Emerging Markets Finance and Trade

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Agricultural Credit and Its Impact on the

Productivity of Certain Cereals in Togo

Akoété Ega Agbodji & Ablamba Ahoefavi Johnson

To cite this article: Akoété Ega Agbodji & Ablamba Ahoefavi Johnson (2019): Agricultural Credit
and Its Impact on the Productivity of Certain Cereals in Togo, Emerging Markets Finance and
Trade, DOI: 10.1080/1540496X.2019.1602038

To link to this article: https://doi.org/10.1080/1540496X.2019.1602038

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Emerging Markets Finance & Trade, 1–17, 2019
Copyright © Taylor & Francis Group, LLC
ISSN: 1540-496X print/1558-0938 online
DOI: https://doi.org/10.1080/1540496X.2019.1602038

Agricultural Credit and Its Impact on the Productivity of

Certain Cereals in Togo
Akoété Ega Agbodji and Ablamba Ahoefavi Johnson
Department of Economics, University of Lomé, Lomé, Togo

ABSTRACT: The objective of this study is to analyze the impact of agricultural credit on maize, sorghum
and paddy rice productivity in Togo. The results reveal that credit has a positive and significant impact on
these productivities. This general result varies depending on the type of credit, however. In kind credit
has a positive and significant impact on maize and sorghum productivity, but no significant impact on
paddy rice productivity. In contrast, the impacts on productivity of credit in hard cash are negative with
respect to maize, positive with respect to sorghum, and not significant with respect to paddy rice.
KEY WORDS: Agricultural credit, impact analysis, productivity
JEL codes: Q14, C21, D24

The Togolese economy is essentially based on agriculture. Since the mid-1990s, agricultural gross
domestic product (GDP) has increased faster than overall GDP. Agriculture employs about 54% of
the active population and contributes significantly to the country‘s national wealth (about 40%), thus
it is the engine of Togo‘s economic and social development. Over the period 2011–2015, the
agricultural sector benefited from massive investment from the Togolese government and from
technical and financial partners in the context of the National Agricultural Investment and Food
Security Program (PNIASA).
The primary sub-sector is characterized by subsistence agriculture. All vegetables are grown by
small farmers who generally use traditional techniques. This type of agriculture is subject to climatic
conditions and price fluctuations. For more than 20 years, recorded cereal yields have remained low
and constant. The main constraints of the agricultural sector are the low rates at which improved
inputs are used, the relatively high post-harvest loss rates, a lack of credit, the high cost of inputs and
labor and the fact that these inputs are not available on a timely basis, the climatic variability, the lack
of control over water use and rights, the low viability of producers‘ organizations and producers’ high
illiteracy rate, the constantly rising prices of agricultural products, and marketing problems. All this is
exacerbated by the progressive degradation of natural resources and soil. The scarcity of and unequal
access to credit constitute another major constraint on the development of the agricultural and rural
sectors and worsen the effects of poverty in rural areas. In addition, the formal financing of the
Togolese agricultural sector in the future is in doubt because commercial banks provide almost none
of this sector’s financing.
In Togo, a quasi-absence of savings means small producers have limited funds for innovation and
agricultural investment. Generally, farmers’ main financing requirement is to have cash for economic
activities, such as purchasing inputs and paying for labor, during each agricultural season. But
farmers have also strongly expressed the need for financing to invest in equipment (tools, harnesses
for plowing, breeding habitat, etc.). To meet these different needs, in kind and in cash credit is offered
to farmers under the auspices of microfinance institutions (MFIs). For in kind credit, the government
has developed a network for distributing agricultural inputs (fertilizers, selected seeds, and other

Address correspondence to Ega Agbodji, Department of Economics, University of Lomé, Togo.

E-mail: aagbodji@univ-lome.tg
Color versions of one or more of the figures in the article can be found online at www.tandfonline.com/mree.
2 A. E. AGBODJI AND A. A. JOHNSON

