| Source of technology and funding | IFAD-supported research carried out by the International Livestock Research Institute (ILRI) |
| Expected Benefit: | Improved efficiency in delivery of livestock health services to smallholder livestock keepers leading to increased use of services and improved livelihoods based on livestock-keeping |
| Crops and enterprise: | Livestock-keeping |
| Agro-ecological zones: | All |
| Target region and countries: | Developing countries |
| Keywords: | Delivery systems, livestock health services, structure-conduct-performance, new institutional economics, transaction costs |
Poor uptake of existing control technologies among smallholder dairy farmers has been attributed primarily to weak or inappropriate delivery systems. Unfortunately, proper design of delivery systems for disease control is typically considered only incidentally once new technologies have been developed. A logical step in enhancing the potential impact of a new control package would be to evaluate the appropriateness of the channels to deliver it to farmers. How can delivery systems be evaluated? We present here a methodology to evaluate the performance of current delivery systems using the example of tick and tick-borne diseases.
Before a veterinary product reaches the end-user, it passes through systems (or pathways) of delivery, within which it changes hands through a series of players at different levels, from the manufacturer all the way to the farmer. Utilization of animal health services therefore depends on the appropriateness of delivery systems for the specific disease control products and their associated services to farmers. Whether or not such systems function well enough to meet the needs of the farmers depends on a number of issues: (a) efficiency, i.e., the costs associated with each delivery pathway; (b) effectiveness or ability of the pathway to deliver a product in the form intended, for example, the need to maintain a cold chain all along the delivery chain for a product requiring refrigeration such as a live vaccine; (c) enforceability, i.e., how well the product reaches the intended end-users; and (d) equity or equal distribution such that the product reaches not just the well-to-do farmers who have more resources, but also resource-poorer farmers.
In the case of livestock production in most developing countries, service provision to farmers remains poor and has often been associated with weak or inappropriate delivery systems. How can the performance of animal health delivery systems be evaluated to identify opportunities for improvement? One way to assess their performance is to try to identify any inefficiencies and their sources in the delivery systems. Here, we use the example of the control of tick and tick-borne diseases (TTBD) in smallholder dairy production systems in Kenya, where they pose a major constraint in dairy farming.
Evaluating the performance of delivery systems
The performance of animal health delivery systems can be characterized using a number of indicators, among which are the institutional structures in place. These include the role of the different players (for example, service providers who are directly in touch with farmers) and sectors (public versus private), the policy environment, characteristics of the product passing through the system and characteristics of the end-users. Delivery systems can be likened to a generic marketing system the performance of which is evaluated using a variety of economic procedures. One such analytical technique is structure-conduct-performance, which is often used to characterize marketing channels through comparison of their performance with that of a perfectly competitive model. Economic theory tells us such a model allocates resources in the most efficient, cost-effective manner. It considers market structure to be a key determinant of market conduct, which in turn determines the level of market performance (Pomeroy and Trinidad, 1995). In a perfectly competitive market, conditions exist that allow healthy competition among traders. For example, buyers and sellers can enter and exit the market freely without any inhibitions, and all parties have equal access to market information. However, in most developing country markets, such as the delivery of animal health services, market contracts (or transactions) are often constrained by limited market information and are often associated with high non-monetary transaction costs. To evaluate the effects of transaction and information costs, the application of additional economic analyses is necessary. One such method is the new institutional economics (NIE), which is often applied to the analysis of the role and effects of transaction costs and provides a framework for characterizing technologies according to their technical and economic features.
Application of structure-conduct-performance and nie to the study of delivery systems
The following are the basic steps in the evaluation of animal health delivery systems using a combination of structure-conduct-performance and NIE analyses.
1. Characterize the structure of the delivery system
The structure of a marketing system is a key determinant of the behaviour of the marketing agents and consequently the performance of the system. Within market structure, factors that should be evaluated are the types and numbers of players involved along the delivery chain, the institutional structures in place and the conditions of entry and exit (such as barriers to entry) that might affect the composition of market structure. A typical structure of the delivery chain for TTBD control technologies is shown in the figure below.
TTBD
delivery systems usually consist of a central manufacturer who converts
the appropriate inputs into a product, which is then supplied to the distribution
channels. The distributor sells the product to the various types of service
providers, who then sell it to farmers in combination with specific services.
The vertical arrow represents the passage of the product through the various
levels, with the thicker part at the lower end representing the product
in combination with associated services. For example, in the case of East
Coast fever (ECF), a debilitating cattle disease that kills a large proportion
of the affected cattle if they are not treated, the drug (butalexR) is
combined with specific services, namely, diagnoses and drug administration,
to achieve treatment. In the case of TTBD control delivery, various types
of service providers, including veterinarians, paraveterinarians, farmer
cooperatives, different types of stores, and individuals trained in fields
related to the veterinary discipline, were found to be competing against
each other in the supply of products and services to farmers. The highest
proportion of service providers was represented by paraveterinarians.
