Publication: Credit Constraints and Agricultural Productivity : Evidence from Rural Rwanda
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Published
2014-02-20
ISSN
0022-0388
Date
2014-04-28
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Abstract
While potentially negative impacts of credit constraints on economic development have long been discussed conceptually, empirical evidence for Africa remains limited. We use a direct elicitation approach on a national sample of Rwandan rural households to empirically assess the extent and nature of credit rationing in the semi-formal sector and its impact, using an endogenous switching model. Elimination of all constraints could increase output by some 17 per cent. Implications for policy and research are spelled out.
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Publication Credit Constraints, Agricultural Productivity, and Rural Nonfarm Participation : Evidence from Rwanda(World Bank, Washington, DC, 2014-02)Although the potentially negative impacts of credit constraints on economic development have long been discussed conceptually, empirical evidence for Africa remains limited. This study uses a direct elicitation approach for a national sample of Rwandan rural households to assess empirically the extent and nature of credit rationing in the semi-formal sector and its impact using an endogenous sample separation between credit-constrained and unconstrained households. Being credit constrained reduces the likelihood of participating in off-farm self-employment activities by about 6.3 percent while making participation in low-return farm wage labor more likely. Even within agriculture, elimination of all types of credit constraints in the semi-formal sector could increase output by some 17 percent. 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