equipment) at subsidized prices to make them available to small producers who own about a hectare
of arable land. Inputs are also deposited with groups that have stores. This credit system involves
cash payment for three bags, with the rest paid after the harvest. Cash credit, on the contrary, is a loan
granted to a producer who, in some cases, is able to pay back the loan using income from extra-
agricultural activities if the harvest is stored.
To encourage the continuation of this agricultural financing policy, the National Fund for Inclusive
Finance (FNFI) was launched in 2014 with the aim of eliminating financial exclusion by enabling the
poor to access loans from MFIs at reduced rates. The FNFI launched its first product, called Access
to Financial Services for the Poor (ASPEF), which has brought about real socioeconomic progress.
With a maximum of XOF30,000(54.55 USD), with an interest rate of 5% per year, such loans have
been granted to more than 528,634 beneficiaries (90% of whom are women).
These significant public investments are designed to increase the productivity of small agricultural
producers. However, little is known about their results, in particular whether agricultural credit has
a positive or negative impact on the agricultural productivity of cereals. The empirical linkages
between agricultural credit and agricultural productivity should be investigated now, while the FNFI
is just beginning its agricultural activities. Do the two types of agricultural credit (in cash and in kind)
have different impacts on the agricultural productivity of cereals?
In the literature, several studies have highlighted the transmission channels through which
agricultural credit has a positive impact on agricultural performance. However, the empirical studies
have produced mixed results from various methodologies, so it is necessary to measure both the
impact of agricultural credit as a whole and the impact of both types of credit.
The overall objective of this study is to assess the impact of agricultural credit on the productivity
of small farms in Togo. Specifically, first we describe and analyze the agricultural credit distributed
(in cash and in kind) and agricultural productivity in Togo; secondly we identifie the determinants of
access to credit, and estimate the impact of agricultural credit (in cash and in kind) on cereal
productivity.
To achieve the objectives of this study and to test the robustness of the results, we used two recent
methods of impact estimation: the propensity score method and the endogenous switching regression
method. The results reveal that credit, as a whole, has a positive and significant impact on the
productivity of maize, sorghum, and rice. More specifically, in kind credit has a positive and
significant impact on maize and sorghum productivity but no significant impact on paddy rice
productivity, while cash credit has a positive and significant effect on sorghum productivity, no
significant impact on rice productivity, and a negative impact on maize productivity.
The article is structured as follows: Section 2 provides a summary (but not exhaustive) of the
theoretical and empirical work to highlight the transmission channels between credit and productiv-
ity; Section 3 describes the methodological approaches used in the study; and Section 4 presents and
analyzes the results of the estimates.

1. Theoretical and Empirical Explanation of the Link between Agricultural Credit and
Agricultural Productivity
1.1. The Relationship between Agricultural Credit and Agricultural Productivity: Theoretical
Argument
The investment decisions of small farmers in developing countries are conditioned by their financial
environment. Credit market constraints and incomplete insurance can reduce investment in high-
profit activities (Karlan et al. 2014). Since the pioneering work of Stiglitz and Andrew (1983), it has
been shown that financial institutions are affected by the uncertainties of the credit market caused by
information asymmetry.
Obtaining agricultural credit enables farmers to finance an agricultural season and protect them-
selves against the uncertainties of the agricultural sector that are likely to reduce productivity (FAO
 AGRICULTURAL CREDIT AND PRODUCTIVITY IN TOGO 3

Figure 1. Transmission channel between agricultural credit and agricultural productivity.

2000 al., 2013). It appears that access to credit is likely to favor access to seeds, soil nutrients,
equipment, labor and advice on expanding. In sum, the transmission channel between agricultural
credit and agricultural productivity is illustrated in Figure 1. The determinants of the adoption of
agricultural innovations are widely discussed in the literature (Baumgart-Getz, Prokopy, and Floress
2012; Knowler and Bradshaw 2007; Prokopy et al. 2008). Education is among the regularly cited
determinants that positively affect the adoption of technology (Mariano, Villano, and Fleming 2012;
Mzoughi 2011; Gedikoglu, McCann, and Artz 2011; Paudel et al. 2008, 2011). Education also
determines whether farmers choose a better combination of inputs and agricultural technology
practices to achieve high levels of agricultural productivity (Ali and Flinn 1989; Coelli and
Fleming 2004; Ram and Singh 1988).

1.2. Relationship between Agricultural Credit and Agricultural Productivity: Empirical Work
No consensus on the effects of credit on agricultural productivity has been achieved in the literature.

1.2.1. Studies on the Existence of a Positive Link between Credit and Productivity or
Agricultural Production
In general, many studies have estimated the benefits of formal credit in developing countries
(Binswanger and Khandker 1995; Carter 1989; Carter and Wiebe 1990; Feder et al. 1990; Pitt and
Khandker 1996, 1998; Khandker and Koolwal 2016; Khandker and Faruqee 2003; Awotide et al.
2015; Narayanan 2016). They show that access to formal credit helps increase productivity and
household income. For example, in the case of Ghana, Abunga (2016) examines the links between
agricultural productivity, access to credit, and the size of farms in Africa. Still in the case of Ghana,
4 A. E. AGBODJI AND A. A. JOHNSON

