Fee-For-Service and privatized extension

A format of fee for service for extension (where the provider may be a public entity or private firms or consultants) in developing countries usually still entails considerable public funding even if the provider is private but it has the potential of reducing the fiscal burden of public extension services.

• Under such an arrangement, small groups of farmers typically contract extension services to address their specific information needs.

• The free-rider problems and non-rivalry in information use are resolved by defining the public good at the level of a small group, and having the whole group share in the cost.

• The difficulty of tracing extension impact is much less of a problem, although issues of asymmetric knowledge of the value of information and identifiability of benefits will still be present and raise design challenges accordingly.

In fee-for-service modalities, farmers clearly determine the type of information that is of priority to them, and thus the impact of extension advice is expected to be higher.

• An important role for public extension and policy is to facilitate the development of private provision of extension services, so that the public system can withdraw as appropriate.

A key drawback of fee-for-service modes of extension is that less commercial farmers (i.e., poorer farmers and those farming smaller and less favored areas), for whom the value of information is lower, may purchase fewer extension services, as the price of the service will tend to be market-determined (thus reflecting also the demand from farmers with higher value of information, to the extent that such farmers use these channels for their information).

• May entail not only social considerations but may be an inefficient outcome if the poor have a lesser ability to prejudge the value of information and tend to undervalue it. The resolution of this concern is the stratification of extension systems by types of clients within the country.

Privatized extension:

The word "extension" has been criticized as inherently emphasizing the "top-down" dissemination of information while ignoring other types of information flow between farmers, extension and research – particularly activities that involve farmers as equal partners in the process.

Private firms provide services in accordance with their specialized incentives and farmers respond in terms of what they see as most beneficial to them. As each type of extension (public and private) has limitations, the objective for farmers, and agricultural development organizations of all types (local and international) is to attain the best mixture of public, private and NGO services.

• While extension services cannot, and should not, be totally privatized, there is room for both some privatization of public extension activities and active promotion of private and NGO extension activities which complement rather than replace existing public extension services.

• In mixed economies, the prevailing economic justification for government involvement in an activity such as agricultural extension is market failure, whereby the market mechanism alone cannot perform all economic functions for appropriate resource allocation.

• Market failure may arise because some goods or services are public goods (such as publicly funded agricultural research knowledge) which can be consumed in a nonrival fashion by all members of society without any individual's consumption reducing the amount available for other individuals.

• Private goods sometimes are subject to market failure, whereby the operation of private markets does not provide certain services at a socially optimal level or where external costs, or benefits are accrued by others rather than the provider of the goods.

  1. Public financing by the taxpayer only for the kinds of services that are of direct concern to the general public

  2. Direct charging for some individual services with direct return (in the form of improved income)

  3. Mixed funding shared between public and private professional association contributions for some services where the benefits are shared.

BY KHAS