Heterogeneous credit constraints and smallholder farming productivity in the Senegal River Valley

Credit constraints come in various forms, to the extent that they translate ex ante into market entry barriers (mostly transaction cost, price, and risk constraints) or ex post into credit application rejection (quantity constraints). This article is concerned with the underlying generating mechanisms of such heterogeneity in credit constraints and the implications for farmers’ productivity in the Senegal River Valley. Results from an endogenous switching regression model based on farm-level data indeed indicate that both pre- and postapplication constraints are holding back farmers’ performance, with differential impact depending on whether the latter is based on the average treatment on the credit beneficiaries or on the nonbeneficiaries and on the productivity measure. This is in addition to significant differences in the generating factors of market entry barriers and credit application outcome. These results are suggestive of various policy options that would not only increase market participation and bring about its beneficial impact, but also contribute to improve smallholder farmers’ credit-worthiness.