Donkoh et al. (2016) show that participation in the Agricultural Credit Program for crop production
in four districts of northern Ghana increases production.
The effect of bank lending on agricultural production in Nigeria was the focus of Ogechi and Ikpesu
(2016). Osa-Afiana and Kelikume (2016) show that the supply of credit to the agricultural sector has
a positive impact on agricultural production in Nigeria. Sunny (2013) has also shown that the various
credit-granting institutions have a positive and significant effect on agricultural productivity.
The use of the endogenous switching model on a national sample of rural households in Rwanda
allowed Ali, Deininger, and Duponchel (2014) to empirically assess the extent and nature of credit
rationing in the semiformal sector and its impact. In Côte d‘Ivoire, Kouakou (2001) shows that credit
recipients and farmers who produce paddy rice do not have the same economic efficiency as those
who do not receive credit.
In India, it has been shown that agricultural credit is a major factor of production and productivity
but that other factors, such as rainfall, seed quality, irrigation, and environmental conditions may also
have an influence. In addition, distributed credit is positively correlated with agricultural GDP
(Naidu, Sankar, and Kumar 2013). Sudha (2016) also examines the nature of the relationship between
formal agricultural credit and India‘s GDP. These results are similar to those of Mishra (2013). Das,
Senapati, and John (2009) use a dynamic analysis of panel data to determine the effect of agricultural
credit on agricultural production in India. Also with respect to India, Binswanger and Khandker
(1995) estimate the effect of formal credit using panel data at the district level. The effect of
agricultural credit on agricultural productivity in India has also been studied by Narayanan (2016),
who notes that credit preserves productivity by supporting mechanization.
The source of credit, ownership of the farm’s fixed assets, market access, and family work also
play an important role (Naheed et al. 2013). Similar results are found by Bashir, Memood, and
Hassan (2010), Ahmad (2011), Shah, Khan, and Khan (2008),and Ayaz and Hussain (2011). Rehman
et al. (2017) conduct an econometric analysis to study the relationship between certain variables and
Pakistan’s agricultural gross domestic product (GDP).
A number of studies, such as those by Nwaru and Onuoha (2010) on Nigeria and Diagne and
Zeller (2001) on Malawi. Sriram (2007) finds it difficult to establish a causal relationship between the
increasing credit supply and increasing agricultural productivity in India. With respect to Bangladesh,
Khandker and Koolwal (2016) find that microcredit has no effect on crop income and that supply-side
credit constraints significantly limit crop income, while Bidisha et al. (2018) find that credit has no
direct effect on productivity. Rehman et al. (2017) also find that lending to farmers in cultivated areas
and cooperatives has a negative but not significant influence on Pakistan‘s agricultural GDP. In Chile,
short-term loans are shown to be less productive than other factors, such as education or type of
activity, according to Reyes et al. (2012). Carter (1989) estimates the effect of credit on production by
small farms in Nicaragua.

2. Modeling the Impact of Agricultural Credit on Productivity in Togo

Two methods of impact analysis were used: the propensity score matching (PSM), or matched groups
method, and the endogenous switching regression (ESR) method.

2.1. The PSM Method

The impact assessment method used in this analysis is the paired or matching method (Heckman,
Ichimura, and Todd 1998; Rubin 1974). In a general way, the method consists of estimating the
following model.

Y i ¼ f ðX i; D iÞ þ u i (1)
 AGRICULTURAL CREDIT AND PRODUCTIVITY IN TOGO 5

where for each individual i, Y is a result variable (here, agricultural production); X is a vector of
control variables; D is both the treatment variable whose effects are evaluated (here, agricultural
credit) and a non-observed variable that contains the effect of other factors that determine Y as well as
X or D. Let Y_1 be the level of agricultural production that would be achieved by an individual if he/
she received agricultural credit, and let Y_0 be the same individual’s production if he/she does not
receive credit. The term u irepresents the usual error term.
The treatment variable D is 1 if the individual is a farm-credit recipient and 0 otherwise. For
a given individual, the observed agricultural production is then:

Y i ¼ Y 0 i þ D i ðY 1 i  Y 0 i Þ (2)

The groups are matched, according to Rosenbaum and Rubin (1983), on the basis of a score called
a “propensity score,” which refers to the probability that a person of given characteristics will receive
credit. This score is thus defined:

Pð X Þ ¼ Pr ðD ¼ 1jX Þ (3)

Several alternative and feasible pairing techniques have been developed in the literature, including
the nearest-neighbor method, the threshold method, the ray-matching method, the stratification
method, and the kernel-matching method. None of the methods is superior to any other, and no
consensus has been reached in the literature on the most satisfactory method. To verify the robustness
of results, all these methods are used. Similarly, the estimation technique of Abadie and Imbens
(2011) is used to correct the potential problem of selection bias.

