Credit constraints and adoption of agricultural technologies in developing countries? Evidence from Nigeria
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International Association of Agricultural Economists
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The agricultural sector in Nigeria is characterized by low productivity, driven partly by low use of modern technologies. Poor access to credit is seen as a key barrier to adoption of these technologies. discourse and literature often associate credit constraints with supply-side factors such as limited access or high borrowing costs. However, demand-side factors, such as borrower’s risk-averse behavior, transaction costs and information asymmetry equally play important roles in credit-rationing. Using a nationally representative LSMS-ISA data from 5000 smallholders in Nigeria and seemingly unrelated econometric models, we examine the nature of credit constraints, factors affecting credit constraints, and the effects of credit constraints on adoption of four agricultural technologies – inorganic fertilizer, improved seed, agrochemicals, and mechanization. Contrary to discourse, we found that demand-side factors are as important as supply-side constraints. Improving supply-side constraints thus may not necessarily address credit constraints for smallholders. On the supply side, lack of adequate collateral is the key constraints; hence supply-side policies should focus on enhancing smallholders’ capacity to possess bankable collateral, such as land titles or assets. On the demand-side, interventions such as crop insurance, information and extension services are needed to increase credit access, technology adoption, and agricultural productivity in Nigeria.
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agricultural technology, policies, technology, smallholders, adoption, agricultural productivity, credit, rural areas