Locking Crops to Unlock Investment: Experimental Evidence on Warrantage in Burkina Faso
51 Pages Posted: 19 May 2020 Last revised: 21 May 2020
Date Written: May 18, 2020
Abstract
Financial market imperfections remain pervasive in developing countries, constraining potentially profitable investment decisions, especially for rural smallholder farmers. Warrantage is an innovative model of rural finance with the potential to overcome credit, storage, and commitment constraints through a localized inventory credit scheme. Exploiting random variations in household access to warrantage and intensity of access across villages, this paper studies the direct impact of this scheme on beneficiaries as well as its spillover effects. Take-up of storage is high (94 percent), while credit take-up is moderate (38 percent). Households with access to warrantage primarily store sorghum and maize and sell their production over an extended period of time, earning higher average prices and resulting in higher sales revenue ($248, or 33 percent, on average). Increased incomes are spent on long-term investments, includinghuman capital expenditures (education), livestock purchases, and investment in agricultural inputs for the subsequent year.
Keywords: Crops and Crop Management Systems, Climate Change and Agriculture, Livestock and Animal Husbandry, Educational Sciences, Nutrition, Food Security
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