2.2. Endogeneity Switching Regression (ESR) Method

To test the robustness of the PSM results given the treatment variable’s self-selectivity, we used the
ESR method. Self-selectivity with respect to access to credit is a source of endogeneity, generally at
the level of the farmer. One of the best ways to explicitly account for this endogeneity is to use the
ESR method, which specifically corrects for any possible selection bias in the sample (Freeman,
Ehui, and Jabbar 1998; Maddala 1983).
The binary decision variable is specified with respect to farmers‘ access to credit for observed
covariates using a probit model, as follows:

P i ¼ βZ i þ ε i (4)

P i ¼ 1 if P i>0 (5a)
P i ¼ 0 if P i  0 (5b)

where Pi is the observed situation of farmer ion the credit market.P i ¼ 1 if the latent process
captured by P iis associated with the farmer receiving agricultural credit, and 0 if it associated
with those who do not benefit from it.
Given the possible selection bias in the sample, farmers can be grouped in two ways:

Regime 1 : access to credit G1 i ¼λ1 X iþ;1 Z1 iþν1 i (6a)

Regime 2 : no access to credit G2 i ¼λ2 X iþ;2 Z2 iþν2 i (6b)

where G1 i and G2 i represent the productivity of the farmers in regimes 1 and 2, respectively; X i is
the vector of exogenous variables that are supposed to determine farmers‘ productivity; ;1 and
6 A. E. AGBODJI AND A. A. JOHNSON

;2 are the parameters to estimate; ν1 i and ν2 i are the error terms; and Z1 i and Z2 i are vectors of
instruments that, by definition, have no effect on performance except by access to credit. The error
terms are assumed to have a normal distribution, with a mean of zero and a non-singular covariance
matrix.
In previous studies, a two-step method is used to estimate the ESR model (Feder et al. 1990;
Freeman, Ehui, and Jabbar 1998; Fuglie and Bosch 1995; Lee 1978). In a first step, a probit model of
the choice criterion equation is estimated and the predicted variables γ1 and γ2 , representing the
inverse of the Mills ratio, are determined. These predicted variables are then used to obtain the next
system of equations to be estimated.

G1 i ¼ λ1 X i þ β1ε γ1 þ ϕ1 P1 i þ η1 (7a)

G2 i ¼ λ2 X i þ β2ε γ2 þ ϕ2 P2 i þ η2 (7b)

The coefficients of the variables γ1 and γ2 , respectively, provide the estimates of the terms β1ε and β2ε .
After the variables γ1 and γ2 are estimated, the residual values η1 and η2 cannot be used to calculate
the standard deviations in the second step estimates. For Lokshin and Sajaia (2004), however, the
efficient method for estimating the ESR model in a single step is the maximum likelihood method. It
is this last approach that is chosen.
In addition, the average effect of access to credit can be calculated as follows:


ATT ¼ EðG1 i  G2 ijP i ¼ 1Þ ¼ H iðλ1  λ2 Þ þ σ1μ  σ2μ γ1 (8)

where EðG1 ijP i ¼ 1Þ ¼ X iλ1 þ σ1μ γ1 represents the expected result for the farmers who have
access to credit, and EðG2 ijP i ¼ 1Þ ¼ X iλ2 þ σ2μ γ1 is the expected productivity of farmers with
no access to credit.
With respect to the agricultural performance variables, different studies use either agricultural
production (Ogechi and Ikpesu 2016; Osa-Afiana and Kelikume 2016; Boone et al. 2013), or
agricultural productivity (Guirkinger and Boucher 2008; De Janvry, Fafchamps, and Sadoulet
1991; Foltz 2004). In this paper, we have retained the agricultural productivity.

2.3. Presentation of Data and Variables

2.3.1. Nature and Sources of Data
The data used in this analysis are from Togo’s National Census of Agriculture. The survey covered all
economic regions in the country during 2012–2013, and all rural farm households were surveyed.
Areas with high urbanization were excluded from the survey. The data were organized into a basic
module and additional modules. The basic module contains all the structural data on Togolese
agriculture. One of the complementary modules covers agricultural financing issues on a sample of
2,226 households. The rest of the data relates to the sociodemographic characteristics of farmer,
areas, yields, agricultural inputs, objective measurements of plots with GPS, method of cultivation,
agricultural credit, agricultural labor, and agricultural expenses.
To analyze the impact of agricultural credit on productivity, we selected three agricultural
products: maize, sorghum, and rice. This choice was guided by the fact that National Program for
Agricultural Investment and Food Security (PNIASA) uses these three cereals as its subcomponent
because of their intensive production. According to the results of the National Census of Agricultural
(RNA), maize is grown by 478,227 agricultural households, making it the most widely cultivated
cereal in Togo. Throughout the country, practically all agricultural households (94%) grow maize,
especially in the Plateaux Region, where the largest proportion of this crop’s farmers live (159,977
households, or 33.4% of maize farmers). Next are sorghum and rice, which are grown in most
 AGRICULTURAL CREDIT AND PRODUCTIVITY IN TOGO 7

regions, although sorghum is grown predominantly in the Kara and Savanes regions, and rice in the
Plateaux, Kara, and Savanes regions. Together the three crops account for more than 90% of the
cultivated cereal plots (MAEP 2013).