Additionally, the players for each type of technology were identified;
for example, the main sorts of service providers for tick control products
are different types of stores and shops.
2. Characterize market conduct and performance
An evaluation of components of market conduct should be carried out, including the number of players (‘concentration index’) and their price-setting behaviour, marketing margins and buying and selling practices, as well as policies at the various levels of the marketing chain. Low numbers or high marketing margins should provide an indication of any lack of efficiency, which is often related to a lack of competition in the marketing systems. In the case of the delivery of TTBD treatment packages, there was no evidence of lack of competition. Inefficiencies were, however, detected in the delivery of the infection and treatment method in ECF immunization, the supply of which was carried out by a single pharmaceutical company, while the administration among cattle was limited to only one type of service provider, the veterinarian. In addition, policy bars paraveterinarians from participation in private practice, which would enhance competition, despite the fact that they constitute the majority of service providers.
3. Identify economic characteristics of technologies
Products can be classified according to their economic characteristics in terms of their nature as public versus private goods, which can in turn be determined using the principles of rivalry and excludability. When the consumption of a product by one individual diminishes its availability to others and when no two consumers can benefit from its use at any given time, the product is said to have ‘high rivalry’. Excludability, on the other hand, means that consumers, particularly those who fail to pay, can be prevented from benefiting. Private goods have high excludability and high rivalry; the opposite is true of public goods, while common pool and toll goods fall within this spectrum. Quality control of TTBD drugs and services falls under public goods. (No one can be excluded from benefiting, and several consumers can use it at a given time.) ECF treatment is a private good (high excludability and high rivalry), while tick control by dipping is a toll good (the facility can be used by more than one user at one time, but non-payers can be excluded). (See the Table below.) This leads to the next step.
Rivalry |
||
| Low | High | Excluding |
Public goods
|
Common Pool good | L o w |
Toll goods
|
Private goods
|
H i g h |
4. Identify appropriate sectors to deliver technologies
The appropriate role of each sector is determined by the economic characteristics of the technologies. For example, a private good is one the benefits of which only accrue to those who consume it, such as the treatment of ECF, which benefits only the owner of the sick cow. Because non-payers of such goods can be prevented from benefiting, there are strong incentives for the end-user to pay for private good services, and the private sector can therefore effectively deliver them. On the other hand, a public good means that those who do not pay cannot be excluded from benefiting, such as a radio programme on good animal husbandry measures, which would benefit all those who are tuned to the programme regardless of whether they have paid for it or not. Because everyone can be a ‘free rider’ in such a service, farmers would be unwilling to pay for it, and the intervention of the state may be necessary to compel consumers to pay or the private sector to deliver, for example indirectly through taxation.
5. Evaluate the types and levels of transaction costs
The non-price costs of carrying out a market exchange (the transaction costs) are generally difficult to measure and conceptualize, and very few empirical studies have actually achieved any degree of success. One possible approach is to first characterize technologies according to their technical characteristics and then identify the potential transaction costs associated with the given characteristics. One technical characteristic associated with the treatment of ECF, for example, is the critical need for the diagnosis and drug administration to be done as early as possible so that they can be effective, since delays may increase the risk of the death of the sick animal. Farmers must therefore identify a service provider who will supply the necessary drugs and services in a timely manner. This means that the farmer must weigh the quality options among the available services, in addition to meeting the prices of necessary products and services. Obtaining information regarding the attributes of different service providers is critical. The process of gathering such information represents an added cost (beyond the price of services) associated with the transaction of ECF treatment. Other transaction costs include the length of travel distances, waiting time, and, in going to fetch a service provider to treat his/her sick cow, the uncertainty a farmer faces as to whether the services can be obtained and whether the service provider is capable and willing to treat the sick cow correctly.
6. Identify policy implications
Once the inefficiencies associated with animal health delivery have been identified, the next logical step is to identify policy interventions that can address these inefficiencies. For example, in the case of TTBD control technologies, the exclusion of paraveterinarians from participation in the private-sector delivery of services translates into a limitation on the access to these services by a majority of the farmers located in rural remote areas where very few veterinarians are operating. The adoption of policies allowing paraveterinarians to take more responsibility for delivery would result in a more geographically equitable delivery to livestock keepers. Similarly, increasing the market for the delivery of the infection and treatment method beyond the Kenya Coast so as to include the rest of the country even at a regional level would benefit a large number of the farmers rearing livestock that are under ECF risk and would result in a wider market for the vaccine. This would have the effect of bringing production costs down and, consequently, reduce the price of the vaccine.
The approach presented here offers some insights on the evaluation of the performance of animal health services and suggests ways to improve the delivery of these services. At the same time, the application of NIE has highlighted the importance of non-monetary transaction costs as a major constraint in animal health service delivery. The challenge is to translate this methodology into a user-friendly approach that can be replicated elsewhere for different technology types (such as helminth or trypanosomosis control) in similar production systems or in other types of production systems such as agropastoral systems.
