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Farmers’ willingness to pay for digital and conventional credit: Evidence from a discrete choice experiment in Madagascar

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  • Sarfo, Yaw
  • Musshoff, Oliver
  • Weber, Ron
  • Danne, Michael

Abstract

In recent decades, microfinance institutions (MFIs) with financial products designed for low income groups have been established all over the world. However, credit access for farmers in developing countries remains low. Digital financial services are rapidly expanding globally at the moment. They also bear great potential to address farmers in remote rural areas. Beyond mobile money services, digital credit is successively offered and also discussed in literature. Compared to conventional credit which is granted based on a thorough assessment of the loan applicant’s financial situation, digital credit is granted based on an automated analysis of the existing data of the loan applicant. However, empirical research on farmers’ preferences and willingness to pay (WTP) for digital credit is non-existent. We employ a discrete choice experiment (DCE) to compare farmers’ WTP for digital and conventional credit. Our results indicate a higher WTP for digital credit compared to conventional credit. Furthermore, we find that longer loan duration has a higher effect on farmers’ WTP for digital credit compared to conventional credit. Additionally, our results show that instalment repayment condition reduces farmers’ WTP for digital credit whilst increasing their WTP for conventional credit. Our results show the potential of digital credit for agricultural finance in rural areas of Madagascar if a certain level of innovation is applied in designing digital credit products.

Suggested Citation

  • Sarfo, Yaw & Musshoff, Oliver & Weber, Ron & Danne, Michael, 2021. "Farmers’ willingness to pay for digital and conventional credit: Evidence from a discrete choice experiment in Madagascar," 61st Annual Conference, Berlin, Germany, September 22-24, 2021 317074, German Association of Agricultural Economists (GEWISOLA).
    • Handle: RePEc:ags:gewi21:317074
    DOI: 10.22004/ag.econ.317074
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    Cited by:

    1. Rachna Madaan & Rajesh Kumar, 2024. "Influence of Digitalization on Agricultural Credit for Green Economy and Sustainable Development," Acta Universitatis Bohemiae Meridionalis, University of South Bohemia in Ceske Budejovice, Faculty of Economics, vol. 27(3), pages 1-16.
    2. Li, Yanru & Wang, Haijun & Gao, Huikun & Li, Qinghai & Sun, Guanglin, 2024. "Credit rating, repayment willingness and farmer credit default," International Review of Financial Analysis, Elsevier, vol. 93(C).
    3. Tim Ölkers & Oliver Mußhoff, 2024. "Exploring the role of interest rates, macroeconomic environment, agricultural cycle, and gender on loan demand in the agricultural sector: Evidence from Mali," Agribusiness, John Wiley & Sons, Ltd., vol. 40(2), pages 484-512, April.
    4. Annkathrin Wahbi & Oliver Musshoff, 2024. "Unlocking rural resilience: Exploring innovative digital saving solutions for farming households in Mali," Journal of Agricultural Economics, Wiley Blackwell, vol. 75(3), pages 931-954, September.

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