Determinants of non-farm enterprise diversification in rural Ethiopia

2020 ◽  
Vol 14 (4) ◽  
pp. 495-513
Author(s):  
Precious Makhosazana Tshabalala ◽  
Shaufique Fahmi Sidique
Keyword(s):  
Panel Data ◽  
Empirical Evidence ◽  
Household Head ◽  
Household Size ◽  
Small Scale ◽  
Content Type ◽  
Access To Credit ◽  
Rural Ethiopia ◽  
Single Region ◽  
Region Data

Purpose This study aims to analyze the factors that determine non-farm enterprise diversification among farm households in Ethiopia. It extends the analysis by examining enterprises and using pooled data, which has the capacity to generate more accurate outcomes. The existing empirical evidence has focused on all non-farm activities, based on single period, single region data. Much of the existing empirical evidence is based on small-scale and location-specific sample surveys that do not demonstrate the characteristics of aggregate populations. Design/methodology/approach The empirical analysis was conducted using a quantitative method. To cater to the censoring nature of participating in non-farm enterprise activities, a panel data double-hurdle model is used to a representative sample of 3,594 Ethiopian rural households. Findings The study finds that the age of household head, household size, distance to the market, social capital and access to credit, are determinants for owning one or more non-farm enterprises. The level of income from these enterprises is then determined by the age and education level of the household head, household size, agricultural equipment, distance to markets and access to credit. Practical implications This study brings to light factors that influence households to participate in non-farm enterprises and the determining factors for the income level. Originality/value Non-farm activities are an important source of household income and a driver of development. This paper provides empirical evidence on factors that determine enterprise ownership using panel data.

Factors affecting household decision to allocate credit for livestock production

2017 ◽  
Vol 77 (4) ◽  
pp. 463-483 ◽  
Author(s):  
Kaleb Shiferaw ◽  
Berhanu Gebremedhin ◽  
Dereje Legesse Zewdie
Keyword(s):  
Empirical Studies ◽  
Household Head ◽  
Livestock Production ◽  
Extension Service ◽  
Small Scale ◽  
Agricultural System ◽  
Credit Allocation ◽  
Data Set ◽  
Content Type ◽  
Access To Credit

Purpose The purpose of this paper is to explore the factors that affect farmer’s decision to allocate credit for livestock production. The results are expected to contribute to the understanding of what motivates smallholders to allocate credit to agricultural production in general and livestock production in particular. A better understanding of the farmers’ behavior in allocating credit for livestock would provide useful information for project implementers and financial institutions that work with small-scale livestock producers. Design/methodology/approach A cross-section data set collected in 2014 from 5,000 households and 497 rural communities in the major highland regions of Ethiopia is examined. The authors developed a conceptual framework for credit allocation decision. Percentiles, means, and standard deviation as well as t, χ2 and Fisher’s exact tests for association and Cramer’s V measure for strength of association have been used to describe the status of farmer’s access to credit and analyze credit utilization, while a three-stage probit model with double sample selection is used to identify factors that affect household’s decision to allocate credit for livestock production. Findings After controlling for potential selection biases, sex and literacy status of household head, land size, wealth and access to livestock centered extension service are found to have a statistically significant effect on farmers’ decision to allocate credit to livestock production. The results showed female-headed households, wealthy farmers, farmers with small plot of land and farmers that have access to livestock centered extension services are more likely to allocate the credit for livestock production. The results suggest that policies aimed at improving access to credit together with access to livestock focused extension service are more effective in increasing livestock production. Research limitations/implications The study’s findings should be viewed with perspective and caution, as only households with excess demand for credit were the subject of the research. Originality/value The contribution of this paper is twofold. First, it is one of a very few empirical studies that try to identify factors that affect households credit allocation to livestock in systematic way that removed confounding effects using three-stage probit models. Given the emphasis on financial constraints in livestock development, new empirical insights on household credit allocation are essential to better inform development interventions. Second, the analysis relies on a comprehensive data set that represents the major agricultural system of the country.