2.3.2. Description of the Variables

To analyze the impact of agricultural credit on agricultural productivity, we used three types of
variables: characteristic variables describing the individuals, a treatment variable, and a result vari-
able. The variables selected for vector X must influence both the use of credit and agricultural
productivity. The treatment variable, which is binary, equals one if the individual has been treated,
and zero otherwise. For example, an individual will be considered as treated if he/she has applied for,
obtained, and used a loan to pay for agricultural expenses (D = 1). The control group consists of
individuals who applied for but did not obtain credit (D = 0). Because the result variable is
productivity, it is defined by the ratio, in real terms, of the product to any or all of the production
factors. In agriculture, productivity is frequently measured in terms of output per unit of land, and
labor productivity is measured as product per worker (Sumanth 1984). The yield per hectare is
computed taking into account individual crops. Given the problem of crop aggregation, it becomes
difficult to calculate the yield per hectare for all crops.
The selected explanatory variables are explained in Table 1.
In order to match individuals who are not very far apart geographically, five “region” binaries
corresponding to those covered by the survey have been defined. This makes it possible to minimize
the agro-climatic differences that may arise from geographic distance and be a source of selection bias.

2.3.3. Statistical Analysis of the Access to Credit and of the Productivity

An analysis of credit obtained per region of residence (Table 2) reveals that farmers in the Kara and
Savanes regions have the most access to credit. In terms of gender and education men and famers
who have once attended school have the most access to agricultural credit. In terms of marital status,
the farmers who have the most access to credit are single males.
A productivity analysis according to region reveals that, on average, the productivity of maize and
sorghum crops is highest in the Central and Plateaux regions (Table 2), while rice productivity is
highest in the Central region. An analysis according to the type of farmer shows that the productivity
of maize and sorghum is higher among male farmers, while the opposite is true for paddy rice.
Correlating productivity with education shows that productivity levels for all three cereals are higher
when farmers are educated than when they are not.
Table 3 shows that farmers have more access to credit than non-farmers. In addition, farmers who
combine raising livestock with farming have greater access to agricultural credit than farmers who do
not raise livestock. Farmers who have participated in state supervision have more access to agricul-
tural credit than those who were not supervised.
Analyzing cereal productivity levels according to the farmer’s occupation reveals that farmers
have higher productivity levels for all crops than non-farmers. Similarly, when farmers raise livestock
as well as farm, their maize, sorghum, and paddy rice productivity is higher than that of farmers who
do not raise livestock. As for the productivity levels of the three cereals according to management
structure, they are higher for farmers supervised by non-state institutions. The productivity of maize,
sorghum, and paddy rice is higher when the producer has access to credit. Finally, with respect to the
type of credit, the results indicate higher maize and paddy rice productivity levels for recipients of in
kind credit, where sorghum productivity increases with cash credit.
8 A. E. AGBODJI AND A. A. JOHNSON

Table 1. List and measurement of model variables.

Variables Measure

Dependent variable
Productivity Total agricultural production by volume per cultivated area (Tons/ha)
Explanatory variables
Age Age of the farmer in the past year. Tauer (1995) has shown that farmers‘ productivity differs
following age group.
Sex Binary variable equal to 1 if the individual is a man and 0 otherwise. Because of differences in
access to productive resources and the individual characteristics of farmers, it is shown that
there is a difference in productivity by sex [Aguilar et al. (2015); Ali et al. (2016)]
Education A binary variable combining the education of the individual and his literacy which is equal to 1 if
the individual is either literate or educated in French or in French Arabic. In the case of
education, an individual will be considered educated when he or she has received at least four
years of schooling, i.e., when he or she attains at least the fourth year of primary school (CE2).
The level of four years of primary schooling was chosen according to some empirical studies
(Lau et al., 1991, Moock, 1981). Regarding literacy, an individual will be considered literate if
he can read and write in French or any other national language.
Marital status Binary variable equal to 1 if the individual is single and 0 otherwise.
Household size Number of individuals in the household. This variable is used as a proxy for the work factor
Animal Practice of breeding in addition to agriculture (0. No, 1.Yes)
management
Supervision status Have been supervised (0. No; 1. Yes)
Supervision Type of institution that supervises the farmer (0. State, 1. Other)
institution
Size of plot Area of the farm. Bardhan (1973), Deolalikar (1981), Piette (2006) postulate a negative
relationship between farm size and productivity
Family Link Position of the farmer in the household (0. Other members, 1. Household member)
Crop combining Binary variable that takes 1 if the farmer only grows cereals and 0 if he combines other crops with
cereal crops
Occupation status Occupation status of the individual (0. Other inactive; 1. Agricultural assets; 2. Non-agricultural
assets)
Main activity Binary variable in relation to the main activity of the individual. It is equal to 1 if agriculture is its
main activity and 0 if no.
Membership group Binary variable of farmer adherence to a socio-economic group (0. No 1. Yes)
Main crop The principal crop produced by the farmer (0. Cash crop; 1. Food crop)
Plot location The plot‘s location in relation to the village (0. outside the village, 1. In the village)
Maritime Economic Region, in which the farmer resides (0. Other region 1. Maritime)
Plateaux Economic Region, in which the farmer resides (0. Other region 1. Plateaux)
Centrale Economic Region, in which the farmer resides (0. Other region 1. Centrale)
Kara Economic Region, in which the farmer resides (0. Other region 1. Kara)
Savanes Economic Region, in which the farmer resides (0. Other region 1. Savanes)

