Telling Myth from Facts
Recent evidence shows that many Sub-Saharan African farmers use modern inputs, but there is limited information on how these inputs are financed. The authors use recent nationally representative data from four countries to explore input financing and the role of credit therein. A number of results contradict “conventional wisdom” found in the literature.
The results consistently show that traditional credit use, formal or informal, is extremely low (across credit type, country, crop and farm size categories). Instead, farmers primarily finance modern input purchases with cash from nonfarm activities and crop sales. Tied output-labor arrangements (which have received little empirical treatment in the literature) appear to be the only form of credit relatively widely used for farming.
Read the full study here.