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Agricultural loans in Benin

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In Benin, as elsewhere in Africa, improving agricultural productivity is a priority for economic transformation and for food security, especially since annual population growth in Benin is higher than overall agricultural growth per year. Innovations offered by financial services providers who are relaxing smallholder farmers’ credit constraints have led to promising results.  

This study, titled, ‘Irrigation technology adoption and microfinance in rural Benin: RENACA’s agricultural loan program’ shows that farmers in rural Benin find it difficult to access finance to improve agricultural productivity. Although 70% of respondents are financially included via microfinance, banking or mobile money, most (60%) have never accessed a formal loan, and only 16% have received an agriculture loan. RENACA (Réseau National des Caisses d’Epargne et de Crédit Autogérées) is contributing to financial inclusion. Thanks to its comprehensive product, which combines working capital and investment assets, the institution is close to farmers‘ needs. In fact, surveyed farmers recognized that access to credit to finance non-machinery inputs (fertilizers, seeds) is as important as access to capital for investment in irrigation equipment. Lack of collateral reduces the ability of farmers to access finance and to invest. Farmers who rent or borrow land indicated a lower willingness to invest in their activities and adopt advanced technologies, including irrigation equipment. Instead, they invest in transport. This allows them to get perishable products to markets in time but does not improve productivity in the long run.

The study was part of a joint program run by the European Investment Bank and the Global Development Network, initiated in 2016, that deployed African researchers to assess the development impacts of the EIB’s work in African and Caribbean countries, allowing the bank to enhance its contribution to sustainable and inclusive development while simultaneously enhancing local research and evaluative capacity.

Name of the Asset | The impact of private sector projects in Africa Studies from the EIB-GDN Program (Study from Cycle I: Irrigation technology adoption and microfinance in rural Benin: RENACA’s agricultural loan program)

Type of Asset | Paper in the Volume: The impact of private sector projects in Africa: Studies from the EIB-GDN Program (Cycle 1).

Date | 2019

Authors | Mariam Sangare and Bassirou

Country and/or Region | Africa, The Caribbean and The Pacific (ACP) countries

Name of the Program | EIB-GDN Program in Applied Development Finance

Download the Full Report | Cycle I