Inventory Credit Research Articles

Inventory credit, a system to improve food security in sub-Saharan Africa

Inventory credit is being developed in several Sahelian countries. This device is implemented by a farmers’ organisation and a financial institution. It consists in storing a portion of harvested grain in a warehouse for several months in exchange for an individual loan. Without this loan, farmers tend to sell their grain immediately after harvesting in order to pay off their debts or to meet their needs. The consequence is that families subsequently struggle to get through the lean season – the transition period between the depletion of food stocks and the new harvest – and to invest in their agricultural production systems. An impact assessment study conducted in western Burkina Faso shows that inventory credit increases food availability in the lean season and boosts agricultural investment and production. To accelerate its development, three conditions must be met: providing access to suitable storage facilities; ensuring the quality of products stored; and building trust between financial institutions, producers’ organisations and traders. The latter condition is undermined by the expansion of armed conflicts in the Sahel.

Inventory credit to enhance food security in Burkina Faso

In many African countries, rural households typically sell their crops immediately after the harvest, and then face severe food shortages during the lean season. This paper explores whether alleviating both credit and storage constraints through an inventory credit (or warrantage) program is associated with improvements in household livelihood. We partnered with a rural bank and a nation-wide organization of farmers to evaluate a warrantage program in seventeen villages in Burkina Faso. In randomly chosen treatment villages, households were offered a loan in exchange for storing a portion of their harvest as a physical collateral in one of the newly-built warehouses of the program. We found that the program has, on average, increased cultivated area in treated villages (mainly cotton and maize), fertilizer use, cattle and grain stock at the end of lean season (millet). Although much less robust, the results of the estimations concerning the direct users of the system further suggest that warrantage may have extended the self-subsistence period of about two weeks and increased dietary diversity, with more fruit consumed weekly.

Locking crops to unlock investment: Experimental evidence on warrantage in Burkina Faso

Warrantage is an innovative model of rural finance with the potential to overcome credit, crop storage, and behavioral constraints through a localized inventory credit system. Using a randomized controlled trial varying household level access to warrantage, we measure its impacts among households interested in participating. Among treated households, take-up of storage is high, while credit take-up is moderate. Treated households primarily store grains sell their production over an extended period, at a time when prices are higher resulting in higher sales revenue. Increased incomes are spent on long-term investments, including education, livestock, and agricultural inputs for the subsequent year.

Microfinance services for smallholder farmers: an assessment from rice farmers\u2019 expectations in Central Benin

This study analyzed the adequacy between credit supply and the expectations of rice farmers in Central Benin to define policies for improved agricultural-oriented financial services. A survey was conducted in October 2016 among 120 rice farmers randomly selected from six rice-farming villages. Data collected through structured and semi-structured interviews included the financial services offered by Microfinance Institutions, socio-demographic characteristics of rice farmers, their expectations and perception. Multivariate analysis combining hierarchical ascending cluster analysis and principal component analysis (PCA) was used to define the distinct groups of rice farmers according to their credit expectations. The unmet expectations of rice farmers for a credit scheme that suits their needs were identified based on the gaps between their expectations and perception. There were three rice farmers’ clusters with distinct characteristics based on their expectations. These farmers were not satisfied with all the attributes of the current credit scheme. Pending the effectiveness of the agricultural bank, the approaches such as the inventory credit system are useful in facilitating credit access to smallholder farmers. It is also essential to combine credit supply with financial education and technical support in a system such as contract farming.

The Supplier-retailer Optimal Replenishment Decisions Under a Two-level Trade Credit Model with Shortage for Deteriorating Items

This paper establishes an integrated inventory model of a supplier and a manufacturer under a two-level trade credit contract. The manufacturer's inventory model follows the economic production quantity model and the produced items follow exponentially deterioration rate and price-dependent demand. Shortages are allowed for the manufacturer and are completely backlogged to the next period. Traditional inventory system and one-level trade credit are also concluded as special cases of the developed two-level trade credit model and the supply chain performance under these three policies are compared. The formulated models aim at helping the supply chain decision makers to determine the best delay strategy and find the optimal values for replenishment policy and the manufacturer's selling price in order to maximise the supply chain total net profit. The results have been then validated with a numerical example and the effect of various parameters on the optimal solution is finally studied by performing sensitivity analysis.

