IDEAS home Printed from https://ideas.repec.org/a/spr/jecstr/v9y2020i1d10.1186_s40008-020-00204-6.html
   My bibliography  Save this article

Determinants of credit constraints and its impact on the adoption of climate change adaptation strategies among rice farmers in South-West Nigeria

Author

Listed:
  • T. O. Ojo

    (University of KwaZulu-Natal
    Obafemi Awolowo University)

  • L. J. S. Baiyegunhi

    (University of KwaZulu-Natal)

Abstract

Interventions on climate change adaptation strategies, involve capital outlays, mostly constrained in supply in developing nations. This study analysed the impact of credit constraints on climate change adaptation strategies among smallholder rice farmers in South-West Nigeria. The nexus between systems of credit constraints and choice of climate change adaptation strategies was estimated using Generalized Method of Moments with Instrumental Variable (IV-GMM) and the seemingly unrelated regression (SUR) model. A principal component analysis (PCA) was used to reduce the multidimensionality of the adaptation strategies and the loading with the highest eigenvalue was chosen and renamed as an improved technology. The results of the study show that risk credit-constrained smallholder rice farmers are less likely to adopt climate change adaptation strategies. The quantitative analysis from this study also points to the fact that age of the household, source of credit, and distance to the source of credit, interest rate, access to extension and climate information were the determinants of credit constraint amongst the smallholder rice farmers in South-West Nigeria. Considering the nexus between climatic factors and credit constraints as noted in this study, increasing awareness about how the credit market works and information on the provision of climate change can help farmers to better adapt to climate change. Therefore, it is recommended that the government frame an agriculture credit policy addressing the issues of smallholder farmers, particularly in areas that are vulnerable to climate change. The income from non-farm activities can be reinvested into farm operations to improve farmers’ adaptive capacity and subsequently increase productivity. It could also be recommended that policies enhancing and strengthening institutional support may also be valuable in augmenting the adaptation strategies of smallholder farmers. A necessary addition should be developed to the assistance already being provided under Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) in the form of loan guarantees and other risk-sharing incentives, such as a regulatory environment that supports the modern contractual obligations that are characteristic of well-functioning agricultural financing.

