IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/45.html
   My bibliography  Save this paper

The Impact of Access to Credit on the Adoption of hybrid maize in Malawi: An Empirical test of an Agricultural Household Model under credit market failure

Author

Listed:
  • Simtowe, Franklin
  • Zeller, Manfred

Abstract

A substantial amount of the literature has reported on the impact of access to credit on technology adoption, and many studies find that credit has a positive impact on adoption. However, most existing studies have failed to explicitly measure and analyze the amount of credit that farm households are able to borrow and whether they are credit constrained or not. They overlooked the fact that credit access can be a panacea for non-adoption only if it is targeted at households that face binding liquidity constraints. Guided by the frame work of a household model under credit market failure, this paper aims at investigating the impact of access to credit on the adoption of hybrid maize among households that vary in their credit constraints. The data used in the study is from Malawi collected by the International Food Policy Research Institute (IFPRI).Using the direct elicitation approach, households are classified into constrained and unconstrained regimes. We start by estimating the probability of being credit constrained, followed by an estimation of the impact of access to credit for the two categories of households (credit constrained and unconstrained), while accounting for selection bias. The impact of access to credit is estimated using a switching regression in a Double-Hurdle model. Results reveal that while access to credit increases adoption among credit constrained households, it has no effect among unconstrained households. Results also show that factors that affect adoption among credit constrained households are different from those that that affect adoption among unconstrained household. Landholding size, for example, has opposite effects on adoption in the two regimes of households. The policy implication is that microfinance institutions should consider scaling up their credit services to ensure that more households benefit from it, and in so doing maize adoption will be enhanced.