Inventory Credit as a Commitment Device to Save Grain Until the Hunger Season

AbstractIn January 2013, we collected data from 653 farmers in Burkina Faso, who were asked hypothetical questions about risk aversion and time discounting. Ten months later, these farmers were offered the opportunity to participate in an inventory credit system, also called warrantage, in which they receive a loan in exchange for storing a portion of their harvest as a physical guarantee in one of the newly‐built warehouses of the program. We found that a significant number of farmers chose to store grain in the warehouse without taking the maximum amount allowed for a loan in return, and that farmers who exhibit a stronger present bias were significantly more likely to participate in the warrantage system than other, otherwise similar, farmers. We interpret these results as evidence that farmers use warrantage as a means to commit to saving a portion of their crop until the lean season. These results are in line with the main predictions of our theoretical model, which explicitly takes the hyperbolic nature of farmers' time preferences into account.

Mineral fertilisation by microdose: Incentives for widespread adoption in Burkina Faso

Mineral fertilisation by microdosing has been tested in Burkina Faso since 2000 to increase the agricultural productivity of small farmers. In order to identify the determinants of its adoption, data were collected from a random sample of 180 women and 440 men in the provinces of Zondoma and Kourittenga in Burkina Faso; where the innovation was disseminated. The results of the Logit model showed that the determinants of adoption varied according to gender and production area. In Kourittenga, warrantage (inventory credit system) system determined the choice by women, whereas that by men depended on warrantage and dissemination tools. In Zondoma, in addition to access to information on mineral fertilisation by microdosing on which the choices of each type of farmer were dependent, education level and belonging to a farmer organisation determined the choice of men and women, respectively. These results challenged policy decision makers to strengthen socio-economic and institutional capacities for effective adoption of mineral fertilisation microdosing technique in order to sustainably improve the food situation of Sahelian small farmers. Key words: Gender, semi-arid, women

English

It is widely believed that limited access of small scale farmers to agricultural credit is one of the key causes of rural poverty and a major constraint to adoption of innovations in Sub-Saharan Africa. Since the early 1960s, many strategies to access agricultural credits have been implemented with success. This study assessed the effects of warrantage, a community-based micro credit system, on poor small resource farmers’ income and livelihoods of the semi-arid area of Burkina Faso. Two broad socio economic surveys were conducted among 1040 farmers and 440 household heads. Data were collected from 58 inventory credit warehouses and 36 input shops established in the study areas. The results showed that the warrantage system is dominated by women farmers (who produce 60% of the stored harvests) and appears as the main source of agricultural credit. The profit (up to 140%) provided allows farmers to purchase external inputs such as inorganic fertilizers. This resulted in higher crop productivity and a substantial increase of farmers’ income which in turn improve farmers’ livelihood. Key words: Inventory credit system, mineral fertilizer, staple crop production, small farmers.

Selling Strategy Selection Considering Both the Way of Payment and Inventory Limitation

In view of the facts that firms can sell their products on either cash or credit, and they may either meet all buyers' demand or only parts of that by setting an inventory limitation, four selling strategies are investigated in this paper: (i) cash sale without inventory limitation, (ii) cash sale with inventory limitation, (iii) credit sale without inventory limitation, and (iv) credit sale with inventory limitation. By comparing these four strategies, a number of interesting observations can be drawn. First, as to the election of the way of payment, it reveals that credit sale always dominates cash sale as long as the inventory level settings are the same. In particular, and contrary to our intuition, it shows that under the case of credit sale with inventory limitation, the firm may sometimes choose not to serve the low-quality buyers even though it's profitable, and choose to serve them under some other circumstances although it would incur a loss, which are mainly due to the incentive effects by doing so. Second, with regard to the selection of the setting of the inventory level, it demonstrates that if the products are sold on cash, not setting inventory limitation will always bring more profits for the firm than setting one; whereas if the products are sold on credit, instead, setting inventory limitation may outperform not setting one under certain conditions, depending critically on the relationship between the expected profit from selling to the low-quality buyers and the salvage value of the unsold products. Third, when taking both the way of payment and inventory level setting into consideration, it turns out that cash sale with inventory limitation should be used only as a last resort. Nevertheless, the relationship between cash sale without inventory limitation and credit sale with inventory limitation is uncertain, mainly because the inventory limitation and the way of payment are inextricably linked in the presence of moral hazard of the sales agent. In the end, the other two types of compensation contracts --- backed-receivables and reward-penalty pooling contracts --- are also examined. And we find that the optimal selling strategy remains unchanged, which verifies the robustness of the insights.