Suggested Citation

  • T. O. Ojo & L. J. S. Baiyegunhi, 2020. "Determinants of credit constraints and its impact on the adoption of climate change adaptation strategies among rice farmers in South-West Nigeria," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 9(1), pages 1-15, December.
    • Handle: RePEc:spr:jecstr:v:9:y:2020:i:1:d:10.1186_s40008-020-00204-6
    DOI: 10.1186/s40008-020-00204-6
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1186/s40008-020-00204-6
    File Function: Abstract
    Download Restriction: no
    File URL: https://libkey.io/10.1186/s40008-020-00204-6?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2003. "Instrumental variables and GMM: Estimation and testing," Stata Journal, StataCorp LP, vol. 3(1), pages 1-31, March.
    2. Luan, D. X. & Bauer, S. & Kuhl, R., 2016. "Income Impacts of Credit on Accessed Households in Rural Vietnam: Do Various Credit Sources Perform Differently?," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 8(1), pages 1-11, March.
    3. Arturo Aguilar & Eliana Carranza & Markus Goldstein & Talip Kilic & Gbemisola Oseni, 2015. "Decomposition of gender differentials in agricultural productivity in Ethiopia," Agricultural Economics, International Association of Agricultural Economists, vol. 46(3), pages 311-334, May.
    4. Solomon Asfaw & Federica Di Battista & Leslie Lipper, 2016. "Agricultural Technology Adoption under Climate Change in the Sahel: Micro-evidence from Niger," Journal of African Economies, Centre for the Study of African Economies, vol. 25(5), pages 637-669.
    5. Wooldridge, Jeffrey M., 2003. "Further results on instrumental variables estimation of average treatment effects in the correlated random coefficient model," Economics Letters, Elsevier, vol. 79(2), pages 185-191, May.
    6. Frank Ellis, 2000. "The Determinants of Rural Livelihood Diversification in Developing Countries," Journal of Agricultural Economics, Wiley Blackwell, vol. 51(2), pages 289-302, May.
    7. Foltz, Jeremy D., 2004. "Credit market access and profitability in Tunisian agriculture," Agricultural Economics, Blackwell, vol. 30(3), pages 229-240, May.
    8. Hitayezu, Patrick & Okello, Julius Juma & Gor, Christopher O., 2010. "Drivers of Household Participation in the Rural Non-Farm Labor Markets in the Post-War Rwanda," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61682, Agricultural and Applied Economics Association.
    9. Salvatore Di Falco & Marcella Veronesi & Mahmud Yesuf, 2011. "Does Adaptation to Climate Change Provide Food Security? A Micro-Perspective from Ethiopia," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(3), pages 825-842.
    10. Awudu Abdulai & Wallace Huffman, 2014. "The Adoption and Impact of Soil and Water Conservation Technology: An Endogenous Switching Regression Application," Land Economics, University of Wisconsin Press, vol. 90(1), pages 26-43.
    11. Akinwumi A. Adesina & Moses M. Zinnah, 1993. "Technology characteristics, farmers' perceptions and adoption decisions: A Tobit model application in Sierra Leone," Agricultural Economics, International Association of Agricultural Economists, vol. 9(4), pages 297-311, December.
    12. Olomola, Aderbigbe & Gyimah-Brempong, Kwabena, 2014. "Loan demand and rationing among small-scale farmers in Nigeria:," IFPRI discussion papers 1403, International Food Policy Research Institute (IFPRI).
    13. Amsalu, Aklilu & de Graaff, Jan, 2007. "Determinants of adoption and continued use of stone terraces for soil and water conservation in an Ethiopian highland watershed," Ecological Economics, Elsevier, vol. 61(2-3), pages 294-302, March.
    14. Adesina, Akinwumi A. & Zinnah, Moses M., 1993. "Technology characteristics, farmers' perceptions and adoption decisions: A Tobit model application in Sierra Leone," Agricultural Economics, Blackwell, vol. 9(4), pages 297-311, December.
    15. Kassie, Menale & Jaleta, Moti & Shiferaw, Bekele & Mmbando, Frank & Mekuria, Mulugetta, 2013. "Adoption of interrelated sustainable agricultural practices in smallholder systems: Evidence from rural Tanzania," Technological Forecasting and Social Change, Elsevier, vol. 80(3), pages 525-540.
    16. Stephen R. Boucher & Michael R. Carter & Catherine Guirkinger, 2008. "Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agricultural Development," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(2), pages 409-423.
