Abstract
By recognizing the gap in the literature in examining the effects of financial resources and development outcomes at the household level, this paper examines whether the poorest income quintile would benefit most from programs aimed at increasing their access to financial services in rural northern Nigeria. Most households from this part of the world consist of farmers and, hence, are exposed to the vagaries of climate change. The data from 320 questionnaires administered in two rural communities (Rijau and Fakai) were analyzed using an ordered logit regression model. The results showed that access to financial services by using formal financial institutions and farmer savings clubs benefits vulnerable farmers (mostly women). The robustness check using the Brant test also confirmed that the parallel regression assumption of the model was not violated. A policy scenario that seeks to increase the delivery of financial services to rural farm households using community savings clubs and microfinance institution reforms for reaching the financially underserved was also found to benefit the poorest income quintile, hence, bringing them out of poverty.
Highlights
The vulnerability of farmers in Sub Saharan Africa to the adverse effects of climate change has been recognized by several studies (IPCC 2007, 2012, Boko et al 2007, World Bank 2008, 2012)
The financial innovations aimed at increasing the access of farmers to financial services as an adaptive strategy have been identified by several studies
The objectives of this study are: (1) to examine the effect of financial inclusive strategies on rural farm households distributed along income quintiles and (2) to determine whether the poorest income quintile would benefit the most from innovative strategies that are aimed at increasing the access to financial services as a climate change adaptation measure
Summary
The vulnerability of farmers in Sub Saharan Africa to the adverse effects of climate change has been recognized by several studies (IPCC 2007, 2012, Boko et al 2007, World Bank 2008, 2012). The financial innovations aimed at increasing the access of farmers to financial services as an adaptive strategy have been identified by several studies (see Siegel and Alwang 2005, Schneider and Gugerty 2011, Sanfo and Gérard 2012, World Bank 2012). The agriculture in West Africa is largely rain-fed, vulnerable to flood and drought. Climate risk management strategies are useful for minimizing risk and taming vulnerabilities (Vargas-Hill and Torrero 2009), financial markets (both insurance and credit markets) in West Africa are often underdeveloped, with over 80% of the population being financially excluded. The high demands for collateral by banks, lack of capacity to develop appropriate credit instruments for agriculture, high perceived risks of lending (2018) 4:25 to this sector, and general aversion of banks toward agriculture have led to the under-capitalization of the agricultural sector
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