3. Presentation and Discussion of the Impact Estimate Results

3.1. Statistical Validity of the Impact Analysis Methods
The purpose of the impact analysis of credit access on the productivity of farmers is to build a control
group (non-credit recipients) comparable to a treatment group (credit recipients) and to arrive at an
unbiased estimate of the effect of treatment on treated individuals, while controlling for selection bias
(Caliendo and Kopeinig 2008). However, there are different matching estimators, from which we have
retained the kernel. These matching estimators attempt to match each treated individual with one or more
 AGRICULTURAL CREDIT AND PRODUCTIVITY IN TOGO 9

Table 2. Distribution of farmers by access to credit, average productivity and socio-

demographic.
Access to credit (%) Productivity (in Kg/ha)

Variables Yes No Maize Sorghum Paddy rice

Economic Region 15.86 12.91 7.13 - 13.24

Maritime 15.86 12.91 7.13 - 13.24
Plateaux 17.6 13.95 13.60 9.40 12.67
Centrale 15.84 13.43 16.31 7.02 21.76
Kara 26.86 25.21 7.89 7.61 15.78
Savanes 23.83 34.5 10.56 9.38 19.45
Sex
Male 52.06 57.25 10.73 8.73 18.12
Female 47.94 42.75 10.46 8.58 18.23
Age
18–34 years 40.12 15.81 11.17 8.59 18.05
35 years and over 59.88 84.19 10.40 8.80 18.11
Level of education
Uneducated 43.83 42.4 10.54 8.60 17.94
Educated 56.17 57.6 10.60 8.79 18.89
Marital status
Single 88.07 90.54 10.63 8.31 16.87
Married Divorced/Widowed 11.93 9.46 10.32 8.77 18.33

Table 3. Access to credit, productivity, and other characteristics.

Access to credit (%) Productivity (in Kg/ha)

Variables Yes No Maize Sorghum Paddy rice

Supervision status
No 6.39 62.99 10.51 8.64 17.29
Yes 93.61 37.01 10.91 8.69 18.87
Supervision institution
State 53.4 64.44 10.37 8.54 18.15
NGO/Project 46.6 35.56 11.27 8.75 18.42
Animal management
No 62.89 34.49 10.49 8.51 17.58
Yes 37.11 65.51 10.71 8.73 18.67
Occupation status
Agricultural assets 69.96 96.05 11.18 8.71 18.48
Other 30.04 3.95 10.50 8.17 15.61
Access to credit
No 10.34 8.59 17.93
Yes 10.96 8.79 18.58
Type of credit
Species 10.78 8.91 18.48
Nature 11.45 8.60 19.05

untreated individuals whose observable characteristics are as similar as possible. It then becomes
interesting to use the variables to test the quality of the pairing from the means distribution tests or the
groups’ variations before and after the pairing. Figures 2 and 3 show the results of this test. Figure 2
highlights the kernel density estimates of propensity scores for the treated and control group samples. The
10 A. E. AGBODJI AND A. A. JOHNSON

Figure 2. Kernel density balancing test on paired groups.

Figure 3. Graphs showing the magnitude of the unbalance of variables in terms of standardized percen-
tage differences for matched and unpaired samples.
 AGRICULTURAL CREDIT AND PRODUCTIVITY IN TOGO 11