Suggested Citation

  • Simtowe, Franklin & Zeller, Manfred, 2006. "The Impact of Access to Credit on the Adoption of hybrid maize in Malawi: An Empirical test of an Agricultural Household Model under credit market failure," MPRA Paper 45, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:45
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/45/1/MPRA_paper_45.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Diagne, Aliou & Zeller, Manfred & Sharma, Manohar, 2000. "Empirical measurements of households' access to credit and credit constraints in developing countries," FCND briefs 90, International Food Policy Research Institute (IFPRI).
    2. Diagne, Aliou, 2000. "Design and sustainability issues of rural credit and savings programs," MP05 briefs 12, International Food Policy Research Institute (IFPRI).
    3. Steven T. Yen & Andrew M. Jones, 1997. "Household Consumption of Cheese: An Inverse Hyperbolic Sine Double-Hurdle Model with Dependent Errors," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(1), pages 246-251.
    4. Feder, Gershon & Just, Richard E & Zilberman, David, 1985. "Adoption of Agricultural Innovations in Developing Countries: A Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 33(2), pages 255-298, January.
    5. Vakis, Renos & Sadoulet, Elisabeth & de Janvry, Alain & Cafiero, Carlo, 2004. "Testing for Separability in Household Models with Heterogeneous Behavior: A Mixture Model Approach," CUDARE Working Papers 25016, University of California, Berkeley, Department of Agricultural and Resource Economics.
    6. Fernandez-Cornejo, Jorge & McBride, William D., 2002. "Adoption Of Bioengineered Crops," Agricultural Economic Reports 33957, United States Department of Agriculture, Economic Research Service.
    7. Zeller, Manfred & Diagne, Aliou & Mataya, Charles, 1998. "Market access by smallholder farmers in Malawi: implications for technology adoption, agricultural productivity and crop income," Agricultural Economics, Blackwell, vol. 19(1-2), pages 219-229, September.
    8. Diagne, Aliou & Zeller, Manfred, 2001. "Access to credit and its impact on welfare in Malawi:," Research reports 116, International Food Policy Research Institute (IFPRI).
    9. Zeller, Manfred & Sharma, Manohar & Ahmed, Akhter U. & Rashid, Shahidur, 2001. "Group-based financial institutions for the rural poor in Bangladesh: an institutional- and household-level analysis," Research reports 120, International Food Policy Research Institute (IFPRI).
    10. Manfred Zeller & Aliou Diagne & Charles Mataya, 1998. "Market access by smallholder farmers in Malawi: implications for technology adoption, agricultural productivity and crop income," Agricultural Economics, International Association of Agricultural Economists, vol. 19(1-2), pages 219-229, September.
    11. Eswaran, Mukesh & Kotwal, Ashok, 1990. "Implications of Credit Constraints for Risk Behaviour in Less Developed Economies," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 473-482, April.
    12. Simtowe, Franklin, 2006. "Can Risk-aversion towards fertilizer explain part of the non-adoption puzzle for hybrid maize? Empirical evidence from Malawi," MPRA Paper 1241, University Library of Munich, Germany, revised 20 Dec 2006.
    13. Adesina, Akinwumi A. & Baidu-Forson, Jojo, 1995. "Farmers' perceptions and adoption of new agricultural technology: evidence from analysis in Burkina Faso and Guinea, West Africa," Agricultural Economics, Blackwell, vol. 13(1), pages 1-9, October.
    14. P G Moffatt, 2005. "Hurdle models of loan default," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 56(9), pages 1063-1071, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Faruque-As-Sunny & Zuhui Huang & Taonarufaro Tinaye Pemberai Karimanzira, 2018. "Investigating Key Factors Influencing Farming Decisions Based on Soil Testing and Fertilizer Recommendation Facilities (STFRF)—A Case Study on Rural Bangladesh," Sustainability, MDPI, vol. 10(11), pages 1-24, November.
    2. Yu, Lili & Zhao, Duanyang & Xue, Zihao & Gao, Yang, 2020. "Research on the use of digital finance and the adoption of green control techniques by family farms in China," Technology in Society, Elsevier, vol. 62(C).
    3. Ojo, T. & Baiyegunhi, L., 2018. "Determinants of Adaptation Strategies to Climate Change among Rice Farmers in Southwestern Nigeria: A Multivariate Probit Approach," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277011, International Association of Agricultural Economists.
    4. Mekonnen, Tigist, 2017. "Willingness to pay for agricultural risk insurance as a strategy to adapt climate change," MERIT Working Papers 2017-028, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    5. Girmay Berhe Araya, 2020. "Impact of Ethiopia's productive safety net program on manure use by rural households: Evidence from Tigrai, Northern Ethiopia," Agricultural Economics, International Association of Agricultural Economists, vol. 51(5), pages 725-742, September.
