Inter-seasonal fluctuation of agricultural prices is widespread throughout the developing world. Prices decrease during the harvest season due to the availability of large quantities of crop, while the prices increase in the lean season. However, small farmers are often unable to benefit from the price increase owing to credit constraints for meeting their immediate cash needs and the lack of storage facilities. They are thus forced to sell at low prices and are unable to make a profit.

Community inventory credit aims to help small farmers to cope with seasonal volatilities by providing liquidity for short-term needs. The Sierra Leone National Program Coordinating Unit (NPCU) at the Ministry of Agriculture implemented a palm oil inventory credit and market support scheme in collaboration with several rural and agricultural banks (RABs) in 40 communities with a view to scaling it up in the future.

The study evaluates the impact of two interventions designed to help farmers to take advantage of price variations over the course of the year:

The first intervention was storage support which involved the provision of community storage rehabilitation, extra palm oil containers and marketing support to target communities. This intervention was aimed at reducing the risk of theft or physical loss; it removed the cost barrier of purchasing storage containers; and it used marketing support to reassure farmers they could sell their product later on in the year.

The second intervention, inventory credit, involved the disbursement of loans. This allowed farmers to use the oil stored in the community storage as collateral for the loans. This intervention is aimed at helping farmers overcome the liquidity constraint which may force them to sell their product early in the year despite lower prices.

RABs were to help farmers identify community storage facilities and offer individual loans worth 75 per cent of their product’s harvest-time value.

The product was randomly allocated to 120 communities in over two districts. The communities were divided into three groups; the first treatment group was offered the complete product; the second treatment group was given palm oil containers and storage spaces, but not credit for storage; the third group was the control group.