    17. Nilakantan, Rahul & Datta, Saurabh C & Sinha, Priyanjali & Datta, Samar K, 2013. "The impact of microfinance on women empowerment: Evidence from Eastern India," International Journal of Development and Conflict, Gokhale Institute of Politics and Economics, vol. 3(1), pages 27-40.
    18. Saleemul Huq & Hannah Reid & Mama Konate & Atiq Rahman & Youba Sokona & Florence Crick, 2004. "Mainstreaming adaptation to climate change in Least Developed Countries (LDCs)," Climate Policy, Taylor & Francis Journals, vol. 4(1), pages 25-43, March.
    19. Omonona, Bolarin T. & Lawal, Justina Oluwayemisi & Oyinlana, A.O., 2010. "Determinants of Credit Constraint Conditions and Production Efficiency Among Farming Households in Southwestern Nigeria," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 95775, African Association of Agricultural Economists (AAAE).
    20. Salvatore Di Falco & Marcella Veronesi, 2013. "How Can African Agriculture Adapt to Climate Change? A Counterfactual Analysis from Ethiopia," Land Economics, University of Wisconsin Press, vol. 89(4), pages 743-766.
    21. Ellis, Frank, 2000. "Rural Livelihoods and Diversity in Developing Countries," OUP Catalogue, Oxford University Press, number 9780198296966.
    22. repec:asi:ajosrd:2012:p:189-200 is not listed on IDEAS
    23. Ngigi, Marther W. & Mueller, Ulrike & Birner, Regina, 2017. "Gender Differences in Climate Change Adaptation Strategies and Participation in Group-based Approaches: An Intra-household Analysis From Rural Kenya," Ecological Economics, Elsevier, vol. 138(C), pages 99-108.
    24. Dadson Awunyo-Vitor & Ramatu Mahama Al-Hassan & Daniel Bruce Sarpong & Irene Egyir, 2014. "Agricultural credit rationing in Ghana: what do formal lenders look for?," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 74(3), pages 364-378, August.
    25. Michael R. Rahm & Wallace E. Huffman, 1984. "The Adoption of Reduced Tillage: The Role of Human Capital and Other Variables," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 66(4), pages 405-413.
    26. Boucher, Stephen R. & Carter, Michael R. & Guirkinger, Catherine, 2008. "AJAE Appendix: Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agriculture Development," American Journal of Agricultural Economics APPENDICES, Agricultural and Applied Economics Association, vol. 90(2), pages 1-6.
    27. Eswaran, Mukesh & Kotwal, Ashok, 1990. "Implications of Credit Constraints for Risk Behaviour in Less Developed Economies," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 473-482, April.
    28. Leclère, David & Jayet, Pierre-Alain & de Noblet-Ducoudré, Nathalie, 2013. "Farm-level Autonomous Adaptation of European Agricultural Supply to Climate Change," Ecological Economics, Elsevier, vol. 87(C), pages 1-14.
    29. Md. Abdur Rashid Sarker & Khorshed Alam & Jeff Gow, 2014. "Assessing the effects of climate change on rice yields: An econometric investigation using Bangladeshi panel data," Economic Analysis and Policy, Elsevier, vol. 44(4), pages 405-416.
    30. M. A Akudugu, 2012. "Estimation of the Determinants of Credit Demand by Farmers and Supply by Rural Banks in Ghana’s Upper East Region," Asian Journal of Agriculture and Rural Development, Asian Economic and Social Society, vol. 2(2), pages 189-200.
    31. Khantachavana, Sivalai V. & Turvey, Calum G. & Kong, Rong, 2011. "Risk Rationing in China Rural Credit Markets," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 104021, Agricultural and Applied Economics Association.
    32. Doan, Tinh & Gibson, John & Holmes, Mark, 2010. "What determines credit participation and credit constraints of the poor in peri-urban areas, Vietnam?," MPRA Paper 27509, University Library of Munich, Germany, revised 17 Dec 2010.
    33. Seo, S. Niggol, 2011. "An analysis of public adaptation to climate change using agricultural water schemes in South America," Ecological Economics, Elsevier, vol. 70(4), pages 825-834, February.
    34. Agboola, S. A., 1979. "Agricultural Atlas of Nigeria," OUP Catalogue, Oxford University Press, number 9780195754087.
    35. Akudugu, M. A., 2012. "Estimation of the Determinants of Credit Demand by Farmers and Supply by Rural Banks in Ghana’s Upper East Region," Asian Journal of Agriculture and Rural Development, Asian Economic and Social Society (AESS), vol. 2(02), pages 1-13, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ayat Ullah & Nasir Mahmood & Alam Zeb & Harald Kächele, 2020. "Factors Determining Farmers’ Access to and Sources of Credit: Evidence from the Rain-Fed Zone of Pakistan," Agriculture, MDPI, vol. 10(12), pages 1-13, November.