results reveal that the distribution of the treated group shifts to the right. This indicates that farmers in the
treated group who received credit have higher propensity scores than those in the control group. Thus, the
farmers in the treatment group that receive credit are beneficial. Moreover, after the two groups have been
paired, the assimilation of the propensity scores is represented on the right in Figure 2. The kernel density
curves of the treated and control groups overlap almost perfectly. This overlap shows that both groups
have the same characteristics. So only the fact of whether someone receiving credit distinguishes the two
groups.
Another equally important test on the matching of the two groups (beneficiary and non-
beneficiary) was carried out to confirm whether equilibrium is reached at the level of each of the
basic variables used to calculate the propensity scores. Figure 3 presents the standardized mean
difference distribution points between the treated and control groups for all the variables before and
after the pairing with respect to the estimated propensity scores. The figures reveal a mean difference
of close to 0 for most of the variables.
In short, the results of the various PSM tests corroborate the availability of treated groups and
a similar control for each crop. As a result, the average effects on the three selected crops can be
estimated.
For the ESR model, robustness is verified by testing the independence of the equations, the
Mills ratio, and the instrument in the selection equation. The results obtained (See Table S.3,
available online) indicate self-selection of farmers in the credit market and the endogenous nature
of access to credit. A simple ordinary regression would have generated biased and inconsistent
estimates. As noted in the literature, model identification requires that there be at least one
variable in the selection equation that does not appear in the result equations. For this purpose,
the membership variable in the economic grouping was used. It is observed that joining an
economic group increases the likelihood that farmers will receive agricultural credit. Similarly,
as an instrument, the dominant crop type on the farm significantly increases the likelihood that
maize farmers will receive agricultural credit. The likelihood ratio tests for the independence of
all three equations (See Table S.3, available online) show that the equations are dependent. One of
the interesting results is the sign and meaning of the covariance terms for maize and paddy rice,
for which the results reveal a negative sign of the correlation coefficients (ρ1) between the error
term in the selection equation and the impact equation.

3.2. Determinants of Access to Agricultural Credit

The first parts of the PSM and ESR impact estimates have identified the main determinants of access
to agricultural credit (See Table S.1 and Table S.3, available online). The results of these two methods
show that:
1. Belonging to an economic group positively and significantly explains access to credit for small
farmers. This result confirms that the credit-granting system introduced by MFIs provides
a solidarity guarantee to small farmers who do not have sufficient guarantees to obtain credit;
2. Male producers of maize and sorghum are more likely to have access to credit than female
producers are;
3. Producers of maize and paddy rice for whom farming is the main activity are less likely to have
access to credit than other producers have because they possess few property rights enabling
them to provide the guarantees needed to obtain agricultural credit;
4. Being educated does not determine the likelihood of having access to credit. Similarly, age has
not been shown to be a significant determinant of the likelihood of having access to credit;
5. Membership in an economic group increases the likelihood of having access to credit. The
same is true for being supervised by the state or a nongovernmental organization. This result
can be explained by the fact that farmers who are assisted by agricultural advisors often receive
12 A. E. AGBODJI AND A. A. JOHNSON

training in agricultural credit management. Credit is therefore offered for the purpose of putting
their training into practice.
The results identify the main determinants of access to the two types of credit (See Table S.2 and
Table S.4, available online). The results reveal that the likelihood of having access to cash credit
decreases as maize producers’ area increases, but these producers are more likely to have access to in
kind credit in this same situation. In addition, the results of the ESR estimate reveal that joining
a group and associating livestock with agriculture positively and significantly determines access to
cash credit by maize producers.

3.3. Measuring and Analyzing the Impact of Agricultural Credit on Productivity

Because producers have access to two types of credit, an analysis of the impact of credit on
agricultural productivity is conducted by considering, first, agricultural credit of both types combined
and, second, credit according to type, whether in kind creditor cash credit.

3.3.1. Both Types of Agricultural Credit Combined

As shown in Figure 4, the productivity curve of farmers who received agricultural credit overlaps that
of farmers who did not benefit on a larger part along the two curves as a whole. These results indicate
that farmers who have access to credit have both higher or lower productivity than those without
access.
In general, the results reveal that access to credit had a positive and significant impact on the
productivity of each of the cereal crops considered in this study. In fact, the PSM and ESR results in
Table 4 reveal a statistically significant increase in the maize productivity of farmers receiving
agricultural credit over that of non-beneficiaries (around 10.7% and 9.75%, respectively). In addition,
the PSM estimate shows a statistically significant increase in the productivity of sorghum and paddy
rice of about 10.8% and 4.3%, respectively. According to the ESR estimate, however, sorghum
productivity decreased for farmers who receive credit. This result corroborates the covariance test,

Figure 4. Kernel density curve of production log following major cereal crops.
 AGRICULTURAL CREDIT AND PRODUCTIVITY IN TOGO 13

Table 4. ATT estimation of credit impact by PSM and ESR methods.

PSM ESR

Crops Treated Controls ATT ATT

Maize 312 428 0.1069*** 0.0975***

(2.48) (23.03)
Sorghum/Millet 68 138 0.1080*** −0.0199***
(2.05) (−3.80)
Paddy rice 41 70 0.0431* 0.1025***
(1.20) (15.84)

***Significant at 1%; **significant at 5%, *significant at 10%

which reveals that sorghum farmers are unlikely to benefit from receiving credit. In addition, the
increase in rice productivity is significant using both methods.

