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Smallholder preferences and willingness-to-pay measures for microcredit

Author

Listed:
  • Zhao Ding
  • Awudu Abdulai

Abstract

Purpose - The purpose of this paper is to examine smallholders’ preferences and willingness to pay for microcredit products with varying attribute combinations, in order to contribute to the debate on the optimal design of rural microcredit. Design/methodology/approach - Data used in this study are based on a discrete choice experiment from 552 randomly selected respondents. Mixed logit and latent class models are estimated to examine the choice probability and sources of preference heterogeneity. Endogenous attribute attendance models are applied to account for attribute non-attendance (ANA) phenomenon, focusing on separate non-attendance probability as well as joint non-attendance probability. Findings - The results demonstrate that preference heterogeneity and ANA exist in the smallholder farmers’ microcredit choices. Averagely, smallholder farmers prefer longer credit period, smaller credit size, lower transaction costs and lower interest rate. Guarantor collateral method and installment repayment positively affect their preferences as well. Moreover, respondents are found to be willing to pay more for the attributes they consider important. The microcredit providers are able to attract new customers under the current interest rates, if the combination of attributes is appropriately adjusted. Originality/value - This study contributes to the debate by assessing the preference trade-off of different microcredit attributes more comprehensively than in previous analyses, by taking preference heterogeneity and ANA into account.

Suggested Citation

  • Zhao Ding & Awudu Abdulai, 2018. "Smallholder preferences and willingness-to-pay measures for microcredit," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 10(3), pages 462-481, July.
    • Handle: RePEc:eme:caerpp:caer-02-2017-0022
    DOI: 10.1108/CAER-02-2017-0022
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    Citations

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    Cited by:

    1. Francis Lwesya & Adam Beni Swebe Mwakalobo, 2023. "Frontiers in microfinance research for small and medium enterprises (SMEs) and microfinance institutions (MFIs): a bibliometric analysis," Future Business Journal, Springer, vol. 9(1), pages 1-18, December.
    2. Richartz, P. Christoph & Abdulai, Awudu & Kornher, Lukas, 2020. "Attribute Non Attendance and Consumer Preferences for Online Food Products in Germany," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 69(1), March.

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