Introducing new agricultural technologies and marketing strategies: A means for increasing income and nutrition of farm households in Ethiopia

Many developing regions have excellent potential agricultural resources. However, historically, the population has become so concentrated in these regions that acute poverty and malnutrition now predominate. The food scientists’ response to the chronic nutrition problem has often been subsidized by bio-fortification with nutrition supplements or more recently cultivars with higher nutrient levels. Where much of the population is in this inadequate nutrition category as in the highland of Ethiopia, the supplements are neither financially feasible nor sustainable. The cultivars can provide a few critical nutrients but are not a comprehensive solution. To improve nutrition, it is necessary to increase income so that an increased quality and quantitative diet can be obtained. Here, a strategy to introduce Striga resistant sorghum varieties, inorganic fertilizers, tied ridges and inventory credit in the Qobo valley of Ethiopia is evaluated. Using the behavioralist criteria defined by the farmers as constraints, a mathematical programming model is built to analyze the effects of different potential combinations of technologies and supporting agricultural policies on the household nutritional gaps and on farmers’ incomes. Striga resistance alone has little effect unless combined with fertilization, water harvesting and an improved credit program. The credit program improvement involves the substitution of inventory credit for the existing input credits that are repayable at harvest. Inventory credit enables the farmer to take advantage of the seasonal price variation and repay after the prices have recovered from the usual price collapse at harvest. An integrated approach, involving the combined technologies of water harvesting, fertilization and Striga resistance along with inventory credit increases farm household income by 31% and eliminates under-nutrition except in extreme drought years (10% probability), during which public assistance will be still needed. Both the treatment of the nutritional deficits and the decision making criteria defined by farmers are expected to be useful techniques in other developing country technology analysis as well.

Моделирование факторинга в банковском секторе экономики

Авторы: Елена Юрьевна Макеева НИУ ВШЭ len-makeeva@yandex.ru
 Константин Георгиевич Марков НИУ ВШЭ
 Факторинг является альтернативой развитию товарного кредита ввиду наличия у него серьезных преимуществ: отсутствия необходимости инвестирования поставщиком значительных денежных средств в дебиторскую задолженность, решения организационных вопросов применения технологий продаж в кредит и т.д. Факторинговое обслуживание по темпам роста занимает лидирующие позиции среди наиболее стремительно и динамично развивающихся секторов финансовой индустрии. За последнее десятилетие количество факторинговых компаний в мире увеличилось в 3,4 раза, а их совокупный оборот – в 3,6 раза. В статье рассматриваются вопросы развития форм, методов и сфер использования факторинга как одного из важнейших инструментов современного финансового менеджмента. Использование факторинга актуально и для Российской экономики, поскольку способствует повышению ликвидности отечественных предприятий за счет снижения дебиторской задолженности, а также ликвидации неплатежей.

Targeting rural development interventions: Empirical agent-based modeling in Nigerien villages

The aim of this article is to analyze the impact of development interventions on the population of three Nigerien villages that differ in terms of their agro-ecological, social and economic characteristics. This is performed by simulating the behavior of individuals in an agent-based modeling framework which integrates the village characteristics as well as the family internal rules that condition access to economic and production activities. Villagers are differentiated according to the social and agro-ecological constraints they are subjected to. Two development project interventions are simulated, assuming no land scarcity: increasing the availability of inorganic fertilizers for farmers and an inventory credit technique based on millet grain. Two distinct approaches were used to model the rationale of farmers’ decision making: gains or losses in economic value or gains or losses in within-village “reputation”. Our results show that village populations do not respond en masse to development interventions. Reputation has little effect on the population behavior and should be considered more as a local proxy for wealth amongst villagers, suggesting the monetization of these societies. Populations involve themselves in the two simulated development interventions only at sites where savings are possible. Some level of household food security and investment capacity is actually required to take part in the development interventions, which are largely conditioned by family manpower and size. As long as uncultivated land remains available in the village territory, support for inorganic fertilizers has little impact in the absence of any intensification process. Inventory credit engages a maximum of 25% of the population at the site with medium agro-ecological conditions. Therefore, both interventions should be viewed as a potential support tool for a limited part of the population capable of going beyond the survival level, but not as a generic poverty-alleviation panacea.

