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This book takes forward our understanding of agricultural input subsidies in low income countries.
The rural economy and microfinance institutions in Malawi; Survey design and description of the data; Econometric analysis of the impact of access to credit on household welfare; Results of the econometric analysis; Conclusions and implications for policy; Econometric methodology.
The adoption of new agricultural technologies may be discouraged because of their inherent riskiness. This study implemented a randomized field experiment to ask whether the provision of insurance against a major source of production risk induces farmers to take out loans to invest in a new crop variety. The study sample was composed of roughly 800 maize and groundnut farmers in Malawi, where by far the dominant source of production risk is the level of rainfall. We randomly selected half of the farmers to be offered credit to purchase high-yielding hybrid maize and improved groundnut seeds for planting in the November 2006 crop season. The other half of the farmers were offered a similar credit package but were also required to purchase (at actuarially fair rates) a weather insurance policy that partially or fully forgave the loan in the event of poor rainfall. Surprisingly, take up was lower by 13 percentage points among farmers offered insurance with the loan. Take-up was 33.0 percent for farmers who were offered the uninsured loan. There is suggestive evidence that the reduced take-up of the insured loan was due to the high cognitive cost of evaluating the insurance: insured loan take-up was positively correlated with farmer education levels. By contrast, the take-up of the uninsured loan was uncorrelated with farmer education.
Credit constraint is considered by many as one of the key barriers to adoption of modern agricultural technologies, such as chemical fertilizer, improved seeds, and irrigation technologies, among smallholders. Past research and much policy discourse associates agricultural credit constraints with supply-side factors, such as limited access to credit sources or high costs of borrowing. However, demand-side factors, such as risk-aversion and financial illiteracy among borrowers, as well as high transaction costs, can also play important roles in credit-rationing for smallholders. Using primary survey data from Ethiopia and Tanzania, this study examines the nature of credit constraints facing smallholders and the factors that affect credit constraints. In addition, we assess whether credit constraints are gender-differentiated. Results show that demand-side credit constraints are at least as important as supply-side factors in both countries. Women are more likely to be credit constrained (from both the supply and demand sides) than men. Based on these findings, we suggest that policies should focus on addressing both supply- and demand-side credit constraints, including through targeted interventions to reduce risk, such as crop insurance and gender-sensitive policies to improve women’s access to credit.
A substantial amount of the literature has reported on the impact of access to credit on technology adoption, and many studies find that credit has a positive impact on adoption. However, most existing studies have failed to explicitly measure and analyze the amount of credit that farm households are able to borrow and whether they are credit constrained or not. They overlooked the fact that credit access can be a panacea for non-adoption only if it is targeted at households that face binding liquidity constraints. Guided by the frame work of a household model under credit market failure, this paper aims at investigating the impact of access to credit on the adoption of hybrid maize among households that vary in their credit constraints. The data used in the study is from Malawi collected by the International Food Policy Research Institute (IFPRI). Using the direct elicitation approach, households are classified into constrained and unconstrained regimes. We start by estimating the probability of being credit constrained, followed by an estimation of the impact of access to credit for the two categories of households (credit constrained and unconstrained), while accounting for selection bias. The impact of access to credit is estimated using a switching regression in a Double-Hurdle model. Results reveal that while access to credit increases adoption among credit constrained households, it has no effect among unconstrained households. Results also show that factors that affect adoption among credit constrained households are different from those that that affect adoption among unconstrained household. Landholding size, for example, has opposite effects on adoption in the two regimes of households. The policy implication is that microfinance institutions should consider scaling up their credit services to ensure that more households benefit from it, and in so doing maize adoption will be enhanced.
Africa is one continent severely affected by the ravaging effects of global environment change yet it is least responsible for this. The continent's rural and urban poor are particularly vulnerable to reduced agricultural production, worsening food security, increased incidence of both flooding and drought, spreading of disease and heightening risk of conflict over scarce land and water resources. As such this timely book consisting of chapters authored by scholars from multidisciplinary backgrounds provides the reader a variety of contexts from which to understand the impacts of global environmental change and how affected African communities are adapting an mitigating the scourge. In addition it discusses different models for mitigation and adaptation applicable to local contexts.
