Demand and supply constraints of credit in smallholder farming: evidence from Ethiopia and Tanzania

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dc.creatorBalana, Bedru
dc.creatorMekonnen, Dawit Kelemework
dc.creatorHaile, Beliyou
dc.creatorHagos, Fitsum
dc.creatorYimam, Seid
dc.creatorRingler, Claudia
dc.date2022-11
dc.date2022-08-23T10:36:08Z
dc.date2022-08-23T10:36:08Z
dc.date.accessioned2026-06-27T18:27:50Z
dc.descriptionCredit constraint is often considered as one of the key barriers to the adoption of modern agricultural technologies and low agricultural productivity in low- and middle-income countries. Past research and much of the policy discourse associate 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 could also affect credit-rationing of smallholder agricultural households. This study investigates the nature of credit constraints, factors affecting credit constraint status, and the effects of credit constraints on adoption and intensity of use of three modern agricultural technologies – small-scale irrigation, chemical fertilizer, and improved seeds. The paper also assesses whether credit constraints are gender-differentiated. Primary survey data were collected from sample farmers in Ethiopia and Tanzania, and Tobit and two-step hurdle econometric models were used to analyze these data. Results show that demand-side credit constraints are as important as supply-side factors in conditioning smallholders’ access to credit in both countries. We also find that credit is a binding constraint for the decision to adopt technologies and input use intensity in Tanzania but not statistically significant in Ethiopia. Results suggest that women are more likely to be credit constrained (from both the supply and demand sides) than men in both study countries. Based on these findings, we suggest that policies should focus on addressing both supply- and demand-side credit constraints to credit access, including through targeted interventions to reduce risk, such as crop insurance, and to strengthen the gender sensitivity of credit policies.
dc.identifierhttps://hdl.handle.net/10568/120612
dc.identifier.urihttp://hdl.handle.net/123456789/156649
dc.languageen
dc.publisherElsevier
dc.relationhttps://doi.org/10.2499/p15738coll2.134152
dc.relationhttps://hdl.handle.net/10568/142531
dc.relationhttps://doi.org/10.1016/j.agwat.2021.106855
dc.relationhttps://doi.org/10.1016/j.wds.2022.100012
dc.rightsOpen Access
dc.sourceBalana, B. B.; Mekonnen, D.; Haile, B.; Hagos, Fitsum; Yimam, S.; Ringler, C. 2022. Demand and supply constraints of credit in smallholder farming: evidence from Ethiopia and Tanzania. World Development, 159:106033. [doi: https://doi.org/10.1016/j.worlddev.2022.106033]
dc.subjectsmall-scale farming
dc.subjectagricultural credit
dc.subjectconstraints
dc.subjectsmallholders
dc.subjectfarmers
dc.subjectsmall-scale irrigation
dc.subjecttechnology
dc.subjectfarm inputs
dc.subjectfertilizers
dc.subjectseeds
dc.subjectsocial capital
dc.subjectloans
dc.subjectaccess to information
dc.subjectgender
dc.subjectwomen
dc.subjecthouseholds
dc.subjectpolicies
dc.subjecteconometric models
dc.subjectdevelopment
dc.subjectless favoured areas
dc.subjectsmallholder
dc.subjectinput use intensity
dc.subjectfinancial literacy
dc.subjectcapacity development
dc.subjectrisk prevention
dc.subjectirrigation
dc.subjectproductivity
dc.subjectchemical fertilizer
dc.subjectinnovation adoption
dc.subjectdeveloping countries
dc.subjectagricultural technologies
dc.subjectcredit constraints
dc.subjectgender relations
dc.subjectcredit
dc.titleDemand and supply constraints of credit in smallholder farming: evidence from Ethiopia and Tanzania
dc.typeJournal Article

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Instituto Internacional para el Manejo del Agua (IWMI)