Burkina Faso: Some subsidy is necessary to kick-start a market

Often, despite there being a significant demand in the market for a product, it may not be enough for investors to take on the financial risk of beginning a new venture, especially when the consumers are from BoP communities and do not have a lot of money to spend. In such conditions, iDE looks to kickstart the process by working with interested suppliers, sharing the financial risk through project funds and designing sales strategies with them. iDE acts as a short-term financial supporter and advisor until sales are profitable, demonstrating the potential of BoP markets and changing the perception of market actors to continue investing in technology for BoP consumers. Reaching the most vulnerable consumers while also needing to convince and attract investors is a tall order and sometimes requires making compromises with social goals to meet financial sustainability.

The primary goal of the SUPW project was to achieve scale and the widespread introduction of micro-irrigation technology (MIT) into the market. Given that, the Burkina Faso program pursued two models for drip irrigation distribution. Aligning with iDE’s core principle of business-oriented solutions to poverty, Burkina Faso developed a social enterprise model with a network of employee retailers selling directly to farmers. The second model had iDE selling MIT equipment indirectly to other organizations. This second model of indirect sales constituted about half of iDE’s Burkina Faso sales in 2016, the final year of the project.

Of the three types of organizations involved in third party distribution of indirect sales, 90 percent distributed their drip kits free to farmers while 5 percent offered a subsidy and the remaining 5 percent re-sold the kit at full cost.

Farmers in rural Burkina Faso are very poor and unable to afford much equipment, often surviving on their own harvests with little leftover to sell in the marketplace. These farmers tend to rely currently on rain-fed irrigation and bucket hauling. For this group, some form of subsidy is an absolute necessity. The challenge of subsidy is ensuring that it actually gets to the correct targeted population. Organizations with a mission to aid the poorest of the poor, identify these beneficiaries and provide the capital necessary to get equipment into their hands.