Does rainfall variability explain low uptake of agricultural credit? Evidence from Ethiopia
Credit markets are key instruments by which liquidity-constrained smallholder farmers may finance productive investments. However, the documented low demand and uptake of agricultural credit by smallholder farmers in sub-Saharan Africa pose challenges for energizing rural transformation in the regio...
| Autores principales: | , , , |
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| Formato: | Journal Article |
| Lenguaje: | Inglés |
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Oxford University Press
2022
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| Acceso en línea: | https://hdl.handle.net/10568/141221 |
| _version_ | 1855521437047062528 |
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| author | Abay, Kibrom A. Koru, Bethelhem Chamberlin, Jordan Berhane, Guush |
| author_browse | Abay, Kibrom A. Berhane, Guush Chamberlin, Jordan Koru, Bethelhem |
| author_facet | Abay, Kibrom A. Koru, Bethelhem Chamberlin, Jordan Berhane, Guush |
| author_sort | Abay, Kibrom A. |
| collection | Repository of Agricultural Research Outputs (CGSpace) |
| description | Credit markets are key instruments by which liquidity-constrained smallholder farmers may finance productive investments. However, the documented low demand and uptake of agricultural credit by smallholder farmers in sub-Saharan Africa pose challenges for energizing rural transformation in the region. In this paper, we investigate the impact of rainfall uncertainty—a major source of production risk—on the uptake of credit by rural farm households in Ethiopia. We further examine whether rainfall uncertainty explains credit rationing among those households not participating in rural credit markets. We find that rainfall variability discourages the uptake of agricultural credit. We also find that rainfall variability is associated with credit risk rationing, expressed as low demand for agricultural credit. We show that our findings are robust to alternative ways of constructing rainfall variability (inter-annual or inter-seasonal) and a battery of robustness checks. For instance, we show that rainfall variability is a strong predictor of credit uptake in rural areas while less relevant in urban areas. We also document heterogeneous responses to rainfall variability; those households living in the arid and semi-arid lands of Ethiopia, which are believed to be more vulnerable to recurrent weather shocks, are more responsive to rainfall variability in terms of reduced uptake of agricultural credit. Our results highlight the impacts of uninsured production risk on the demand for agricultural credit and hence smallholder agricultural investments. Our findings suggest the importance of interventions aimed at relaxing smallholders’ credit rationing while also reducing their production risk. |
| format | Journal Article |
| id | CGSpace141221 |
| institution | CGIAR Consortium |
| language | Inglés |
| publishDate | 2022 |
| publishDateRange | 2022 |
| publishDateSort | 2022 |
| publisher | Oxford University Press |
| publisherStr | Oxford University Press |
| record_format | dspace |
| spelling | CGSpace1412212025-10-26T13:01:22Z Does rainfall variability explain low uptake of agricultural credit? Evidence from Ethiopia Abay, Kibrom A. Koru, Bethelhem Chamberlin, Jordan Berhane, Guush rain risk management rainfall farmers agricultural credit agriculture smallholders farms production risk credit constraints risk credit finance credit control Credit markets are key instruments by which liquidity-constrained smallholder farmers may finance productive investments. However, the documented low demand and uptake of agricultural credit by smallholder farmers in sub-Saharan Africa pose challenges for energizing rural transformation in the region. In this paper, we investigate the impact of rainfall uncertainty—a major source of production risk—on the uptake of credit by rural farm households in Ethiopia. We further examine whether rainfall uncertainty explains credit rationing among those households not participating in rural credit markets. We find that rainfall variability discourages the uptake of agricultural credit. We also find that rainfall variability is associated with credit risk rationing, expressed as low demand for agricultural credit. We show that our findings are robust to alternative ways of constructing rainfall variability (inter-annual or inter-seasonal) and a battery of robustness checks. For instance, we show that rainfall variability is a strong predictor of credit uptake in rural areas while less relevant in urban areas. We also document heterogeneous responses to rainfall variability; those households living in the arid and semi-arid lands of Ethiopia, which are believed to be more vulnerable to recurrent weather shocks, are more responsive to rainfall variability in terms of reduced uptake of agricultural credit. Our results highlight the impacts of uninsured production risk on the demand for agricultural credit and hence smallholder agricultural investments. Our findings suggest the importance of interventions aimed at relaxing smallholders’ credit rationing while also reducing their production risk. 2022-01-10 2024-04-12T13:37:29Z 2024-04-12T13:37:29Z Journal Article https://hdl.handle.net/10568/141221 en https://hdl.handle.net/10568/146802 Limited Access Oxford University Press Abay, Kibrom A.; Koru, Bethelhem; Chamberlin, Jordan; and Berhane, Guush. 2022. Does rainfall variability explain low uptake of agricultural credit? Evidence from Ethiopia. European Review of Agricultural Economics 49(1): 182-207. https://doi.org/10.1093/erae/jbab013 |
| spellingShingle | rain risk management rainfall farmers agricultural credit agriculture smallholders farms production risk credit constraints risk credit finance credit control Abay, Kibrom A. Koru, Bethelhem Chamberlin, Jordan Berhane, Guush Does rainfall variability explain low uptake of agricultural credit? Evidence from Ethiopia |
| title | Does rainfall variability explain low uptake of agricultural credit? Evidence from Ethiopia |
| title_full | Does rainfall variability explain low uptake of agricultural credit? Evidence from Ethiopia |
| title_fullStr | Does rainfall variability explain low uptake of agricultural credit? Evidence from Ethiopia |
| title_full_unstemmed | Does rainfall variability explain low uptake of agricultural credit? Evidence from Ethiopia |
| title_short | Does rainfall variability explain low uptake of agricultural credit? Evidence from Ethiopia |
| title_sort | does rainfall variability explain low uptake of agricultural credit evidence from ethiopia |
| topic | rain risk management rainfall farmers agricultural credit agriculture smallholders farms production risk credit constraints risk credit finance credit control |
| url | https://hdl.handle.net/10568/141221 |
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