Technical efficiency and its determinants in the Indian textile garments industry

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Abdulla ◽  
Shiv Kumar
Keyword(s):  
Panel Data ◽  
Technical Efficiency ◽  
Textile Industry ◽  
Small And Medium Enterprises ◽  
Stochastic Frontier ◽  
Efficiency Score ◽  
Value Chains ◽  
Small Scale ◽  
Content Type ◽  
Medium Enterprises

Purpose This paper aims to examine technical efficiency and its determinants in Indian textile garments industry in post-agreement on textiles and clothing regime and evaluate the technical efficiency among micro, small and medium enterprises (MSMEs) firms. Design/methodology/approach This study uses unbalanced panel data for the period 2005–2010 to 2015–2016. The stochastic frontier function is used to estimate technical efficiency and its determinants. Findings The results show that the overall ecosystem of textile garments’ value chains could be improved to enhance the technical efficiency thereof. The result also reveals that small-scale firms have the highest technical efficiency scores, and medium-scale firms have the least technical efficiency score among all the categories of MSMEs. Research limitations/implications The textile garments industry needs to define its innovation strategies, as these strategies lead to different results that can be achieved only through the management of resources dedicated to the generation and implementation of innovations. Practical implications This study has shown that to offset India’s cost disadvantage in the international markets, there is a need to develop an ecosystem of textile manufacturing and value chains, eliminate the inverted duty structure (where inputs are taxed at a higher rate than the final product) and switch over from shuttle looms toward shuttle-less looms. This would unleash the potential of textile and garments industry and make it globally competitive and technically efficient. Further, there will be an alignment with the ease of doing business with an appropriate mix of policy, technology, institution, infrastructure, information and services. Originality/value Using frontier production function takes stochastic context into account for the dynamic character of technical efficiency and its components. Most of the past studies have assessed technical efficiency at the aggregate level using three-digit National Industrial Classification (NIC) or four-digit NIC code. An analysis at higher levels of aggregation masks the variation in technical efficiency. This study used five-digit NIC data to measure the firm-specific technical efficiency of the textile industry. According to the authors’ knowledge, this study is the first of its kind in the Indian textile industry using stochastic frontier approach and panel data. Further, it also looks at the contribution of different determinants in technical efficiency to the firms.

scholarly journals Uptake of insurance-embedded credit in presence of credit rationing: evidence from a randomized controlled trial in Kenya

2020 ◽  
Vol 80 (5) ◽  
pp. 745-766 ◽  
Author(s):  
Michael K. Ndegwa ◽  
Apurba Shee ◽  
Calum G. Turvey ◽  
Liangzhi You
Keyword(s):  
Randomized Controlled Trial ◽  
Controlled Trial ◽  
Household Head ◽  
Credit Rationing ◽  
Small Sample ◽  
Content Type ◽  
Access To Credit ◽  
Randomized Controlled ◽  
Study Results ◽  
Credit Demand

PurposeDrought-related climate risk and access to credit are among the major risks to agricultural productivity for smallholder farmers in Kenya. Farmers are usually credit-constrained due to either involuntary quantity rationing or voluntary risk rationing. By exploiting randomized distribution of weather risk-contingent credit (RCC) and traditional credit, the authors estimate the causal effect of bundling weather index insurance to credit on uptake of agricultural credits among rural smallholders in Eastern Kenya. Further, the authors assess farmers' credit rationing, its determinants and effects on credit uptake.Design/methodology/approachThe study design was a randomized controlled trial (RCT) conducted in Machakos County, Kenya. 1,170 sample households were randomly assigned to one of three research groups, namely control, RCC and traditional credit. This paper is based on baseline household survey data and the first phase of loan implementation data.FindingsThe authors find that 48% of the households were price-rationed, 41% were risk-rationed and 11% were quantity-rationed. The average credit uptake rate was 33% with the uptake of bundled credit being significantly higher than that of traditional credit. Risk rationing seems to influence the credit uptake negatively, whereas premium subsidies do not have any significant association with credit uptake. Among the socio-economic variables, training attendance, crop production being the main household head occupation, expenditure on food, maize labour requirement, hired labour, livestock revenue and access to credit are found to influence the credit uptake positively, whereas the expenditure on non-food items is negatively related with credit uptake.Research limitations/implicationsThe study findings provide important insights on the factors of credit demand. Empirical results suggest that risk rationing is pervasive and discourages farmers to take up credit. The study results also imply that credit demand is inelastic although relatively small sample size for RCC premium subsidy groups may be a limiting factor to the authors’ estimation.Originality/valueBy implementing a multi-arm RCT, the authors estimate the factors affecting the uptake of insurance bundled agricultural credits along with eliciting credit rationing among rural smallholders in Eastern Kenya. This paper provides key empirical findings on the uptake of RCC and the effect of credit rationing on uptake of agricultural credits, a field which has been majorly theoretical.

