Farmers' preferences and willingness to pay for microcredit in Benin: results from in-the-field choice experiments in Benin

Tchekpo Fortune Ogouvide, Ygue Patrice Adegbola, Roch Cedrique Zossou, Afio Zannou and Gauthier Biaou

Agricultural Finance Review, 2020, vol. 80, issue 5, 665-692

Abstract: Purpose - This document analyses farmers' preferences and willingness to pay (CAP) for microcredit, in order to facilitate their access in rural areas. Design/methodology/approach - Data are based on a discrete choice experiment with 400 randomly selected farmers from 20 villages of the 7 Benin agricultural development hubs (ADHs). The preference choice modelling was performed using mixed logit (MXL) and latent class logit (LCL) models. Farmers' willingness to pay for each preferred attribute was estimated. The endogenous attribute attendance (EAA) model was also used to capture attribute non-attendance (ANA) phenomenon. Findings - The results indicate that, on average, farmers prefer individual loans, low interest rates, in kind + cash loans, cash loans, disbursement before planting and loans with at least 10-month duration. These preferences vary according to farmers' classes. Farmers are willing to pay higher or lower interest rates depending on attribute importance. The estimate of the EAA model indicates that, when taking the ANA phenomenon into consideration, people will show stronger attitudes regarding WTP for important factors. Research limitations/implications - Based on these results from Benin, microfinance institutions (MFIs) in developing countries can, based on the interest rates currently charged, attract more farmers as customers, reviewing the combination of the levels of the attributes associated with the nature of the loan, the type of loan (individual or collective), the disbursement period of funds, the waiting period of the loan and the loan duration. However, the study only considered production credit, ignoring equipment or investment credit. Practical implications - The document provides information on the key factors that can facilitate producers' access to MFI products and services. Social implications - Facilitating small farmers' access to financial service will contribute to poverty reduction. Originality/value - This research contributes to the knowledge of the attributes and attribute levels favoured by farmers when choosing financial products and the amounts they agree to pay for these attributes. The implementation of the results would facilitate small producers' access to financial services; thus contributing to poverty reduction.

Keywords: Benin; Farmers; Microcredit; Mixed logit; Preferences; Willingness to pay; G; G2; G21 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eme:afrpps:afr-01-2020-0004

DOI: 10.1108/AFR-01-2020-0004

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