3.3.2. Impact of in Kind and Cash Credit on Agricultural Productivity

We also considered the impact of each type of credit on the productivity of the selected cereal crops.
Considering credit and crop types, only the effect on maize cultivation has been estimated using the
ESR method because the data distribution for sorghum and rice crops requires more observations than
are available. The results of the estimate show that the covariance term for recipients of in kind and
cash credit is statistically significant (See Table S.4, available online). This indicates a self-selection
of agricultural credit recipients. In addition, the negative sign of autocovariance indicates a positive
selection bias, suggesting that farmers who receive these types of credit have a higher likelihood of
the credit being beneficial rather than detrimental.

3.3.2.1. Impact of in kind credit. The results of the estimates using the PSM and ESR methods
(Table 5) show that in kind credit has a positive and significant impact on maize and sorghum
productivity. This is because these crops are made up of inputs (fertilizer and improved seeds) that
farmers use directly on farms, and because small farmers tend to be the most vulnerable. They have
little arable land and few family assets, and do not have access to farm equipment. Access to in kind
credit (fertilizer and improved seeds) enables them to reduce the cost of inputs and thus increase the
amount of fertilizer used, which directly increases yields. With respect to paddy rice productivity,

Table 5. ATT estimate of the impact of in kind credits by PSM and ESR
methods.
PSM ESR

Crops Treated Controls ATT ATT

Maize 85 227 0.0741** 0.090**

(1.96) (11.69)
Sorghum/Millet 25 43 0.1734* -
(1.76)
Paddy rice 7 34 0.2244 -
(1.13)

***significant at 1%; **significant at 5%, *significant at 10%

14 A. E. AGBODJI AND A. A. JOHNSON

Table 6. ATT estimate of the impact of cash credit, by PSM and ESR.
PSM ESR

Crops Treated Controls ATT ATT

Maize 227 85 −0.0788*** −0.078***

(−2.13) (−5.14)
Sorghum/Millet 43 25 0.2151*** -
(2.15)
Paddy rice 30 7 −0.0303 -
(−0.42)

***significant at 1%; **significant at 5%, *significant at 10%

however, the impact is positive but not significant. Rice production is considered almost production
of rent. As a result, it is usually grown alongside subsistence agriculture such as maize and sorghum
crops. Under these conditions, fertilizer received as in kind credit is partly used for maize and/or
sorghum crops. Furthermore, some small vulnerable farmers sell their input kits in order to meet their
subsistence needs (Mackiewicz-Houngue and Aguey-Wognon 2014).

3.3.2.2. Impact of cash credit. The results of the PSM estimates in Table 6 indicate a positive
and significant impact of the cash credit on sorghum productivity. The non-significant impact on rice
productivity can be explained by the fact that the cultivation of paddy rice requires significant
financial resources that are easily obtained through small cash agricultural loans. The impact on
maize productivity was negative, however, and significant with both methods. The precariousness
and low purchasing power of small farmers explains these results. An absence of savings and extreme
poverty force these small farmers to sell low-priced products and use cash loans to meet basic needs
(health, education, housing, etc.). Thus, despite receiving cash agricultural loans, these farmers have
difficulty acquiring other production factors, including improved seeds. In addition, the existing offer
of agricultural credit is poorly suited to financing family farming, as these financing systems ignore
systemic realities. Moreover, the agricultural organizations that receive the loans are not in a position
to define the financing needs of their members.

4. Conclusion
The overall objective of this study is to analyze the impact of agricultural in kind and in-cash credit on the
agricultural performance of small farmers in Togo. Two impact estimation methods were used to estimate
the impact of credit on the agricultural productivity of the main cereal crops. The results show that overall,
the productivity of farmers who have access to credit is higher than that of farmers who do not. There is
therefore a positive and significant impact of in kind credit on the maize productivity of farmers who
receive credit. However, in kind credit has only a weak impact on the productivity of paddy rice and
sorghum. The impact of cash credit on cereal productivity is positive for sorghum and negative for maize
and paddy rice. The results also reveal a mismatch between the needs of small farmers and the supply of
input suppliers and financial institutions. These results are likely to encourage ongoing actions by the
FNFI for small farmers. Although this study does not confirm whether the expected gains in the
performance of small farmers have made it possible to offset government subsidy expenditures, the
results of this study indicate that for FNFI actions to be more effective, the agricultural credit supply must
address the systemic needs of financing family farms in order to reduce the diversion of cash loans and in
kind credit must be encouraged, particularly by pursuing the agricultural input subsidy policy.
 AGRICULTURAL CREDIT AND PRODUCTIVITY IN TOGO 15

Acknowledgments
This research was supported by an African Economic Research Consortium (AERC) grant (grant
numberRC16513). The authors acknowledge the members of the AERC research network who acted
as resources for their valuable comments at different stages of this study.

Supplementary material
Supplemental data for this article can be accessed here.

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