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Rural Finance and Agricultural Technology Adoption in Ethiopia: Does the Institutional Design of Lending Organizations Matter?

Author

Listed:
  • Abate, Gashaw Tadesse
  • Rashid, Shahidur
  • Borzaga, Carlo
  • Getnet, Kindie

Abstract

It has now become almost a stylized fact that sustained agricultural growth is central to rapid poverty reduction and economic development. Yet, world poverty is largely concentrated in the agrarian societies, which have the potential for agricultural productivity growth. This is particularly true for Sub-Saharan African countries, where the gaps between potential and actual yields remain high. Minimizing this gap through the promotion of modern inputs—such as fertilizer and modern seeds—has been at the core of almost all development strategies in Ethiopia. Among other initiatives, the country has promoted microfinance institutions and member-owned financial cooperatives to alleviate credit constraints of the smallholder farmers. This paper analyzes the impacts of these institutions. Using household survey data and a propensity-score-matching technique, we examine the effects that institutional financial services have on farmers’ adoption of agricultural technology in Ethiopia. The results suggest that access to institutional finance has a significant positive impact on both the adoption and extent of technology use. However, when impacts are disaggregated by type of financial institution and farm size, heterogeneities are observed. In particular, financial cooperatives have a greater impact on technology adoption than microfinance institutions, and the results appear to vary depending on farm size and types of inputs. The paper concludes with implications for policies to promote adoption of modern agricultural inputs.

Suggested Citation

  • Abate, Gashaw Tadesse & Rashid, Shahidur & Borzaga, Carlo & Getnet, Kindie, 2016. "Rural Finance and Agricultural Technology Adoption in Ethiopia: Does the Institutional Design of Lending Organizations Matter?," World Development, Elsevier, vol. 84(C), pages 235-253.
  • Handle: RePEc:eee:wdevel:v:84:y:2016:i:c:p:235-253
    DOI: 10.1016/j.worlddev.2016.03.003
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    Citations

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    Cited by:

    1. repec:spr:agfoec:v:6:y:2018:i:1:d:10.1186_s40100-018-0098-0 is not listed on IDEAS
    2. repec:spr:jecstr:v:6:y:2017:i:1:d:10.1186_s40008-017-0093-8 is not listed on IDEAS
    3. repec:bla:annpce:v:90:y:2019:i:1:p:187-215 is not listed on IDEAS
    4. Kibrom A. ABAY & Bethelhem KORU & Gashaw Tadesse ABATE & Guush BERHANE, 2019. "How Should Rural Financial Cooperatives Be Best Organized? Evidence From Ethiopia," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 90(1), pages 187-215, March.
    5. repec:pal:eurjdr:v:31:y:2019:i:1:d:10.1057_s41287-018-0180-1 is not listed on IDEAS
    6. repec:gam:jsusta:v:10:y:2018:i:12:p:4407-:d:185436 is not listed on IDEAS
    7. repec:eee:ecolec:v:143:y:2018:i:c:p:199-209 is not listed on IDEAS
    8. repec:eee:jeborg:v:143:y:2017:i:c:p:98-115 is not listed on IDEAS
    9. repec:gam:jsusta:v:9:y:2017:i:12:p:2216-:d:120940 is not listed on IDEAS
    10. Shukkri AHMED & Craig MCINTOSH & Alexandros SARRIS, 2017. "The Impact of Commercial Rainfall Index Insurance: Experimental Evidence from Ethiopia," Working Papers 4288, FERDI.
    11. Kibrom A. Abay & Guush Berhane & Garrick Blalock, 2018. "Locus of Control and Technology Adoption in Africa: Evidence from Ethiopia," Working Papers PMMA 2018-04, PEP-PMMA.
    12. Shukkri AHMED & Craig MCINTOSH & Alexandros SARRIS, 2017. "The Impact of Commercial Rainfall Index Insurance: Experimental Evidence from Ethiopia," Working Papers 4289, FERDI.

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