Design and sustainability issues of rural credit and savings programs

Joint liability group lending is currently the lending technology of choice of microfinance institutions because of the success of the Grameen Bank, which is using the technology to successfully lend to millions of poor Bangladeshi women. The analysis and findings presented in this brief are the results of research undertaken by the International Food Policy Research Institute (IFPRI) and Bunda College of Agriculture on the practice and performance of joint liability group lending in Malawi. This research provides evidence on the extent to which peer selection, peer monitoring, and peer pressure are taking place in the credit groups affiliated to the Malawi Rural Finance Company (MRFC), the main microfinance institution in Malawi, and their impact on the joint liability on loan repayment. authorities have on the formation and com-positionCredit Malawi. ,Grameen Bank. ,Technology. ,Microenterprises Malawi Finance. ,Finance Developing countries. ,Rural credit Developing countries. ,Financial institutions. ,

Taking a New Look at Empirical Models of Adoption: Average Treatment Effect Estimation of Adoption Rates and their Determinants

This paper shows that the observed sample adoption rate does not consistently estimate the population adoption rate even if the sample is random. It is proved that instead the sample adoption rate is a consistent estimate of the population joint exposure and adoption rate, which does not inform about adoption per se. Likewise, it is shown that a model of adoption with observed adoption outcome as dependent variable and where exposure to the technology is not observed and controlled for cannot yield consistent estimates of the determinants of adoption. Such model can at best provide consistent estimates of the effects of the included explanatory variables on joint exposure and adoption. Even for that to be possible, the model must be explicitly specified as a model of determinants of joint exposure and adoption and not as a model of determinants of adoption alone. The paper uses the counterfactual outcomes framework to show that the true population adoption rate corresponds to what is defined in the modern treatment effect literature as the average treatment effect (ATE), which measures the effect or impact of a "treatment" on a person randomly selected in the population. In the adoption context, a "treatment" corresponds to exposure to the technology. Another quantity that is also the subject of attention in the treatment effect literature is the average treatment effect on the treated, which measures the effect of treatment in the treated subpopulation and corresponds in the adoption context to the adoption rate among those exposed to the technology. The paper uses the ATE estimation framework to derive consistent nonparametric and parametric estimators of population adoption rates and their determinants and applies the results to consistently estimate the population adoption rates and determinants of the NERICA (New Rice for Africa) rice varieties in Cote d'ivoire.Technology Adoption, Rice, NERICA, West Africa, Average Treatment Effect, Research and Development/Tech Change/Emerging Technologies, C8, O3, Q12, Q16, Q55,

Access to credit and its impact on welfare in Malawi:

Poor rural households in developing countries lack adequate access to credit. Many development professionals believe that this lack of credit has negative consequences for poor people's agricultural productivity, food security, health, and overall household welfare. Improved access to credit, they argue, will help poor rural households engage in more productive income-generating activities both on and off the farm and raise their living standards. Community and member-based microfinance programs have thus enjoyed considerable political and financial support during the 1990s. Yet in Access to Credit and Its Impact on Welfare in Malawi, Aliou Diagne and Manfred Zeller argue that access to microcredit may not be an effective way of alleviating poverty if the necessary infrastructure and socioeconomic environment are lacking.Rural poor Malawi., Agricultural credit Malawi., Agricultural policies., Developing countries., Small business Developing countries Finance.,

Impact of access to credit on income and food security in Malawi

The paper departs from the standard practice that takes the estimated marginal effects of either the amount of credit received or membership in a credit program as measures of the impact of access to credit on household welfare. The marginal effects of the formal credit limit variable on household welfare, controlling for the credit limit from informal sources as well as the credit demanded from both sources, measure the marginal effects of access to formal credit. The main finding of the paper is that access to formal credit, by enabling households to reduce their borrowing from informal sources, has marginally beneficial effects on household annual income. However, these effects are very small and do not cause any significant difference between the per capita incomes, food security, and nutritional status of credit program members and noncurrent members. Moreover, the beneficial substitution effect reflects only the fact that reduced borrowing from informal sources makes informal loans play a lesser role in the negative impact that borrowing (from formal or informal sources) has on net crop incomes. The marginal effects on household farm and nonfarm incomes resulting from mere access to formal credit (without necessarily borrowing) are positive and quite sizable, but not statistically significant. Land scarcity and unfavorable terms of trade for the smallholders' farm products remain by far the factors that most constrain per capita household income growth in Malawi. The paper concludes that the necessary complementary resources and economic environment are not yet in place for access to formal credit to realize its full benefits for Malawi's rural population.Rural population. ,Nutritional status. ,Credit Malawi. ,Food security Malawi. ,