    2. Adewale Isaac Olutumise, 2023. "Impact of credit on the climate adaptation utilization among food crop farmers in Southwest, Nigeria: application of endogenous treatment Poisson regression model," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 11(1), pages 1-19, December.
    3. Girma Admasu & Jema Haji & Chanyalew Siyum & Eric Ndemo, 2024. "Impact of Climate Change Adaptation Strategies on Food Security of Farm Households in Rural Dire Dawa Administration, Ethiopia," Sustainable Agriculture Research, Canadian Center of Science and Education, vol. 13(2), pages 1-1, October.
    4. Tanko, Mohammed, 2022. "Nexus of risk preference, culture and religion in the adoption of improved rice varieties: Evidence from Northern Ghana," Land Use Policy, Elsevier, vol. 115(C).
    5. Ojo, T.O. & Ogundeji, A.A. & Belle, J.A., 2021. "Climate change perception and impact of on-farm demonstration on intensity of adoption of adaptation strategies among smallholder farmers in South Africa," Technological Forecasting and Social Change, Elsevier, vol. 172(C).
    6. Nasiru Inuwa & Sagir Adamu & Mohammed Bello Sani & Abubakar Muhammad Saidu, 2022. "Resource Curse Hypothesis in GCC Member Countries: Evidence from Seemingly Unrelated Regression," Biophysical Economics and Resource Quality, Springer, vol. 7(4), pages 1-10, December.
    7. Ojo, Temitope & Ogundeji, Abiodun A. & Belle, Johannes A. & Demont, Matty, 2021. "A Three-Stage Approach of Understanding Climate Change Perception and Adaptation Strategies Among Smallholder Farmers in South Africa," 2021 Conference, August 17-31, 2021, Virtual 315854, International Association of Agricultural Economists.
    8. Addai, Bismark & Tang, Wenjin & Twumasi, Martinson Ankrah & Asante, Dennis & Agyeman, Annette Serwaa, 2022. "Access to financial services and lighting energy consumption: Empirical evidence from rural Ghana," Energy, Elsevier, vol. 253(C).
    9. Anh, Nguyen Tuan & Gan, Christopher & Anh, Dao Le Trang, 2022. "Multi-market credit rationing: The determinants of and impacts on farm performance in Vietnam," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 159-173.
    10. Fadoju, Dorcas Tolulope & Felicia Adesiyan, Oluwafunmilola & Adeomi, Damilola Toluse, 2022. "Credit Constraints in Farm Households in South West Nigeria: Nature and Determinants," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 10(4), October.
    11. Danuta Zawadzka & Agnieszka Strzelecka & Ewa Szafraniec-Siluta, 2021. "Debt as a Source of Financial Energy of the Farm—What Causes the Use of External Capital in Financing Agricultural Activity? A Model Approach," Energies, MDPI, vol. 14(14), pages 1-17, July.
    12. Jisha, K K & Palakkeel, Prashobhan, 2023. "Availability of agricultural credit: determinants, marginal effect, and predicted probability," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 9(4), December.
    13. Ndlovu, P.N. & Thamaga-Chitja, J.M. & Ojo, T.O., 2021. "Factors influencing the level of vegetable value chain participation and implications on smallholder farmers in Swayimane KwaZulu-Natal," Land Use Policy, Elsevier, vol. 109(C).
    14. Oyinlola Rafiat Ogunpaimo & Zainab Oyetunde-Usman & Jolaosho Surajudeen, 2021. "Impact of Climate Change Adaptation on Household Food Security in Nigeria—A Difference-in-Difference Approach," Sustainability, MDPI, vol. 13(3), pages 1-19, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Khanal, Uttam & Wilson, Clevo & Hoang, Viet-Ngu & Lee, Boon, 2018. "Farmers' Adaptation to Climate Change, Its Determinants and Impacts on Rice Yield in Nepal," Ecological Economics, Elsevier, vol. 144(C), pages 139-147.
    2. Balana, Bedru & Oyeyemi, Motunrayo, 2021. "Credit Constraints and Adoption of Agricultural Technologies in Developing Countries? Evidence from Nigeria," 2021 Conference, August 17-31, 2021, Virtual 315347, International Association of Agricultural Economists.
    3. Ojo, T.O. & Baiyegunhi, L.J.S., 2020. "Determinants of climate change adaptation strategies and its impact on the net farm income of rice farmers in south-west Nigeria," Land Use Policy, Elsevier, vol. 95(C).
    4. Varma, Poornima, 2017. "Adoption of System of Rice Intensification and its Impact on Rice Yields and Household Income: An Analysis for India," IIMA Working Papers WP2017-02-03, Indian Institute of Management Ahmedabad, Research and Publication Department.
