Small businesses, potentially large impacts

Purpose - Constraints associated with public agricultural extension services imply that farmers increasingly rely on input providers for agricultural innovations and knowledge. Yet such providers are typically commercial profit-making agents and may have an incentive to suggest relatively costly inputs and/or high rates. The purpose of this paper is to look into the case of Bangladesh and the role of fertilizer traders in terms of farmers’ decisions on which fertilizer to apply and at what rate. Using primary data, the authors examine farmers’ chemical fertilizer use and the associated rice production efficiency, based on different information sources (fertilizer traders, government extension agents or own/peer experience). Design/methodology/approach - Using primary data, the present study estimates an ordered probit model and production functions separately based on whether or not a farmer relied on information from fertilizer traders or own experience and government extension agents, and examines the efficiency score of each type of farmer. Findings - The findings demonstrate that the resource-poor farmers rely more on traders’ suggestions for fertilizer application than public extension – but the actual fertilizer information source has no significant effect on the production efficiency of the rice farmers. This study, therefore, does not find exploitative behavior of fertilizer traders. Thus, this study concludes that small rural traders in Bangladesh are working as agricultural extension agents and provide necessary fertilizer application information to resource-poor farmers. Research limitations/implications - This is a case study based on Bangladesh – an emerging economy in South Asia. The findings of the study may not be generalized for other countries. Originality/value - To the authors’ knowledge, this is the first study that confirms the role of agricultural input sellers as the extension agent in developing countries.