Rice and Banana Farmers 2010-2011

This report is an impact evaluation of two components of the Rural Business Development Program (RBD) in Nicaragua, specifically the components benefitting rice and plantain farmers on Nicaragua’s Pacific coast. The RBD program helped finance irrigation equipment, inputs, and extension services for plantain producers, as well as extension, inputs, and drying patios for rice producers in 2009 and 2010; the price of rice is a function of its moisture content, and by increasing access to drying patios the RBD program sought to increase the value of sales by producers. Using a unique data set collected for the evaluation, average impacts of the RBD program on participating plantain farmers were estimated using difference-in-differences, while average impacts of the rice component on beneficiaries were estimated using fixed effects regressions. Estimated program impacts were combined with administrative cost data to calculate an internal rate of return for the plantain program and for one aspect of the rice program (construction of drying patios).

Key results of the evaluation are:
-Estimated impacts suggest that the RBD rice program raised yields and revenues by 11% in the 2009 - 2010 growing season and 18% in 2010 - 2011 on average relative to the yields and revenues beneficiaries would have obtained without the program.
-The estimated ERR of the drying patio component of the RBD rice program ranges from 7% under the assumption of a five year lifespan for drying patios to 27% when assuming a 20 year lifespan.
-No ERR was estimated for the input/extension component of the rice program; part of the value of the extension/input bundles received by beneficiaries was to be paid back by each beneficiary farmer to his or her cooperative, and the sum total of payments was to serve as seed money for credit funds managed by cooperatives in future years. The reliance of future benefits of this program component on farmer repayment performance makes its long-term value uncertain; therefore I chose to focus my ERR calculation on the drying patios.
-While average impacts and the drying patio ERR are both positive, RBD rice program impacts are estimated imprecisely, and we cannot reject the null hypothesis that average impacts of the program on yields and revenues were zero.
-Estimated impacts of the RBD plantain program were large and significant for revenues and yields of first quality plantains (harvested plantains come in three different quality grades).
-The average impact of the RBD program on sales suggests that the program raised the value of plantain sales by 72% relative to what beneficiaries would have obtained without the RBD program.
-I use the estimated impact on revenues as well as administrative data on production costs and program costs to estimate the ERR of the plantain program.
-The plantain ERR ranges from -23% when assuming a lifespan of 5 years for irrigation equipment and 13% when assuming a lifespan of 20 years.
-The apparent discrepancy between large impacts on sales and the modest ERR is a reflection of the high cost per beneficiary of the program, which was around $15,062 per farmer for the cohort studied here (around $3.6 million divided by 239 beneficiaries).