Smallholder farmers’ engagement in non-certified organic farming: a case from Southern China

2019 ◽  
Vol 122 (2) ◽  
pp. 465-481
Author(s):  
Bing Zhu ◽  
André Habisch
Keyword(s):  
Organic Farming ◽  
Structural Equation ◽  
Smallholder Farmers ◽  
Southern China ◽  
Small Scale ◽  
Content Type ◽  
Southern Chinese ◽  
Single Region ◽  
Confirmatory Factor ◽  
Certified Organic

Purpose The purpose of this paper is to investigate the influences of smallholder farmers’ motivations, opportunities and abilities on their satisfactions of non-certified organic farming practices in Southern China based on the motivation–opportunity–ability (MOA) model. Design/methodology/approach The sample covers 314 smallholders from Nanning region in Southern China who have engaged in non-certified organic farming. Judgmental and convenient sampling are applied to collect data. Data analysis consists of confirmatory factor analysis, structural equation modelling and mediation test. Findings The results show opportunity as dominant impact factor of smallholder farmers’ satisfaction followed by motivation and ability. Also, their commitment to further non-certified organic farming is positively influenced by their satisfactory level. Mediation test reveals that satisfaction partially mediates the relationships between motivation, ability and commitment. Research limitations/implications First, due to the limited sample size in a single region, the findings cannot represent even Southern Chinese farmers as an entirety. Second, the study only limited itself in the scope of the MOA model. Practical implications Apart from providing updated empirical results for existing studies, this study also highlights the importance of farmer association, supporting scheme as well as the relevant training for the smallholder farmers to size the opportunities, promote their motivations and strengthen their abilities. Originality/value As little attention has been given to small-scale farmer who are involved in organic farming practice in China, this paper presents findings based on the MOA framework.

Second-hand fashion market: consumer role in circular economy

2019 ◽  
Vol 23 (3) ◽  
pp. 382-395 ◽  
Author(s):  
Maria Amália Dutra Machado ◽  
Stefânia Ordovás de Almeida ◽  
Laura Chiattone Bollick ◽  
Gabriela Bragagnolo
Keyword(s):  
Circular Economy ◽  
Three Dimensional ◽  
Active Role ◽  
Content Type ◽  
Consumer Motivation ◽  
Fashion Products ◽  
Single Region ◽  
Region Data ◽  
Practical Implications

Purpose The purpose of this paper is to investigate the role of consumer motivation in the context of the circular economy (CE) through the reuse of fashion products. Design/methodology/approach A qualitative approach was employed through ethnographic as well as in-depth interviews with nine consumers who buy used fashion products in thrift stores and street fairs in Brazil. Findings The findings are based on interrelationships and overlaps found in the integration between the three-dimensional consumer motivations to buy second-hand fashion cited in the literature. A framework showing a virtuous circle of motivations involving the consumer in an active role in the CE is proposed as a result. Research limitations/implications Limitations include participants’ selection and a single region data collection. Implications aim to help researchers to more fully understand a new and complex consumer behavior in a CE. Practical implications By highlighting consumers’ motivations for this kind of commerce, the practical implications of this work are the possibilities to inspire retailers to start second-hand fashion businesses. Also, policy makers can focus on engaging consumers in active roles that foster CE events. Originality/value This work is one of the first attempts to show the role of consumers in the CE and their motivations to engage in this active behavior.

Farm credit access, credit constraint and productivity in Ghana

2017 ◽  
Vol 77 (4) ◽  
pp. 446-462 ◽  
Author(s):  
Samuel Sekyi ◽  
Benjamin Musah Abu ◽  
Paul Kwame Nkegbe
Keyword(s):  
Group Membership ◽  
Household Size ◽  
Farm Size ◽  
Baseline Survey ◽  
Future Research ◽  
Credit Constraint ◽  
Content Type ◽  
Credit Access ◽  
Access To Credit ◽  
Feed The Future

