The Effect of Credit Constraints on Agricultural Input Technology Adoption of Farmers.
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Date
2023-06
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Addis Ababa University
Abstract
Agricultural credit constraints hinder the adoption of modern input technologies and contribute to low agricultural productivity in developing nations, including Ethiopia. This study investigates the nature of credit constraints among smallholder farmers, factors influencing these constraints, and their impact on the adoption of Chemical fertilizer and agrochemicals. Using nationally representative LSMS-ISA data from 2200 smallholders, two econometric models (MNP and SUR) are employed to estimate credit constraint status and analyze input technology adoption. The findings reveal a significant experience of credit constraints, influenced by both supply-side and demand-side factors. Collateral ownership-related factors (e.g., livestock ownership, land use certificates) influence supply-side credit constraints, while literacy, remittance access, and agricultural extension services affect demand-side credit constraints. Moreover, credit constraints negatively affect the adoption of agrochemical input technology. Addressing credit constraints requires mitigating both supply-side and demand-side factors. Strengthening smallholders' capacity for bankable collateral ownership and providing information literacy, education, and agricultural extension services can alleviate these constraints. Resolving both demand-side and supply-side constraints can enhance credit access, increase the adoption of modern input technologies, and ultimately improve agricultural productivity. Policymakers should focus on targeted measures to enhance credit availability and access, thereby promoting sustainable agricultural development in Ethiopia.
Keywords: Rural credit constraints, Agricultural input, adoption, Supply-side and demand-side, Ethiopia
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SOCIAL SCIENCES::Business and economics::Economics