Smallholder preferences and willingness-to-pay measures for microcredit

Abstract

Purpose -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/approach -Data 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.Findings -The 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/value -This 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.

Modelling smallholder farmers’ preferences for soil fertility management technologies in Benin: A stated preference approach

“…In addition, more recent studies have revealed that respondents participating in discrete choice experiences often ignore certain attributes in their decision-making process (called ANA). Resulting biases in modelling occur when these aspects are not taken into account [ 28 , 38 , 39 ]. Two approaches were proposed to account for the ANA.…”

“…Stated ANA is an experimental approach, which consists of asking the respondent to answer specific questions about the attribute ignored during decision-making [ 24 ]. Inferred ANA is an econometric approach that provides a better fit for the model, while the stated ANA is not consistent[ 27 , 28 ]. First, the fact that respondents attribute low importance to certain attributes, which could be ignored at the beginning of their choices, leads to overestimation [ 28 ].…”

“…Inferred ANA is an econometric approach that provides a better fit for the model, while the stated ANA is not consistent[ 27 , 28 ]. First, the fact that respondents attribute low importance to certain attributes, which could be ignored at the beginning of their choices, leads to overestimation [ 28 ]. In addition, the answers to questions relating to the ignored attributes can be a source of potential problems regarding endogeneity bias [ 27 ].…”

“…In the EAA model, each choice is considered a two-step process in which the decision maker first decides which attributes to take into account when comparing profiles. Then, he selects the profile with the best characteristics, taking into account his individual characteristics [28,38]. Thus, the formulation of the basic logit of EAA is presented as follows:…”

“…This choice of modelling highlights the expectations of different classes of producers and their willingness to adopt for attributes. The attribute non-attendance (ANA) was particularly taken into account by using the endogenous attribute attendance econometric model (EAA), which constitutes progress compared with previous experimentation studies on choice [ 27 , 28 ]. In addition, the present study was carried out following the new conformation of the agricultural sector.…”