Advanced Search
MyIDEAS: Login

Farm household economic behaviour in imperfect financial markets


Author Info

  • Komicha, Hussien Hamda
Registered author(s):


    Financial markets in developing countries are imperfect and are likely to affect decision-making behaviour of economic agents, especially smallholder farm households. This thesis, comprising four articles, aimed to understand and explain farm household economic behaviour with reference to saving, credit and production efficiency under imperfect financial market conditions. It is based on data obtained from farm household survey conducted in two districts of southeastern Ethiopia from September 2004 to January 2005. Data was analysed using stochastic frontier analysis and limited dependent variable econometric tools. In article I, farm household saving behaviour and its determinants were studied. Results show that, on average, a farm household saved 37% of its farm income in financial and physical assets. However, more than 90% of savers held their savings outside formal financial institutions. Such saving behaviour of farm households was affected by factors related more to incentives and opportunities to save than to ability to save. In Article II, borrowing behaviour of farm households was analysed by considering sectoral choice of farm households among formal, semiformal and informal credit sectors and factors contributing to their choice. The informal credit sector was found to dominate sectoral choice of the farm households even though this sector charged the highest interest rates. Factors other than the interest rate, i.e., loan processing time, type of loan, credit information and loan size, significantly affected this borrowing behaviour of the farm households. In Article III, technical efficiency of smallholder farmers was estimated using a stochastic frontier analysis. There was about 12% efficiency differential between credit-constrained and credit-unconstrained farm households, ceteris paribus. In Article IV, farm households’ demand for credit and its determinants were investigated. It was found that farm households had credit demand for production and consumption purposes, whereas the formal credit sector targeted credit only for production purpose, although production and consumption purposes are closely related. In conclusion, imperfect financial markets adversely affect saving, credit demand, credit sectoral choice and production behaviours of farm households. This study suggests some policy measures, which may help to redress the adverse effects identified and to enhance development of rural financial markets and institutions.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL:
    Download Restriction: no

    Bibliographic Info

    Paper provided by Swedish University of Agricultural Sciences, Department of Economics in its series Department of Economics publications with number 1563.

    as in new window
    Date of creation: 2007
    Date of revision:
    Handle: RePEc:sua:ekonwp:1563

    Contact details of provider:
    Postal: Box 7013, 750 07 UPPSALA
    Phone: 018-67 1724
    Fax: 018-67 3502
    Web page:
    More information through EDIRC

    Related research



    No references listed on IDEAS
    You can help add them by filling out this form.



    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


    Access and download statistics


    When requesting a correction, please mention this item's handle: RePEc:sua:ekonwp:1563. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alejandro Engelmann).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.