travel time) to urban markets. Total crop production relative to potential production is 45% for areas within 4 hours travel time from a city of 100,000 people. In contrast, it is just 5% for areas more than 8 hours away.The authors use the estimated relationship between production and travel time to simulate the changes which could be expected if travel links were improved. A 1% reduction in travel time to the nearest city with 100,000 people or more could be expected to increase low-input crop production by 2.9%; for travel time to the nearest city with 500,000 people or more, this rises to 4.8%.