Does the structure of credit markets affect agricultural development in West African countries?

Growing evidence suggests that credit constraint or the inability of rural farmers to access financial instruments remains a binding constraint to enhanced productivity in sub-Saharan Africa. We complement this evidence by exploring the contribution of credits to agricultural development with a particular emphasis on the structure of the credit market, captured by agricultural credits, credit to households and firms engaged in agricultural production, and domestic credit to the private sector. Employing advanced panel data estimation techniques to account for endogeneity and cross-sectional dependence in a panel of West African countries, we find evidence supporting the supply leading and demand following hypotheses. We argue that targeted policy reforms that increase agricultural credits and credit to firms engaged in agricultural activities might be more effective in increasing agricultural productivity. (c) 2021 Economic Society of Australia, Queensland. Published by Elsevier B.V. All rights reserved.

Automated summary

This study explores the contribution of credits to agricultural development, highlighting the importance of targeted policy reforms that increase agricultural credits and credit to firms engaged in agricultural activities. The findings support the supply leading and demand following hypotheses.