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Self-Selection into Credit Markets: Evidence from Agriculture in Mali

Author

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  • Beaman, Lori
  • Karlan, Dean S.
  • Thuysbaert, Bram
  • Udry, Christopher

Abstract

We examine whether returns to capital are higher for farmers who borrow than for those who do not, a direct implication of many credit market models. We measure the difference in returns through a two‐stage loan and grant experiment. We find large positive investment responses and returns to grants for a random (representative) sample of farmers, showing that liquidity constraints bind. However, we find zero returns to grants for a sample of farmers who endogenously did not borrow. Thus we find important heterogeneity, even conditional on a wide range of observed characteristics, which has critical implications for theory and policy.

Suggested Citation

  • Beaman, Lori & Karlan, Dean S. & Thuysbaert, Bram & Udry, Christopher, 2014. "Self-Selection into Credit Markets: Evidence from Agriculture in Mali," Center Discussion Papers 183318, Yale University, Economic Growth Center.
    • Handle: RePEc:ags:yaleeg:183318
    DOI: 10.22004/ag.econ.183318
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    Cited by:

    1. Marup Hossain & Mohammad Abdul Malek & Amzad Hossain & Hasib Reza & Shakil Ahmed, 2016. "Impact Assessment of Credit Program for Tenant Farmers in Bangladesh: Evidence from a Field Experiment," CIRJE F-Series CIRJE-F-1025, CIRJE, Faculty of Economics, University of Tokyo.
    2. repec:lic:licosd:42020 is not listed on IDEAS
    3. Imke Hering & Oliver Musshoff, 2017. "Progressive Lending in Microfinance—What about the Farmers?," Review of Development Economics, Wiley Blackwell, vol. 21(3), pages 803-828, August.
    4. Marup Hossain & Conner Mullally, 2022. "Using evaluation data to predict loan performance among poor borrowers: The case of BRAC’s asset transfer and microcredit programmes," Development Policy Review, Overseas Development Institute, vol. 40(3), May.
    5. Lyu, Wenyi & Yu, Leng & Zhang, Jiajun, 2024. "Peer effects in digital inclusive finance participation decisions: Evidence from rural China," Technological Forecasting and Social Change, Elsevier, vol. 208(C).
    6. Inna Cintina & Inessa Love, 2014. "The Miracle of Microfinance Revisited: Evidence from Propensity Score Matching," Working Papers 201424, University of Hawaii at Manoa, Department of Economics.
    7. Karlan, Dean & Knight, Ryan & Udry, Christopher, 2015. "Consulting and capital experiments with microenterprise tailors in Ghana," Journal of Economic Behavior & Organization, Elsevier, vol. 118(C), pages 281-302.
    8. Seck, Abdoulaye, "undated". "Heterogeneous Credit Constraints and Smallholder Farming in Senegal," 92nd Annual Conference, April 16-18, 2018, Warwick University, Coventry, UK 273491, Agricultural Economics Society.
    9. Chowdhury, Shyamal & Smits, Joeri & Sun, Qigang, "undated". "Does Access to Microcredit Lead to Technology Adoption by Smallholder Farmers? Experimental Evidence from Rural Bangladesh," 2020 Conference (64th), February 12-14, 2020, Perth, Western Australia 305247, Australian Agricultural and Resource Economics Society.
    10. Paulina Oliva & B. Kelsey Jack & Samuel Bell & Elizabeth Mettetal & Christopher Severen, 2020. "Technology Adoption under Uncertainty: Take-Up and Subsequent Investment in Zambia," The Review of Economics and Statistics, MIT Press, vol. 102(3), pages 617-632, July.
    11. Günther Fink & B. Kelsey Jack & Felix Masiye, 2020. "Seasonal Liquidity, Rural Labor Markets, and Agricultural Production," American Economic Review, American Economic Association, vol. 110(11), pages 3351-3392, November.
    12. Fiala, Nathan, 2018. "Returns to microcredit, cash grants and training for male and female microentrepreneurs in Uganda," World Development, Elsevier, vol. 105(C), pages 189-200.
    13. Kara, Alper & Zhou, Haoyong & Zhou, Yifan, 2021. "Achieving the United Nations' sustainable development goals through financial inclusion: A systematic literature review of access to finance across the globe," International Review of Financial Analysis, Elsevier, vol. 77(C).
    14. Diego Vera-Cossio, 2022. "Targeting Credit through Community Members," Journal of the European Economic Association, European Economic Association, vol. 20(2), pages 778-821.
    15. Eustadius Francis Magezi & Nakano, Yuko, 2020. "The Impact of Microcredit on Household Income: The Case of BRAC in Tanzania," Japanese Journal of Agricultural Economics (formerly Japanese Journal of Rural Economics), Agricultural Economics Society of Japan (AESJ), vol. 22.
    16. Marshall Burke & Lauren Falcao Bergquist & Edward Miguel, 2019. "Sell Low and Buy High: Arbitrage and Local Price Effects in Kenyan Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(2), pages 785-842.
    17. Lota Tamini & Ibrahima Bocoum & Ghislain Auger & Kotchikpa Gabriel Lawin & Arahama Traoré, 2019. "Enhanced Microfinance Services and Agricultural Best Management Practices: What Benefits for Smallholders Farmers? An Evidence from Burkina Faso," CIRANO Working Papers 2019s-11, CIRANO.
    18. World Bank, 2021. "Strengthening the Link between Economic Growth and Poverty Reduction in Mali," World Bank Publications - Reports 36587, The World Bank Group.
    19. Gashaw Tadesse Abate & Tanguy Bernard & Alan de Brauw & Nicholas Minot, 2018. "The impact of the use of new technologies on farmers’ wheat yield in Ethiopia: evidence from a randomized control trial," Agricultural Economics, International Association of Agricultural Economists, vol. 49(4), pages 409-421, July.
    20. Booyuel Kim & Rony Rodriguez-Ramirez & Hee-Seung Yang, 2024. "Does the small business programme benefit self-employed workers? Evidence from Nicaragua," Journal of Development Effectiveness, Taylor & Francis Journals, vol. 16(4), pages 428-447, October.
    21. Nittai K. Bergman & Rajkamal Iyer & Richard T. Thakor, 2015. "Financial Accelerator at Work: Evidence from Corn Fields," NBER Working Papers 21086, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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