    6. Aslihan Arslan & Kristin Floress & Christine Lamanna & Leslie Lipper & Solomon Asfaw & Todd Rosenstock, 2020. "IFAD RESEARCH SERIES 63 - The adoption of improved agricultural technologies - A meta-analysis for Africa," IFAD Research Series 304758, International Fund for Agricultural Development (IFAD).
    7. Stellah Mong’ina Masese, 2021. "Diversification of Livelihoods in Urban Informal Settlements in Nairobi, Kenya," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 5(2), pages 546-553, February.
    8. Kankwamba, Henry & Mangisoni, Julius H. & Simtowe, Franklin & Mausch, Kai & Siambi, Moses, 2012. "Improved Legume Seed Demand Systems In Central Malawi: What Do Farmers’ Seed Expenditures Say About Their Preferences?," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 131684, International Association of Agricultural Economists.
    9. Finagnon Antoine Dedewanou & Rolande C. B. Kpekou Tossou, 2022. "Remittances and agricultural productivity in Burkina Faso," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 44(3), pages 1573-1590, September.
    10. Adams, Abdulai & Jumpah, Emmanuel Tetteh & Caesar, Livingstone Divine, 2021. "The nexuses between technology adoption and socioeconomic changes among farmers in Ghana," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    11. Julián Aramburu & Mario González & Lina Salazar & Paul Winters, 2014. "When a Short-term Analysis is not a Short-term Approach: Impacts of Agricultural Technology Adoption in Bolivia," IDB Publications (Working Papers) 86815, Inter-American Development Bank.
    12. Yi, Fujin & Sun, Dingqiang & Zhou, Yingheng, 2015. "Grain subsidy, liquidity constraints and food security—Impact of the grain subsidy program on the grain-sown areas in China," Food Policy, Elsevier, vol. 50(C), pages 114-124.
    13. Kenneth, Akankwasa & Gerald, Ortmann & Edilegnaw, Wale & Wilberforce, Tushemereirwe, 2012. "Ex-Ante Adoption of New Cooking Banana (Matooke) Hybrids in Uganda Based on Farmers' Perceptions," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 123302, International Association of Agricultural Economists.
    14. Shaibu Baanni Azumah & Samuel A. Donkoh & Isaac Gershon K. Ansah, 2017. "Contract farming and the adoption of climate change coping and adaptation strategies in the northern region of Ghana," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 19(6), pages 2275-2295, December.
    15. Frederick Murdoch Quaye & Valentina Hartarska, 2016. "Investment Impact of Microfinance Credit in Ghana," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(3), pages 137-150, March.
    16. Dennis Kimoso Mulupi & Mose P. B Ph.D & Kenneth Waluse Sibiko Ph.D, 2021. "Subsidized Fertilizer Utilization and Determinants among Small-scale Maize Farmers in Kakamega County, Kenya," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 5(11), pages 614-622, November.
    17. Yi, Fujin & Lu, Wuyi & Zhou, Yingheng, 2015. "Cash Transfers and Multiplier Effect: Lessons from the Grain Subsidy Program in China," 2015 Conference, August 9-14, 2015, Milan, Italy 211877, International Association of Agricultural Economists.
    18. Mulwa, Chalmers & Marenya, Paswel & Rahut, Dil Bahadur & Kassie, Menale, 2015. "Response to Climate Risks among Smallholder Farmers in Malawi: A Multivariate Probit Assessment of the Role of Information, Household Demographics and Farm Characteristics," 2015 Conference, August 9-14, 2015, Milan, Italy 212511, International Association of Agricultural Economists.
    19. Gin, Xavier & Yang, Dean, 2009. "Insurance, credit, and technology adoption: Field experimental evidencefrom Malawi," Journal of Development Economics, Elsevier, vol. 89(1), pages 1-11, May.
    20. Bola Amoke Awotide & Adebayo Ogunniyi & Kehinde Oluseyi Olagunju & Lateef Olalekan Bello & Amadou Youssouf Coulibaly & Alexander Nimo Wiredu & Bourémo Kone & Aly Ahamadou & Victor Manyong & Tahirou Ab, 2022. "Evaluating the Heterogeneous Impacts of Adoption of Climate-Smart Agricultural Technologies on Rural Households’ Welfare in Mali," Agriculture, MDPI, vol. 12(11), pages 1-16, November.
    21. Onyeneke, Robert Ugochukwu & Igberi, Christiana Ogonna, 2020. "Climate change adaptation actions by fish farmers: evidence from the Niger Delta Region of Nigeria," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 64(2), April.
    22. Aramburu, Julián & González, Mario & Salazar, Lina & Winters, Paul, 2014. "When a Short-term Analysis is not a Short-term Approach: Impacts of Agricultural Technology Adoption in Bolivia," IDB Publications (Working Papers) 6676, Inter-American Development Bank.
    23. Yi, Fujin & Sun, Dingqiang, 2014. "Grain Subsidy, Liquidity Constraints and Food security—Impact of the Grain Subsidy Program on the Grain-Sown Areas in China," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169779, Agricultural and Applied Economics Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Simtowe, Franklin & Zeller, Manfred & Diagne, Aliou, 2009. "The impact of credit constraints on the adoption of hybrid maize in Malawi," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 90(1).
