Department of Agricultural, Food, and Resource Economics Feed the Future Innovation Lab for Food Security Policy

Adjognon, G. S., Liverpool-Tasie, L. S. O., & Reardon, T. (2017). Financing Agricultural Inputs in Africa: Own Cash or Credit?.

Abstract

Reports that farmers in Africa rarely use credit when purchasing farm inputs, such as inorganic fertilizer or improved seeds, though access to loans (mostly informal) has a favorable effect on fertilizer use. Although the role of credit in rural transformation proves well understood, only six percent of farmers in the four countries studied (Malawi, Nigeria, Tanzania, and Uganda) use any form of credit to buy modern inputs. Larger farms will more likely use credit, but even the use of informal credit remains rare. Modern input purchases come mainly through savings, crop sales, and nonfarm activities. Financing the start-up costs of nonfarm enterprises or consumption remain by far the most common purpose of credit for a farming family. Rural development policies and programs spurring broad development of the rural nonfarm sector would benefit farm input purchases and thus productivity and food security. These policies and programs would prove important complements to credit policies and programs.