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Smallholder preferences and willingness-to-pay measures for microcredit

Smallholder preferences and willingness-to-pay measures for microcredit The purpose of this paper is to examine smallholders’ preferences and willingness to pay for microcredit products with varying attribute combinations, in order to contribute to the debate on the optimal design of rural microcredit.Design/methodology/approachData used in this study are based on a discrete choice experiment from 552 randomly selected respondents. Mixed logit and latent class models are estimated to examine the choice probability and sources of preference heterogeneity. Endogenous attribute attendance models are applied to account for attribute non-attendance (ANA) phenomenon, focusing on separate non-attendance probability as well as joint non-attendance probability.FindingsThe results demonstrate that preference heterogeneity and ANA exist in the smallholder farmers’ microcredit choices. Averagely, smallholder farmers prefer longer credit period, smaller credit size, lower transaction costs and lower interest rate. Guarantor collateral method and installment repayment positively affect their preferences as well. Moreover, respondents are found to be willing to pay more for the attributes they consider important. The microcredit providers are able to attract new customers under the current interest rates, if the combination of attributes is appropriately adjusted.Originality/valueThis study contributes to the debate by assessing the preference trade-off of different microcredit attributes more comprehensively than in previous analyses, by taking preference heterogeneity and ANA into account. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png China Agricultural Economic Review Emerald Publishing

Smallholder preferences and willingness-to-pay measures for microcredit

Ding, Zhao; Abdulai, Awudu
China Agricultural Economic Review , Volume 10 (3): 20 – Aug 22, 2018
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References (62)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1756-137X
DOI
10.1108/caer-02-2017-0022
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is to examine smallholders’ preferences and willingness to pay for microcredit products with varying attribute combinations, in order to contribute to the debate on the optimal design of rural microcredit.Design/methodology/approachData used in this study are based on a discrete choice experiment from 552 randomly selected respondents. Mixed logit and latent class models are estimated to examine the choice probability and sources of preference heterogeneity. Endogenous attribute attendance models are applied to account for attribute non-attendance (ANA) phenomenon, focusing on separate non-attendance probability as well as joint non-attendance probability.FindingsThe results demonstrate that preference heterogeneity and ANA exist in the smallholder farmers’ microcredit choices. Averagely, smallholder farmers prefer longer credit period, smaller credit size, lower transaction costs and lower interest rate. Guarantor collateral method and installment repayment positively affect their preferences as well. Moreover, respondents are found to be willing to pay more for the attributes they consider important. The microcredit providers are able to attract new customers under the current interest rates, if the combination of attributes is appropriately adjusted.Originality/valueThis study contributes to the debate by assessing the preference trade-off of different microcredit attributes more comprehensively than in previous analyses, by taking preference heterogeneity and ANA into account.

Journal

China Agricultural Economic Review – Emerald Publishing

Published: Aug 22, 2018

Keywords: Willingness-to-pay; Microcredit; Mixed logit; Attribute non-attendance; China

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