Purpose The purpose of this paper is to examine farmers’ access to credit, credit constraint, and productivity in the Northern Savannah ecological zone of Ghana. Design/methodology/approach Secondary data from the Ghana Feed the Future baseline survey involving a total sample of 2,968 farm households were used. The conditional mixed process (CMP) framework was applied to estimate access to credit, credit constraint, and productivity simultaneously. As a system estimator the CMP corrects for possible heterogeneity and sample selection bias. Findings The results from the estimations revealed that age, literacy, farm non-mechanized equipment, and group membership were the variables influencing farmers’ access to credit. Credit constraint conditions were determined by household size, locality, group membership, and household durable assets. Finally, the results showed that productivity of farmers was dependent on marital status, household size, locality, farm size, commercialization, farm mechanized equipment, group membership, and household durable assets. Originality/value This paper is the first, to the best of the authors’ knowledge, to use the CMP framework to jointly estimate access to credit, credit constraint, and productivity. The results indicate that estimating credit access and constraint models separately would have yielded biased estimates. Thus, this paper informs future research on farmers’ credit access, credit constraint, and productivity for informed policymaking.

Financing village enterprises in rural Bangladesh

2016 ◽  
Vol 15 (1) ◽  
pp. 76-94 ◽  
Author(s):  
Vange Mariet Ocasio
Keyword(s):  
Economic Outcomes ◽  
Small Scale ◽  
Scale Production ◽  
Enterprise Development ◽  
Content Type ◽  
Access To Credit ◽  
Enterprise Growth ◽  
Rural Bangladesh ◽  
Credit Program

Purpose The purpose of this paper is to explore the factors that determine non-farm enterprise revenue and to empirically test the association between access to credit, credit source and firm performance among poor entrepreneurs in rural Bangladesh. Design/methodology/approach Using a Bangladesh Institute of Development Studies and World Bank survey from over 1,700 households in rural Bangladesh, a panel data model is used to control for unobserved heterogeneity among households and explore the determinants of non-farm revenue. Findings The findings suggest that village infrastructure and household labor assets have a positive impact on enterprise development. The findings reveal that the use of rural credit as a production input is important in augmenting revenue for the non-farm enterprise, but there are differential effects by credit source. Research limitations/implications Because the study uses data from a quasi-experimental survey design, unobserved effects that can bias the results must be controlled for. Also, as credit program impacts can be location-specific, caution in generalizing the results of this study must be exercised. Practical implications This study provides evidence on the positive effects of microcredit, family assets and family social capital on economic outcomes and microenterprise growth for poor entrepreneurial households. If enterprise growth is important for development, greater understanding of the determinants of microenterprise performance and the role of credit in the success of microfirms is beneficial for policymakers and the institutions that finance small-scale production. Social implications If it is agreed that entrepreneurship is important in promoting development, self-sufficiency and positive economic outcomes (Yunus, 2007), then credit program design should focus on both the credit needs of the poor and the dynamics inherent in enterprise development for this group of entrepreneurs. Originality/value This paper expands the limited literature on the determinants of microenterprise growth and the role of credit in microenterprise development by tracing a positive link between village infrastructure, family demographics and access to credit. The identification of the factors that determine non-farm enterprise revenue is important for policymakers because enterprise growth is perceived as essential for economic development.

Microfinance, entrepreneurship and institutional quality

2020 ◽  
Vol 9 (1) ◽  
pp. 137-148
Author(s):  
Malavika Nair ◽  
Martha Njolomole
Keyword(s):  
Economic Growth ◽  
Private Property ◽  
Institutional Quality ◽  
Empirical Literature ◽  
Small Scale ◽  
Microfinance Institutions ◽  
Content Type ◽  
Private Property Rights ◽  
Access To Credit ◽  
Institutional Failure

Purpose The purpose of this paper is to consider the success and failure of microfinance institutions in generating economic growth over the past 30 years and propose a dual criterion of evaluation. Design/methodology/approach It surveys the empirical literature on microfinance and finds that while there has been small and localized success in various countries in improving access to credit, at the same time there has been a broader failure to generate economic growth. The authors argue that this broader failure should be viewed from the viewpoint of institutional failure or the lack of supporting institutions such as private property rights and stable rule of law within developing countries. Findings Using Baumol’s (1968) theory of entrepreneurship, the authors argue that the broader failure of microfinance is a case of poor institutional quality leading to unproductive or even destructive entrepreneurship rather than productive entrepreneurship. The paper also suggests a link between the literature criticizing foreign aid and this view on microfinance. Originality/value The paper provides a survey of the empirical literature on micro finance as well as a novel framework that aids in understanding both the localized small-scale success as well as broader failure to generate economic growth.

scholarly journals Estimating Profit Efficiency of Artisanal Fishing in the Pru District of the Brong-Ahafo Region, Ghana

