| 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. |