The recent wave of targeted subsidy programs in Africa have arguably been
more attentive to minimizing ‘crowding out’ of existing smallholder demand for commercial
fertilizer to thereby improve program efficiency in raising smallholder total fertilizer use,
relative to untargeted, universal subsidy schemes. To our knowledge, there are no studies
that have assessed the extent to which a truly ‘smart’ fertilizer subsidy program has achieved
goals associated with ‘jump-starting’ the sustainable development of a market-driven
agricultural input distribution system: (1) to improve smallholder access to inorganic
fertilizer and improved maize/rice seed; (2) to provide a rapid, sustained and predictable
increase in smallholder farmers’ effective demand for inorganic fertilizer and improved
maize/rice seed so as to promote longer-term investment by the private sector fertilizer/seed
supply chains. We use a range of data sources to assess the extent to which Tanzania’s
National Agricultural Input Voucher Scheme program has achieved these goals. We find that
NAIVS did lead to significant increases in use of inorganic fertilizer in maize/rice production
from 2008/09 to 2012/13 and that most subsidy recipients had not previously used fertilizer
on these crops. We also find evidence of infrastructural investments made by agro-dealers
and distributors during this time period, which key informants say were due in part to the
increased demand from NAIVS. Finally, we find a significant increase over time in the
amount of agricultural inputs given to agro-dealers by distributors on credit; an indicator that
repeated transactions between them appear to have reduced transaction costs of exchange.