Abstract
AbstractPrevious studies highlight the limited credit access for farmers compared to non-agricultural firms in sub-Saharan Africa. A new innovation that has the potential to serve the financing needs of farmers in sub-Saharan Africa is digital credit. However, empirical studies on farmers’ preferences for digital credit are limited. Formal financial institutions and mobile network operators are two different delivery channels for digital credit with different loan characteristics. We apply a discrete choice experiment to investigate smallholder farmers’ preferences for digital credit in Madagascar. Our results show that digital credit is more attractive for farmers if it offers a lower interest rate per month, longer loan duration, and flexible repayment conditions adapted to farmers’ production needs. Our results highlight the potential of digital credit for rural farmers if mobile network operators could provide digital credit with longer loan maturities, and formal financial institutions could offer digital credit with more flexible repayment conditions.
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