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.
Milling and related activities are central to the improvement of the quality of locally produced rice in many African countries. Fee-based milling and paddy buying-milling-selling services are among the strategies used in the milling business. The Heckman two-stage model and gross profit method were used on survey data, collected in 2011 on rice millers in major rice-producing regions of Benin to identify the factors that influence millers' choice of strategy and determine the quantity of paddy milled under the buying-milling-selling strategy. Results from the first stage of the Heckman model identified previous salary activity, utilization of modern technology, and trade as main activity as factors positively influencing millers' decision, while the second stage showed that the milling capacity and length of service in milling activity as factors positively influencing the quantity of paddy milled. The average profit of miller-traders was higher than that of millers-only.
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