    5. Varma, P., 2018. "Adoption and the Impact of System of Rice Intensification on Rice Yields and Household Income: A study for India," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 275986, International Association of Agricultural Economists.
    6. Uttam Khanal & Clevo Wilson & Boon L. Lee & Viet-Ngu Hoang, 2018. "Climate change adaptation strategies and food productivity in Nepal: a counterfactual analysis," Climatic Change, Springer, vol. 148(4), pages 575-590, June.
    7. Olomola, Aderbigbe & Gyimah-Brempong, Kwabena, 2014. "Loan demand and rationing among small-scale farmers in Nigeria:," IFPRI discussion papers 1403, International Food Policy Research Institute (IFPRI).
    8. Fadoju, Dorcas Tolulope & Felicia Adesiyan, Oluwafunmilola & Adeomi, Damilola Toluse, 2022. "Credit Constraints in Farm Households in South West Nigeria: Nature and Determinants," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 10(4), October.
    9. Tiziana Pagnani & Elisabetta Gotor & Enoch Kikulwe & Francesco Caracciolo, 2021. "Livelihood assets’ influence on Ugandan farmers’ control practices for Banana Xanthomonas Wilt (BXW)," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 9(1), pages 1-19, December.
    10. Martey, Edward & Etwire, Prince Maxwell & Abdoulaye, Tahirou, 2020. "Welfare impacts of climate-smart agriculture in Ghana: Does row planting and drought-tolerant maize varieties matter?," Land Use Policy, Elsevier, vol. 95(C).
    11. Josephson, Anna Leigh & Michler, Jeffrey D., 2015. "To Specialize or Diversify: Agricultural Diversity and Poverty Persistence in Ethiopia," 2015 Conference, August 9-14, 2015, Milan, Italy 212459, International Association of Agricultural Economists.
    12. Gebremariam, Gebrelibanos & Tesfaye, Wondimagegn, 2018. "The heterogeneous effect of shocks on agricultural innovations adoption: Microeconometric evidence from rural Ethiopia," Food Policy, Elsevier, vol. 74(C), pages 154-161.
    13. Awotide, B.A. & Abdoulaye, Tahirou & Alene, Arega & Manyong, Victor M., 2015. "Impact of Access to Credit on Agricultural Productivity: Evidence from Smallholder Cassava Farmers in Nigeria," 2015 Conference, August 9-14, 2015, Milan, Italy 210969, International Association of Agricultural Economists.
    14. Turvey, C. G., 2017. "IFAD RESEARCH SERIES 10 - Inclusive finance and inclusive rural transformation," IFAD Research Series 280048, International Fund for Agricultural Development (IFAD).
    15. Aslihan Arslan & Kristin Floress & Christine Lamanna & Leslie Lipper & Solomon Asfaw & Todd Rosenstock, 2020. "IFAD RESEARCH SERIES 63 - The adoption of improved agricultural technologies - A meta-analysis for Africa," IFAD Research Series 304758, International Fund for Agricultural Development (IFAD).
    16. Julius Manda & Cornelis Gardebroek & Makaiko Khonje & Arega Alene & Munyaradzi Mutenje & Menale Kassie, 2016. "Determinants of child nutritional status in the eastern province of Zambia: the role of improved maize varieties," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 8(1), pages 239-253, February.
    17. Kumar, Suresh & Singh, Dharm Raj & Mondal, Biswajit & Palanisamy, Venkatesh & Kumar, Anil, 2021. "Does Adoption of Soil Bund Increase Sorghum Productivity? Some Empirical Evidence from Drought Prone Areas of Karnataka, India," 2021 Conference, August 17-31, 2021, Virtual 315343, International Association of Agricultural Economists.
    18. Nsabimana, Aimable & Adom, Philip Kofi, 2024. "Heterogeneous effects from integrated farm innovations on welfare in Rwanda," World Development Perspectives, Elsevier, vol. 33(C).
    19. Misganaw Teshager Abeje & Atsushi Tsunekawa & Enyew Adgo & Nigussie Haregeweyn & Zerihun Nigussie & Zemen Ayalew & Asres Elias & Dessalegn Molla & Daregot Berihun, 2019. "Exploring Drivers of Livelihood Diversification and Its Effect on Adoption of Sustainable Land Management Practices in the Upper Blue Nile Basin, Ethiopia," Sustainability, MDPI, vol. 11(10), pages 1-23, May.
    20. Jara-Rojas, Roberto & Bravo-Ureta, Boris E. & Díaz, José, 2012. "Adoption of water conservation practices: A socioeconomic analysis of small-scale farmers in Central Chile," Agricultural Systems, Elsevier, vol. 110(C), pages 54-62.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:jecstr:v:9:y:2020:i:1:d:10.1186_s40008-020-00204-6. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.