Agricultural credit supply and the performance of microfinance institutions in southern Togo

Abstract

The problem of underfinancing in the agricultural sector has always been a subject of consideration for governments. Thus, for decades, programs have been implemented to eradicate poverty and facilitate access to financial services for the most disadvantaged segments of the population, represented mainly by the rural population. Among these programs, microfinance holds a predominant place. However, the latter is increasingly moving away from the agricultural sector, depending on its assessment of the risky nature of agricultural investments. This study sought to analyze the effect of agricultural credit supply on the performance of microfinance institutions (MFIs). Data from the two largest microfinance institutions (FUCEC-Togo and WAGES) were analyzed. The linear regression model was used for the analysis. The results show that the supply of agricultural credit has a negative impact on financial performance ratios of both MFIs in this study. The study recommended that microfinance institutions improve their agricultural financial services to adapt them to the needs of rural populations. The introduction of financial products should be adapted to the needs of producers and compatible with the profits of microfinance structures.