Impact Assessment of Microfinance Interventions in Ghana and South Africa: A Synthesis of Major Impacts and Lessons

Abstract

International trade liberalization often implies increased potentials for export production. In order to invest in increasing capacity in agriculture, farmers need to have credit access. However, farmers in Central Europe and East Africa, among other places, are credit constrained, due to collateral reasons. A model illustrates the additional producer gains from having access to credit; the gains are composed of a price effect, an investment effect, and a social-capital externality. The model and empirical findings suggest that improvements of agricultural credit can be achieved by relying on existing social structures, such as farmers' social capital. The paper concludes that such externalities need to be addressed when designing optimal agricultural credit institutions.

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