LARS FIEDLER, DAGMAR MITHÖFER, HERMANN WAIBEL
University of Hannover, Department of Economics and Business Administration, Germany
The domestication programme of indigenous fruit trees (IFT) of the World Agroforestry Centre (ICRAF) aims to increase farm-household income via farmer-led tree planting of domesticated indigenous fruit trees. Improvements of the domestication programme target at reducing age at maturity and increasing fruit yield and quality. Farmers so far rarely plant the IFT but rather collect IFT products from the commons. Previous research in Zimbabwe shows that trees have to be improved significantly to render farmer-led tree planting economical. In other Southern African countries, e.g. in Malawi, economic conditions as well as availability of IFT products from the commons differ and thus the adoption potential for indigenous fruit tree planting may also differ.
The paper aims at assessing the technology adoption potential of planting domesticated indigenous fruit trees in Malawi from an ex ante perspective. By applying a real options approach uncertainty and irreversibility over benefits related to investment are taken into account and the value of waiting to invest is determined. Similar to previous research in Zimbabwe, contingent claims analysis and the capital asset pricing model are applied in order to determine the risk adjusted rate of return under Malawian conditions. To this purpose, the different sources of farm-household income are used to set-up the rural household portfolio. Our analysis investigates (i) to what level fruit collection cost have to rise, (ii) the necessary technical change, i.e. breeding progress, and/or (iii) price increase of domesticated indigenous fruit that will render tree planting economical in Malawi. Finally, results on the adoption potential of IFT in Malawi are compared to findings on the adoption potential of IFT planting in Zimbabwe, factors that explain the difference are identified and recommendations for the domestication programme are given.
Keywords: Ex ante impact assessment, indigenous fruits, Malawi, real option, technology adoption, Zimbabwe