    2. Kenneth, Akankwasa & Gerald, Ortmann & Edilegnaw, Wale & Wilberforce, Tushemereirwe, 2012. "Ex-Ante Adoption of New Cooking Banana (Matooke) Hybrids in Uganda Based on Farmers' Perceptions," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 123302, International Association of Agricultural Economists.
    3. Yusuf Ibrahim Kofarmata & Shri Dewi Applanaidu & Sallahuddin Hassan, 2016. "Determinants of Demand for Credit: A Conceptual Review," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 3(1), pages 6-10.
    4. Beke, Tite Ehuitché, 2011. "Institutional constraints and adoption of improved rice varieties: Econometric evidence from Ivory Coast," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 92(2).
    5. Zeller, Manfred, 1999. "Towards Enhancing the Role of Microfinance for Safety Nets of the Poor," Discussion Papers 280263, University of Bonn, Center for Development Research (ZEF).
    6. Tite Ehuitché Beke, 2011. "Institutional constraints and adoption of improved rice varieties: Econometric evidence from Ivory Coast," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 92(2), pages 117-141.
    7. Conning, Jonathan & Udry, Christopher, 2007. "Rural Financial Markets in Developing Countries," Handbook of Agricultural Economics, in: Robert Evenson & Prabhu Pingali (ed.), Handbook of Agricultural Economics, edition 1, volume 3, chapter 56, pages 2857-2908, Elsevier.
    8. Gonzalo Villa-Cox & Paul Herrera & Ramón Villa-Cox & Elvia Merino-Gaibor, 2017. "Small and Mid-Sized Farmer Irrigation Adoption in the Context of Public Provision of Hydric Infrastructure in Latin America and Caribbean," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 31(14), pages 4617-4631, November.
    9. Paramasivam Ramasamy & Umanath Malaiarasan, 2023. "Agricultural credit in India: determinants and effects," Indian Economic Review, Springer, vol. 58(1), pages 169-195, June.
    10. Freudenreich, H., 2018. "Explaining Mexican Farmers Adoption of Hybrid Maize Seed - The Role of Social Psychology, Risk and Ambiguity Aversion," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277410, International Association of Agricultural Economists.
    11. Alwang, Jeffrey & Puhazhendhi, V., 2002. "The impact of the International Food Policy Research Institute's research program on rural finance policies for food security for the poor," Impact assessments 16, International Food Policy Research Institute (IFPRI).
    12. Muthini, D., 2018. "Variety Awareness, Nutrition Knowledge and Adoption of Nutritionally Enhanced Crop Varieties: Evidence from Kenya," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277135, International Association of Agricultural Economists.
    13. S?ren Marcus Pedersen & Kim Martin Lind & Orjon Xhoxhi & Attila Yazar & Sven-Erik Jacobsen & Jens Erik ?rum, 2020. "Introducing quinoa in Turkey - farmers perception in the region of Adana," Economia agro-alimentare, FrancoAngeli Editore, vol. 22(1), pages 1-24.
    14. Perosa, Bruno & Newton, Peter & Carrer, Marcelo José, 2021. "Access to information affects the adoption of integrated systems by farmers in Brazil," Land Use Policy, Elsevier, vol. 106(C).
    15. Ta Nhat Linh & Dang Anh Tuan & Phan Thu Trang & Hoang Trung Lai & Do Quynh Anh & Nguyen Viet Cuong & Philippe Lebailly, 2020. "Determinants of Farming Households’ Credit Accessibility in Rural Areas of Vietnam: A Case Study in Haiphong City, Vietnam," Sustainability, MDPI, vol. 12(11), pages 1-16, May.
    16. Matuschke, Ira & Mishra, Ritesh R. & Qaim, Matin, 2007. "Adoption and Impact of Hybrid Wheat in India," World Development, Elsevier, vol. 35(8), pages 1422-1435, August.
    17. Balana, Bedru & Oyeyemi, Motunrayo, 2021. "Credit Constraints and Adoption of Agricultural Technologies in Developing Countries? Evidence from Nigeria," 2021 Conference, August 17-31, 2021, Virtual 315347, International Association of Agricultural Economists.
    18. Akinola, Adebayo A. & Alene, Arega D. & Adeyemo, Remi & Sanogo, D. & Olanrewaju, A.S. & Nwoke, C. & Nziguheba, G., 2010. "Determinants of adoption and intensity of use of balance nutrient management systems technologies in the northern Guinea savanna of Nigeria," Quarterly Journal of International Agriculture, Humboldt-Universitaat zu Berlin, vol. 49(1), pages 1-21.
    19. Lambrecht, Isabel & Vanlauwe, Bernard & Merckx, Roel & Maertens, Miet, 2014. "Understanding the Process of Agricultural Technology Adoption: Mineral Fertilizer in Eastern DR Congo," World Development, Elsevier, vol. 59(C), pages 132-146.
    20. Kuhl, Laura, 2018. "Potential contributions of market-systems development initiatives for building climate resilience," World Development, Elsevier, vol. 108(C), pages 131-144.

    More about this item

    Keywords

    credit constraints; double-hurdle; hybrid maize; adoption; Malawi;
    All these keywords.

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:45. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.