nep-mfd New Economics Papers
on Microfinance
Issue of 2019‒05‒13
four papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Implicit and Explicit Commitment in Credit and Saving Contracts: A Field Experiment By Uzma Afzal; Giovanna D'Adda; Marcel Fafchamps; Simon R. Quinn; Farah Said
  2. Enhanced Microfinance Services and Agricultural Best Management Practices: What Benefits for Smallholders Farmers? An Evidence from Burkina Faso By Lota Dabio Tamini; Ibrahima Bocoum; Ghislain Auger; Kotchikpa Gabriel Lawin; Arahama Traoré
  3. Inventory Credit to Enhance Food Security in Africa By Subervie Julie; Tristan Le Cotty; Elodie Maitre d'Hotel
  4. Understanding farmers’ valuation of agricultural insurance: Evidence from Viet Nam By Singh Anuj; King Michael

  1. By: Uzma Afzal; Giovanna D'Adda; Marcel Fafchamps; Simon R. Quinn; Farah Said
    Abstract: We conduct a field experiment to test the demand for flexibility and for soft and hard commitment among clients of a microfinance institution. We offer a commitment contract inspired by the rotating structure of a ROSCA. Additional treatments test ex ante demand for soft commitment (in the form of reminders), hard commitment (in the form of a penalty for missing an installment), and flexibility (an option to postpone an installment). Our design is unique in the literature for allowing us to test — using the same respondent population — how demand for explicit commitment features differs between loan and savings contracts. We find substantial demand for both credit and savings contracts but no demand for additional commitment features — either in isolation or in combination — in spite of their effectiveness in improving repayment. In particular, demand for savings is insensitive to explicit commitment features. Individuals offered loans actively dislike commitment and flexibility, unless the latter is combined with reminders. These findings complement a literature showing that commitment devices induce financial discipline. They show that demand for commitment depends on whether commitment features are implicit or explicit.
    JEL: G02 O16
    Date: 2019–05
  2. By: Lota Dabio Tamini; Ibrahima Bocoum; Ghislain Auger; Kotchikpa Gabriel Lawin; Arahama Traoré
    Abstract: This paper analyses the crop production intensification credit [Crédit d’Intensification de la Production Agricole] (CIPA) and its impact on smallholders farmers in Burkina Faso. The methodological approach of the evaluation is based on a randomized experiment coupled to propensity score matching. For the latter, the strategy was to use the observable characteristics of producers and their farms to identify, in non-CIPA areas, producers who have characteristics that have an impact on the propensity to take a credit similar to the CIPA beneficiary producers. We used a Difference-in-Difference approach and analysed the changes in the results between the baseline (2015) and final (2017) surveys witch result in a total of 955 observations in the northern of Burkina Faso and 1,311 in the southern part. The results show that CIPA has a positive effect on area planted, yield, production and sales. However, there is heterogeneity regarding gender, province and perceived quality of services to producers (provided by extension agents, producers’ organization and input suppliers). Development projects should therefore consider this heterogeneity in the design of their interventions.
    Keywords: Burkina Faso,Microcredit,Agricultural production,Agricultural productivity,Impact evaluation,
    JEL: O13 Q14
    Date: 2019–05–06
  3. By: Subervie Julie (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier); Tristan Le Cotty (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CNRS - Centre National de la Recherche Scientifique - ENPC - École des Ponts ParisTech - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech); Elodie Maitre d'Hotel (UMR MOISA - Marchés, Organisations, Institutions et Stratégies d'Acteurs - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - INRA Montpellier - Institut national de la recherche agronomique [Montpellier] - CIHEAM-IAMM - Centre International de Hautes Etudes Agronomiques Méditerranéennes - Institut Agronomique Méditerranéen de Montpellier - CIHEAM - Centre International de Hautes Études Agronomiques Méditerranéennes - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier)
    Abstract: In many African countries, rural households typically sell their output immediately after harvest and then have to face the lean season in often dramatic conditions. This paper explores whether alleviating both credit and storage constraints through an inventory credit (or warrantage) program in Burkina Faso is associated with improvements in household food insecurity and dietary diversity. We partnered with a rural bank and a nation-wide organization of farmers to evaluate a warrantage system with seventeen villages in the western region of Burkina Faso. In randomly chosen treatment villages, the households were offered a loan in exchange for storing a portion of their harvest as a physical guarantee in one of the newly-built warehouses of the project. We show that, after three seasons, the warrantage program has extended users' self-subsistence period by an average of seventeen days, increased the average size of the farmby one and a half hectares (one additional hectare of cotton and one additional half hectare of maize) and increased dietary diversity significantly, with more fish, fruit and oil consumed weekly.
    Keywords: inventory credit,warrantage,savings,storage,intertemporal price fluctuations
    Date: 2019
  4. By: Singh Anuj; King Michael
    Abstract: We employ a novel approach to investigate the reasons for a low demand for agricultural insurance. We confirm that farmers systematically undervalue agricultural insurance.First, we find that private transfers, mainly from family members, explain under-valuation of agricultural insurance. Second, membership of a farmer’s union, interpreted as a form of social capital or pro-active behaviour, explains the differential between willingness to pay (WTP) and the predicted economic value of insurance. Third, we help answer the puzzle why the most risk averse are least likely to take up agricultural insurance.We find that over-confidence holds a positive and significant relationship with WTP for agricultural insurance and interpret this as evidence that, within the context of implementation challenges and likely concerns about insurer viability, only the most confident are likely to purchase insurance. These results hold across a range of robustness checks.
    Keywords: Agriculture,Insurance,Risk
    Date: 2018

This nep-mfd issue is ©2019 by Aastha Pudasainee and Olivier Dagnelie. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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