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Farm household economic behaviour in imperfect financial markets

empirical evidence and policy implications on saving, credit and production efficiency in Southeastern Ethiopia

Komicha, Hussien Hamda (2007). Farm household economic behaviour in imperfect financial markets. Diss. (sammanfattning/summary) Uppsala : Sveriges lantbruksuniv., Acta Universitatis agriculturae Sueciae, 1652-6880 ; 2007:78
ISBN 978-91-576-7377-0
[Doctoral thesis]

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Abstract

Financial markets in developing countries are imperfect and are likely to affect decision-making behaviour of economic agents, especially smallholder farm households. This thesis, comprising four articles, aimed to understand and explain farm household economic behaviour with reference to saving, credit and production efficiency under imperfect financial market conditions. It is based on data obtained from farm household survey conducted in two districts of southeastern Ethiopia from September 2004 to January 2005. Data was analysed using stochastic frontier analysis and limited dependent variable econometric tools. In article I, farm household saving behaviour and its determinants were studied. Results show that, on average, a farm household saved 37% of its farm income in financial and physical assets. However, more than 90% of savers held their savings outside formal financial institutions. Such saving behaviour of farm households was affected by factors related more to incentives and opportunities to save than to ability to save. In Article II, borrowing behaviour of farm households was analysed by considering sectoral choice of farm households among formal, semiformal and informal credit sectors and factors contributing to their choice. The informal credit sector was found to dominate sectoral choice of the farm households even though this sector charged the highest interest rates. Factors other than the interest rate, i.e., loan processing time, type of loan, credit information and loan size, significantly affected this borrowing behaviour of the farm households. In Article III, technical efficiency of smallholder farmers was estimated using a stochastic frontier analysis. There was about 12% efficiency differential between credit-constrained and credit-unconstrained farm households, ceteris paribus. In Article IV, farm households’ demand for credit and its determinants were investigated. It was found that farm households had credit demand for production and consumption purposes, whereas the formal credit sector targeted credit only for production purpose, although production and consumption purposes are closely related. In conclusion, imperfect financial markets adversely affect saving, credit demand, credit sectoral choice and production behaviours of farm households. This study suggests some policy measures, which may help to redress the adverse effects identified and to enhance development of rural financial markets and institutions.

Authors/Creators:Komicha, Hussien Hamda
Title:Farm household economic behaviour in imperfect financial markets
Subtitle:empirical evidence and policy implications on saving, credit and production efficiency in Southeastern Ethiopia
Year of publishing :2007
Volume:2007:78
Number of Pages:41
Papers/manuscripts:
NumberReferences
ALLI. Komicha, H. H., Öhlmer, B. & Emana, B. 2007. Saving behaviour of farm households under imperfect rural credit markets: The case of Southeastern Ethiopia. Ethiopian Journal of Agricultural Economics, 6 (2): 1-39. II. Komicha, H. H. Credit sectoral choice of farm households and its determinants in imperfect credit markets of Southeastern Ethiopia. Submitted to The Developing Economies. III. Komicha, H. H. & Öhlmer, B. Influence of credit constraint on technical efficiency of farm households in Southeastern Ethiopia. Submitted to Food Economics. IV. Komicha, H. H. Farm household demand for credit and its determinants in imperfect credit markets of Southeastern Ethiopia. Submitted to Quarterly Journal of International Agriculture.
Place of Publication:Uppsala
ISBN for printed version:978-91-576-7377-0
ISSN:1652-6880
Language:English
Publication Type:Doctoral thesis
Full Text Status:Public
Agrovoc terms:small farms, households, economic behaviour, savings, credit, capital market, financial institutions, decision making, financial policies, econometric models, ethiopia
Keywords:Agricultural finance, asymmetric information, credit demand, formal finance, informal finance, rural credit, smallholder farmers, technical efficiency.
URN:NBN:urn:nbn:se:slu:epsilon-1807
Permanent URL:
http://urn.kb.se/resolve?urn=urn:nbn:se:slu:epsilon-1807
ID Code:1563
Department:(NL, NJ) > Dept. of Economics
Deposited By: Hussien Hamda Komicha
Deposited On:26 Sep 2007 00:00
Metadata Last Modified:02 Dec 2014 10:12

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