Farmers' preferences and willingness to pay for microcredit in Benin: results from in-the-field choice experiments in Benin
ISSN: 0002-1466
Article publication date: 13 May 2020
Issue publication date: 5 October 2020
Abstract
Purpose
This document analyses farmers' preferences and willingness to pay (CAP) for microcredit, in order to facilitate their access in rural areas.
Design/methodology/approach
Data are based on a discrete choice experiment with 400 randomly selected farmers from 20 villages of the 7 Benin agricultural development hubs (ADHs). The preference choice modelling was performed using mixed logit (MXL) and latent class logit (LCL) models. Farmers' willingness to pay for each preferred attribute was estimated. The endogenous attribute attendance (EAA) model was also used to capture attribute non-attendance (ANA) phenomenon.
Findings
The results indicate that, on average, farmers prefer individual loans, low interest rates, in kind + cash loans, cash loans, disbursement before planting and loans with at least 10-month duration. These preferences vary according to farmers' classes. Farmers are willing to pay higher or lower interest rates depending on attribute importance. The estimate of the EAA model indicates that, when taking the ANA phenomenon into consideration, people will show stronger attitudes regarding WTP for important factors.
Research limitations/implications
Based on these results from Benin, microfinance institutions (MFIs) in developing countries can, based on the interest rates currently charged, attract more farmers as customers, reviewing the combination of the levels of the attributes associated with the nature of the loan, the type of loan (individual or collective), the disbursement period of funds, the waiting period of the loan and the loan duration. However, the study only considered production credit, ignoring equipment or investment credit.
Practical implications
The document provides information on the key factors that can facilitate producers' access to MFI products and services.
Social implications
Facilitating small farmers' access to financial service will contribute to poverty reduction.
Originality/value
This research contributes to the knowledge of the attributes and attribute levels favoured by farmers when choosing financial products and the amounts they agree to pay for these attributes. The implementation of the results would facilitate small producers' access to financial services; thus contributing to poverty reduction.
Keywords
Acknowledgements
The authors thank Dr. Adjanohoun Adolphe and Dr. Ahoyo-Adjovi Nestor, Director General and Scientific Director of the National Institute of Agricultural Research of Benin, respectively, and Dr. Dagbenonbakin D. Gustave, Coordinator of Smallholder Agricultural Productivity Enhancement Project (SAPEP) in Benin for their various advice and support. They thank the Islamic Development Bank (IDB) for its financial support during the literature review, the data analysis and the report writing stages of the study, through the SAPEP. Finally, they thank the Word Bank for its financial support during the data collection stage, through the West Africa Agricultural Productivity Program (WAAPP).
Citation
Ogouvide, T.F., Adegbola, Y.P., Zossou, R.C., Zannou, A. and Biaou, G. (2020), "Farmers' preferences and willingness to pay for microcredit in Benin: results from in-the-field choice experiments in Benin", Agricultural Finance Review, Vol. 80 No. 5, pp. 665-692. https://doi.org/10.1108/AFR-01-2020-0004
Publisher
:Emerald Publishing Limited
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