Development impact of agricultural finance

The 2009 EFSE Development Impact Study analysed the development impact of agricultural lending of EFSE’s partner institutions on end-borrowers, namely farmers, agro-processors and agro-traders, as well as EFSE’s role in promoting agricultural lending among its partner institutions.

In order to analyse the impact of agricultural loans on end-borrowers, a survey was conducted among a total of 480 end-borrowers from six EFSE partner institutions (banks and MFIs) in three countries (Albania, Kosovo and Moldova) and among a control group of 180 farmers who did not borrow from any formal financial institution in recent years.

The main findings can be summarised as follows:

  • Access to agricultural credit in the countries analysed has improved since EFSE started disbursing loans in the region: 45% of end-borrowers observed that access to credit has improved since January 2006
  • Access to agricultural credit triggered investments: 90% of end-borrowers expressed that they could not have made the investment without credit
  • Access to agricultural credit has had a significant impact on increased enterprise profits: 60 to 70% of end-borrowers perceived that their profit has increased thanks to the investment
  • Access to agricultural credit has increased the end-borrowers’ well being: more than one third of the respondents claimed that their capacity to pay for their children’s education and health services has improved, together with the quality and quantity of food consumption
  • Agricultural extension services have a positive impact on farm profit: the regression on change in profit shows a positive and statistically significant relationship between use of advice and increase in profits

Furthermore, it was concluded that EFSE has had a positive impact on the rural and agricultural orientation of its partner institutions through dialogue and technical assistance and that the absence of EFSE would probably have meant less credit for agriculture for MFIs, especially since MFIs in the region often cannot mobilise savings.

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