Adjoua Roxène Priscille Assogba Kpossou, Adjoua Pascaline Ida Babadankpodji, Esaïe Gandonou, Augustin Aoudji, Afio Zannou and Gauthier Biaou
This paper analyzes the effect of repayment capacity on the quantitative rationing of credit to agricultural credit applicants.
Abstract
Purpose
This paper analyzes the effect of repayment capacity on the quantitative rationing of credit to agricultural credit applicants.
Design/methodology/approach
The empirical analysis of credit supply involved 595 applicants for agricultural credit. The instrumental variable (IV) approach of probit and tobit was used to identify credit rationing factors.
Findings
All things being equal, a 1% increase in repayment capacity increases the amount received by 25% for large applicants, and 47% for small applicants. Other variables related to equity, participation rate, crops produced, reputation, age, activity stability and proximity influence the credit supply.
Research limitations/implications
The results of this study provide a theoretical basis for comparing small and large agricultural credit applicants, which is essential for better decision-making by financial institutions and the government. This article recommends that all applicants should have a good reputation and keep their business income and expenditure book up-to-date, that small applicants should invest in their business and improve their financial education and that large applicants should accumulate wealth and invest in perennial crops. As a limitation of this study, it would be possible to extend the data to other institutions using panel data.
Originality/value
The originality of this study lies in its consideration of the endogeneity problem between repayment capacity and credit rationing and, in a comparative analysis of small and large credit applicants. The results of this analysis will be used to adjust agricultural credit granting policies.
Details
Keywords
Tchekpo Fortune Ogouvide, Ygue Patrice Adegbola, Roch Cedrique Zossou, Afio Zannou and Gauthier Biaou
This document analyses farmers' preferences and willingness to pay (CAP) for microcredit, in order to facilitate their access in rural areas.
Abstract
Purpose
This document analyses farmers' preferences and willingness to pay (CAP) for microcredit, in order to facilitate their access in rural areas.
Design/methodology/approach
Data are based on a discrete choice experiment with 400 randomly selected farmers from 20 villages of the 7 Benin agricultural development hubs (ADHs). The preference choice modelling was performed using mixed logit (MXL) and latent class logit (LCL) models. Farmers' willingness to pay for each preferred attribute was estimated. The endogenous attribute attendance (EAA) model was also used to capture attribute non-attendance (ANA) phenomenon.
Findings
The results indicate that, on average, farmers prefer individual loans, low interest rates, in kind + cash loans, cash loans, disbursement before planting and loans with at least 10-month duration. These preferences vary according to farmers' classes. Farmers are willing to pay higher or lower interest rates depending on attribute importance. The estimate of the EAA model indicates that, when taking the ANA phenomenon into consideration, people will show stronger attitudes regarding WTP for important factors.
Research limitations/implications
Based on these results from Benin, microfinance institutions (MFIs) in developing countries can, based on the interest rates currently charged, attract more farmers as customers, reviewing the combination of the levels of the attributes associated with the nature of the loan, the type of loan (individual or collective), the disbursement period of funds, the waiting period of the loan and the loan duration. However, the study only considered production credit, ignoring equipment or investment credit.
Practical implications
The document provides information on the key factors that can facilitate producers' access to MFI products and services.
Social implications
Facilitating small farmers' access to financial service will contribute to poverty reduction.
Originality/value
This research contributes to the knowledge of the attributes and attribute levels favoured by farmers when choosing financial products and the amounts they agree to pay for these attributes. The implementation of the results would facilitate small producers' access to financial services; thus contributing to poverty reduction.