Eleven original case studies make up this volume on sustainable development in Africa, carefully selected from presentations at a series of Sustainable Development Workshops organised by eight partner universities. The book is one answer to the critical appeal for greater research efforts aimed at understanding Africa’s challenges as they pertain to poverty reduction and climate change. Its contributors include faculty and graduates of the three master’s programmes in Sustainable Urban Development, Sustainable Integrated Rural Development and Mining and Mineral Resources coordinated by the eight partner African universities who make up the Education for Sustainable Development in Africa (ESDA) initiative. This initiative is administered by the United Nations University Institute for the Advanced Study of Sustainability (UNU-IAS) in Tokyo, Japan. The volume is part of the ESDA book series that serves primarily as undergraduate and graduate instruction materials for courses on sustainable development in Africa. It also seeks to inform policy initiatives on development issues on the continent.
This book describes how models are used to monitor crops and soils in precision agriculture, and how they are used to support farmers’ decisions. The introductory section starts with an overview of precision agriculture from the early days of yield monitoring in the 1980s to the present, with a focus on the role of models. The section continues with descriptions of the different kinds of models and the opportunities for their application in precision agriculture. The section concludes with a chapter on socio-economic drivers and obstacles to the adoption of precision agriculture technologies. The middle section of the book explores the state-of-the-art in modeling for precision agriculture. Individual chapters focus on the major processes in precision agriculture: water use, nitrogen and other amendments, as well as weeds, pests and diseases. The final section contains a series of short chapters that each describe a commercial, model-based service that is currently available to farmers. The book aims to provide useful information to graduate-level professionals that want to broaden their knowledge of precision agriculture; to scientists who want to learn about using academic knowledge in practical farming; and to farmers, farm consultants and extension workers who want to increase their understanding of the science behind some of the commercial software available to the farming community.
The agricultural sector in Nigeria is characterized by low productivity that is driven by low use of modern agricultural technologies, such as improved seed, chemical fertilizer, agrochemicals, and agricultural machinery. Poor access to credit is claimed to be one of the key barriers to adoption of these technologies. This study examines the nature of credit constraints among smallholder farmers – whether smallholders are credit constrained or not and the extent to which credit constraints emanate from supply-side or demand-side factors. Using multinomial probit and seeming unrelated simultaneous equations econometric models with data from the 2018/19 Living Standards Measurement Study-Integrated Surveys on Agriculture (LSMS-ISA) for Nigeria, the study investigates the factors affecting credit access and the effects of these credit constraints on adoption of four agricultural technologies – inorganic fertilizer, improved seed, agrochemicals, and mechanization. The results show that about 27 percent of survey households were found to be credit constrained – 12.8 percent due to supply-side factors and 14.2 percent due to demand-side factors. Lack of access to information and communication technology, extension services, and insurance coverage are the major demand-side factors negatively affecting smallholder’s access to credit. Registered land tiles and livestock ownership enhance credit access. Credit constraints manifests themselves differentially on the adoption of different agricultural technologies. While adoption of inorganic fertilizer and improved seed are significantly affected by credit constraints from both the supply and the demand-sides; use of agricultural machinery is affected only by demand-side factors, while use of agrochemicals is not affected from either supply or demand-side credit factors. From a policy perspective, our findings indicate that improving credit access via supply-side interventions alone may not necessarily boost use of modern agricultural technologies by smallholder farmers in Nigeria. Demand-side factors, such as access to information, extension services, and insurance cover, should equally be addressed to mitigate the credit constraints faced by smallholders and increase their adoption of modern agricultural technologies and improve their productivity.
Since the 1980s when the microfinance revolution began, much has been accomplished, but the field became more refined in the 1990s as a result of shifts in paradigms, strategies, and development practices. This volume addresses the three policy objectives that now occupy those who wish to use credit as a development tool: financial sustainability of microfinance institutions, outreach to the poor, and welfare impact. Inevitable tradeoffs exist among these objectives, and the book advances an analytical framework that assists students of and experts in microfinance to identify the tradeoffs and synergies at the institutional level and in the policy environment. The book features a wealth of empirical data and innovative analytical studies, and critically discusses the role of public support for microfinance institutions (MFIs) in light of the social costs and benefits generated by such financial systems. The book is organized into five parts. The first discusses the demand for and access to financial services by the poor, emphasizing that demand-oriented, pro-poor financial services are crucial in reaching the poor. The second is concerned with two of the criteria used to evaluate MFIs—outreach and financial sustainability. The third features innovative econometric studies seeking to evaluate the impact of MFIs at the household level. The fourth looks at the role of both public- and private-sector institutions in developing sustainable financial systems. And the fifth summarizes implications for policy and research. Given the lack of sound, empirical literature on microfinance, this volume is sure to advance knowledge and research methodology in the field.