Pay for Results’ Role in Transforming Tanzania’s Dairy Input Supplier Model

February 13, 2023

photo of cows

Increased demand for fresh milk in Tanzania presents a major opportunity for smallholder farmers – yet, they still have low productivity. What is holding smallholder farmers (SHF) back and can the private sector be a major actor in solving this challenge?

Tanzania’s dairy sector has sizable hurdles to overcome that are present across the full value chain. Approximately 97% of Tanzania’s dairy cattle are low yield breeds which constrains productivity for smallholder farmers. Other associated factors are the SHF’s limited awareness and understanding of quality inputs, low accessibility to inputs, and the lack of accessible and effective extension and advisory services. These combined deficiencies have resulted in minimal use of productivity increasing inputs and therefore reduced outcomes.

The AgResults Tanzania Dairy Challenge Project was established to incentivize private sector input suppliers to raise awareness and educate SHF on the value of adopting productivity-increasing input bundles to enhance production and strengthen dairy-based livelihoods. Conventional, supply sided ‘push’ interventions that reward activities rather than results may take years before sustained market transformations occur. However, three years into the Tanzania Dairy Challenge Project, the Pay-for-Results ‘pull’ incentive approach has already made an impactful shift in the dairy input supplier model and market, strengthening SHF’s demand for improved inputs.

Through the prize structure, nine competing input suppliers are partnering with SHF, especially those in historically underserved areas, to supply them with input bundles and advisory services. Smallholder farmers now have access to quality inputs, receive proper training on their correct usage, and have expanded their knowledge of livestock management. Input bundles are also having a profound impact on dairy cattle health – productivity is dramatically rising and mortality is declining. Farmers can judge the impact of increased input usage on milk yield, fertility, and animal health, which is reinforcing the input supplier’s extension messages and advice.

The rapid returns SHFs are experiencing from using enhanced extension services has accelerated the shift to make improved input purchases the default. These factors secure the demands for inputs and reduce risks for input supplier businesses. Smallholder dairy farmers are now positioned to participate more fully in formal markets, due to the increased milk supply, improving their incomes and livelihoods.

The project spans four sales periods each lasting nine months (June to February) and is currently in the third sales period. The competition has awarded over $375k in monetary prizes to date, based on input sales made. Competitors have continued to strengthen their business practices each sales period, helping AgResults achieve its goals of increased input usage and greater dairy productivity. Impact is spreading rapidly and competitors are so encouraged by the results that they plan to continue these practices following the project’s conclusion.

Read more about the Project’s impacts in our Lessons Learned Article:

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