This study investigates the role of Agricultural Input Subsidy Programme on poverty reduction in rural Malawi using the Individual Household Modeling Approach. The study is based on information derived from a village in Chingale area in Zomba District. Using a “with” and “without” the subsidy project evaluation approach, the study makes a comparison of the ultra poverty and poverty rates in the two scenarios. The Agriculture Input Subsidy Programme has a positive impact on the poverty rate. However, the programme does not affect the proportion of households living below food security threshold. The poorest of the poor are not made any better off as a result of the AISP. The implication is that on average, the food security situation of the lowest income group is not improved by the subsidy programme. Moreover, the maize price escalations that occur during the traditional lean months of December to February implies worsening food security situation for all maize deficit households and more so for the ultra poor since it usually means surviving on less than the required kilocalorie intake. However, complete coverage of smallholder households with one 50kg bag of fertilizer is expected to greatly reduce both the poverty and ultra poverty rates.
The study also examines the targeting efficiency of the AISP and finds that the programme is biased towards the richer households. Although this conforms to the programme’s design structure, it is also a constraining factor to the programme’s effectiveness as a social safety net tool.