Pull Mechanisms for Overcoming Market Failures in the Agriculture Sector

Abstract

After the food crises of 2007-2008 and the growing realization that donor resources were not sufficient to meet global agricultural development challenges, the AgResults initiative was launched at the June 2012 G20 Summit in Los Cabos, Mexico as an innovation to boost private sector engagement in meeting these challenges. AgResults initiative comprised of seven pilot projects that incentivize the private sector to develop and deliver innovative products to smallholder farmers in settings where markets for these products are otherwise underdeveloped. Each pilot provides financial incentives to the private sector actors to encourage them to enter the market, but the incentives are paid only after they achieve predefined results. This Knowledge Note reflects the initial findings from the external evaluator’s ongoing research to evaluate the pilots. The authors conclude by identifying the critical steps involved in design of a pull mechanism. Throughout, the authors draw on examples from the AgResults On-Farm Storage pilot in Kenya to illustrate their guidance.