Empirical measurements of households' access to credit and credit constraints in developing countries

This paper presents a new methodological framework for measuring the level of household access to credit. It provides an analytical framework for examining the determinants of household credit limits and derives implications on information needed to examine the extent to which households are credit constrained. Empirical application of this method involves directly eliciting credit limit information in household surveys. Illustrations are provided using data from Bangladesh and Malawi.FCND ,Credit Bangladesh. ,Credit Malawi. ,

The impact of credit constraints on the adoption of hybrid maize in Malawi.

This paper investigates the impact of credit constraints on the adoption of hybrid maize among rural households in Malawi. To address the endogenous and binary nature of the household's credit constraints status, we employ a treatment-effects model to consistently estimate the effect of credit constraints. Results reveal that after effectively correcting for endogeneity, credit constraints have a negative and significant effect on the amount of land allocated to hybrid maize. Results also show that farmers with larger land holdings allocate more land to hybrid maize. Although less likely to report credit constraints, older farmers allocate less land to hybrid maize than younger farmers. These findings suggest that there is scope for increasing the cultivation of hybrid maize in Malawi if credit is targeted at younger farmers that are credit-constrained.credit constraints, hybrid maize, adoption, treatment-effect, endogenous, Malawi

Empirical measurements of households' access to credit and credit constraints in developing countries

This paper presents a new methodological framework for measuring the level of household access to credit. It provides an analytical framework for examining the determinants of household credit limits and derives implications on information needed to examine the extent to which households are credit constrained. Empirical application of this method involves directly eliciting credit limit information in household surveys. Illustrations are provided using data from Bangladesh and Malawi.FCND ,Credit Bangladesh. ,Credit Malawi. ,

Estimation of Actual and Potential Adoption Rates and Determinants of Improved Rice Variety Among Rice Farmers in Nigeria: The Case of NERICAs

The article used the ATE estimation framework to derive consistent semi-parametric estimators of population adoption rates and their determinants of the NERICA (New Rice for Africa) rice varieties in Nigeria. Empirical evidence shows that the observed sample adoption rate does not consistently estimate the population adoption rate even if the sample is random. NERICA awareness was found to be a major constraint to NERICA adoption in Nigeria. Several socioeconomic/demographic characteristics were found to be important determinants of NERICA awareness and adoption. Among those factors are age, gender, major occupation, year of experience and vocational training. In particular, we have found that the NERICA adoption rate in Nigeria would have been up to 76% in 2008 instead of the actually observed 20% joint exposure and adoption rate, if the whole population were exposed to the NERICAs in 2008 or before. This justifies investing in the dissemination of the NERICA varieties; considering that the 76% is bound to increase significantly in the future as farmers learn more about the characteristics of the NERICAs and become comfortable with their performances.NERICAs Adoption, awareness, Average Treatment Effect, Nigeria, Crop Production/Industries,

Determinants of Agricultural Technology adoption: the case of improved groundnut varieties in Malawi

This paper applies the Average Treatment Effect (ATE) framework on data obtained from a random cross-section sample of 594 farmers in Malawi to document the actual and potential adoption rates of improved groundnut varieties and their determinants conditional on farmers’ awareness of the technology. The fact that not all farmers are exposed to the new technologies makes it difficult to obtain consistent estimates of population adoption rates and their determinants using direct sample estimates and classical adoption models such as probit or tobit. Our approach tries to control for exposure and selection bias in assessing the adoption rate of technology and its determinants. Results indicate that only 26% of the sampled farmers grew at least one of the improved groundnut varieties. The potential adoption rate of improved groundnut for the population is estimated at 37% and the adoption gap resulting from the incomplete exposure of the population to the improved groundnut is 12%. We further find that the awareness of improved varieties is mainly influenced by information access variables, while adoption is largely influenced by economic constraints. The findings are indicative of the relatively large unmet demand for improved groundnut varieties suggesting that there is scope for increasing the adoption rate of improved groundnut varieties in Malawi once the farmers are made aware of the technologies and if other constraints such as lack of access to credit are addressed.groundnuts, adoption, Average Treatment Effect, Malawi, Crop Production/Industries,