AGRICULTURAL CREDIT'S YIELD: GAUGING ITS IMPACT ON PRODUCTIVITY

Abstract

Access to credit is a fundamental driver of agricultural development, recognized by international organizations and scholars alike. Nonetheless, in many developing nations, securing credit can be a daunting challenge, influenced by both supply-side and demand-side factors. Banks often perceive lending to small rural farmers as high-risk and costly, while farmers may lack sufficient collateral or perceive borrowing as excessively risky. The absence of accessible credit and capital constraints pose significant barriers to the adoption of modern technologies, hindering efficiency and productivity improvements within the agricultural sector. Moreover, the imposition of high-interest rates disrupts the efficient allocation of savings to investment, diminishing lending incentives and limiting credit access for producers operating near the break-even point. The economic literature has yielded divergent perspectives on the relationship between agricultural credit access and agricultural productivity. Some studies assert a positive correlation, while others emphasize a negative link. Consequently, the debate endures, and the role of agricultural credit in explaining agricultural productivity remains a pertinent topic in Congo. This article aims to address the question: What is the magnitude of the impact of agricultural credit on productivity? The hypothesis posits that the impact of agricultural credit on productivity is limited, despite the sector's undeniable need for financing to foster development.