2017 ◽  
Vol 2017 ◽  
pp. 1-7 ◽  
Author(s):  
Edinam Dope Setsoafia ◽  
Phoebe Owusu ◽  
Gideon Danso-Abbeam
Keyword(s):  
Production Efficiency ◽  
Group Formation ◽  
Household Head ◽  
Easy Access ◽  
Small Scale ◽  
Artisanal Fishing ◽  
Profit Efficiency ◽  
Cross Sectional ◽  
Access To Credit ◽  
Ranking Technique

This study evaluated the profit efficiency of artisanal fishing in the Pru District of Ghana by explicitly computing profit efficiency level, identifying the sources of profit inefficiency, and examining the constraints of artisanal fisheries. Cross-sectional data was obtained from 120 small-scale fishing households using semistructured questionnaire. The stochastic profit frontier model was used to compute profit efficiency level and identify the determinants of profit inefficiency while Garrett ranking technique was used to rank the constraints. The average profit efficiency level was 81.66% which implies that about 82% of the prospective maximum profit was gained due to production efficiency. That is, only 18% of the potential profit was lost due to the fishers’ inefficiency. Also, the age of the household head and household size increase the inefficiency level while experience in artisanal fishing tends to decrease the inefficiency level. From the Garrett ranking, access to credit facility to fully operate the small-scale fishing business was ranked as the most pressing issue followed by unstable prices while perishability was ranked last among the constraints. The study, therefore, recommends that group formation should be encouraged to enable easy access to loans and contract sales to boost profitability.

Lenders and borrowers’ collaboration-based risk mitigation credit market

2019 ◽  
Vol 80 (2) ◽  
pp. 173-199 ◽  
Author(s):  
Vincent Flifli ◽  
Peter Adebola Okuneye ◽  
Dare Akerele
Keyword(s):  
Panel Data ◽  
Survey Data ◽  
Value Chain ◽  
Sample Selection ◽  
Empirical Models ◽  
Cross Sectional Survey ◽  
Cross Sectional ◽  
Content Type ◽  
Access To Credit ◽  
To Receive

Purpose The purpose of this paper is to study an innovative rice value chain financing system (VCFS) established in Benin, to identify the determinants of producers and processors access to formal credit, both at intensive and extensive margins. It focuses on multi-stakeholder platforms (MSP) which connect producers and processors in need of credit to potential financial lenders. Design/methodology/approach The empirical analysis uses rich cross-sectional survey data collected in Northern Benin in 2018. The sample consists of 215 rice producers and 217 rice processors randomly selected through a multi-stage sampling and interviewed with structured questionnaires. The empirical models analyze the determinants of the likelihood to receive a credit and the amount of credit received. To account for the sample selection and censored nature of the main outcome variable, the study considers a Heckman two-stage model coupled with a Tobit model for robustness checks. Findings The study finds that the MSP are effective in increasing access to formal credit and the amount borrowed. Producers and processors who are members of the MSP are more likely to receive credit and, conditional on being approved for credit borrower, a larger amount. Other key factors that significantly explain access to credit include the use of soft guarantee for securing a loan, the degree of participation in the platform and demographic characteristics. These findings are consistent across the Heckman and Tobit models. Research limitations/implications The study attempts to rigorously analyze the factors explaining producers and processors access to credit using cross-sectional survey data. But it has some limitations. The main limitation is the type of data used. Ideally, one would like to run a randomized control trial (RCT) to randomly assign participation in the MSP to causally estimate its impact of access to credit. The second-best option would be to have a panel data covering the period before and after the establishment of the platform. However, in the absence of an RCT or panel data, the study resorts to cross-sectional data and empirical models that account for sample selection bias and the censored nature of the credit received. Practical implications One of the key findings of the study is that participation in the MSP (through different value chain stages associations) increases access to formal credit. This highlights an important and effective mechanism, a well-coordinated value chains that integrated lenders, that policymakers can leverage to facilitate access to credit in the agricultural sector. Social implications Access to credit is important to boost agricultural productivity and income. Hence, the findings of the study have social implications in terms of poverty reduction in rural areas. Originality/value The study contributes to earlier theories and empirical studies on the demand for credit. It focuses on an innovative VCFS, increasingly adopted in many developing countries, adds originality and value to the understanding of mechanisms to unlock agricultural actors’ access to credit in low-income countries.

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