Rural Finance and Agricultural Technology Adoption in Ethiopia: Does Institutional Design Matter?

36 Pages Posted: 9 Apr 2015

See all articles by Gashaw Tadesse Abate

Gashaw Tadesse Abate

University of Trento; European Research Institute on Cooperative & Social Enterprises (EURICSE)

Shahidur Rashid

International Food Policy Research Institute (IFPRI)

Carlo Borzaga

University of Trento; European Research Institute on Cooperative & Social Enterprises (EURICSE)

Kindie Getnet

International Water Management Institute (IWMI)

Date Written: March 23, 2015

Abstract

Financial cooperatives and microfinance institutions (MFIs) are the two major sources of rural finance in Ethiopia. Whereas MFIs are relatively new, financial cooperatives have existed for centuries in various forms. The coexistence of two different institutions serving the same group of people, and delivering the same financial services, raises several policy questions. Those questions have become particularly relevant, as the government has embarked on developing a new strategy for improving rural financial services delivery. This study is expected to serve as an input to that policy discussion.

Using a unique household survey dataset and the propensity-score-matching technique, we examine the impacts of the two financial service providers on agricultural technology adoption. The results suggest that access to institutional finance has significant positive impacts on both the adoption and extent of technology use. However, when impacts are disaggregated by type of financial institution and farm size, considerable heterogeneities are observed. In particular, financial cooperatives have a greater impact on technology adoption than do MFIs, and the impacts appear to vary depending on farm size and types of inputs. The underlying implications of these results are discussed in light of the country’s rural finance policies and programs.

Keywords: institutional finance; agricultural technology adoption; impact analysis; propensity score matching; Ethiopia

JEL Classification: G21; Q14

Suggested Citation

Abate, Gashaw Tadesse and Rashid, Shahidur and Borzaga, Carlo and Getnet, Kindie, Rural Finance and Agricultural Technology Adoption in Ethiopia: Does Institutional Design Matter? (March 23, 2015). IFPRI Discussion Paper 01422. Available at SSRN: https://ssrn.com/abstract=2583852

Gashaw Tadesse Abate (Contact Author)

University of Trento ( email )

Via Giuseppe Verdi 26
Trento, Trento 38152
Italy

European Research Institute on Cooperative & Social Enterprises (EURICSE) ( email )

Via S. Giovanni 36
38122 Trento (TN)
Italy

Shahidur Rashid

International Food Policy Research Institute (IFPRI) ( email )

United States
202-862-6498 (Phone)
202-467-4439 (Fax)

HOME PAGE: http://www.ifpri.org/staffprofile/shahidur-rashid

Carlo Borzaga

University of Trento ( email )

Via Giuseppe Verdi 26
Trento, Trento 38152
Italy

European Research Institute on Cooperative & Social Enterprises (EURICSE) ( email )

Via S. Giovanni 36
38122 Trento (TN)
Italy

Kindie Getnet

International Water Management Institute (IWMI) ( email )

Addis Ababa
Ethiopia

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