Does credit market inefficiency affect technology adoption? Evidence from Sub-Saharan Africa

Abstract

Purpose

The purpose of this paper is to investigate factors affecting the adoption of agricultural technologies in Sub-Saharan Africa, specifically the role of credit market inefficiency in adoption of agricultural technologies in the region.

Design/methodology/approach

Most importantly, the paper applies a 2SLS model on a unique data set on nine agrarian countries from Sub-Saharan Africa’s intensification of food crops agriculture (Afrint) to provide evidence on how credit market inefficiency affects adoption of technologies in the sub region.

Findings

The study finds that the relationship between credit and technology adoption is one-way causal relation (i.e. credit access leads to technology adoption) as opposed to a two-way relation (i.e. mutual dependent relation). Further, the results indicate that credit market inefficiency can be a major barrier to the adoption of yield enhancing technologies in Sub-Saharan Africa. Further, the study showed mixed results for household variables. The results give credence to studies that highlight the importance of infrastructure and risk control in the adoption of new technologies.

Research limitations/implications

The study is limited to only nine countries in Sub-Saharan Africa. Thus, the findings and interpretations should be considered as such. Further, there is the need for further research that considers all the region so as to establish whether or not there is a relationship between credit market inefficiencies and technology adoption in the region.

Practical implications

The policy implication is that microfinance institutions should consider scaling up their credit services to ensure that more households benefit from it, and in so doing technology adoption will be enhanced.

Originality/value

The main contribution of the study lies in its use of a unique data set from Sub-Saharan Africa’s intensification of food crops agriculture (Afrint) to investigation relationship between credit market inefficiency and technology adoption.

Citation

Abdallah, A.-H. (2016), "Does credit market inefficiency affect technology adoption? Evidence from Sub-Saharan Africa", Agricultural Finance Review, Vol. 76 No. 4, pp. 494-511. https://doi.org/10.1108/AFR-05-2016-0052