Outreach and sustainability of inventory credit programme in Ghana

The study examined the outreach and sustainability of the inventory credit programme (ICP) in Ghana using both qualitative and quantitative data between 1996 and 2003. The findings revealed that the outreach of the ICP reached the poor with a depth of 25-47% (nationwide) measured in terms of loan size/GNP per capita. The outreach measured in terms of percentage of female clients served was initially 20%, but fairly increased to 59% over the study period. However, a comparative analysis with two successful MFIs in Ghana and standardized performance benchmarks indicate that the ICP did not perform well in reaching the very poor. The results of the financial performance indicate that the ICP was operationally and financially sustainable. Further, the study showed that the ICP had high loan recovery rate which underlies its profitability. However, the ICP operated with a low efficiency measured in terms of adjusted operational expenses ratio. Based on these findings the study concludes that there is a trade-off between outreach to the poorest and a financial sustainability of the ICP which can be mitigated by the enhanced credit allocation through lower cost structures.

Introducing inventory credit into Nigerien agriculture: improving technology diffusion

A critical component of agriculture in developing countries is increasing soil fertility in response to depleted soils and declining crop yields. An inventory credit program was introduced in western Niger to generate savings for farmers’ groups to facilitate the purchase of inorganic fertilizers. This program is compared with a more traditional inventory credit program, which provides credit at harvest but lets farmers sell their grain in the post‐harvest period after grain prices have recovered. The evaluation of the two programs for their impacts on farmers’ incomes and farm‐level technology adoption is undertaken with a linear programming model. The decision‐making framework of this model comes from interviews of farmers in a number of African countries. Farmers are found to be risk averse, but exhibit a different type of decision making than the usual expected income‐income variability tradeoff.

Emporium of glamour and sanctum of scientific management

The early decades of the twentieth century witnessed a significant transformation in managerial control practices within the US department store. New principles of scientific management, already employed on the factory floor, were now implemented on the retail “shop floor”. The purpose of this paper is to provide insights into this transition by examining three such scientific management initiatives introduced by store management during this era. The paper draws on a number of sources in its historical examination of early department store scientific management initiatives. These include archival records, published literature of the era, and particularly the proceedings of meetings of the annual Controllers Congress of the National Retail Dry Goods Association (US). The paper finds how notions of the rationality of science reined over such store operations as inventory valuation, credit control and overhead expense allocation. Traditional positions of power were recast and new managerial roles created in the name of science. The paper illustrates the insights that can be gained from an examination of scientific management practices in an alternative arena to the factory floor. Further historical research in the area of retail management may prove productive not only for our understanding of this site but also our knowledge of the process by which new managerial initiatives become assimilated. The study of the managerial practices of such vast organizational forms proves fruitful not only for the history scholar. Given the centrality of the department store in the creation of a contemporary culture of consumption, such examination becomes all the more insightful.

The role of warehouse receipt systems in enhanced commodity marketing and rural livelihoods in Africa

Most African countries have, since the 1980s, liberalised agriculture without experiencing food crisis, as feared by sceptics, but the outcome of reforms has been rather disappointing and agricultural markets remain underdeveloped and inefficient. One means to improve agricultural marketing, which is the focus of this paper, is to develop regulated warehouse receipt (WR) systems. The system will curtail cheating on weights and measures; ease access to finance at all levels in the marketing chain; moderate seasonal price variability and promote instruments to mitigate price risks. It will also reduce the need for the Government to intervene in agricultural markets, and reduce the cost of such interventions if needed. The major problem in establishing WR systems in Africa is disabling elements in the policy environment. Drawing on experience from projects implemented in Africa during the last decade 1 1 The authors learnt the valuable lessons discussed in the article through their involvement in: (a) two DFID-funded research projects, from 1992 onwards; (b) DFID-funded monitoring of the implementation of a pilot inventory credit project in Ghana (1993–97), and: (c) the Common Fund for Commodities (CFC) project in Ethiopia, Ghana and Zambia (since 2000). The Zambia component of the CFC project, which is extensively discussed in the paper, has attracted co-financing from the Dutch Government, USAID (initially through the ZATAC, the Zambian Agribusiness Technical Assistance Centre), DFID, IFAD (through the SHEMP project) and the United States Department of Agriculture (USDA). USDA provided its support ‘in kind’, sending an experienced commodity marketing specialist to work with the team. The views expressed are exclusively those of authors and neither represent nor are endorsed in any way by the above-mentioned funding agencies. CFC reserves the exclusive right to the publication, in whatever form, of the results and technical outputs of the Project it has funded. , the authors outline how this challenge can be addressed, the most crucial being to build strong stakeholder support behind the initiative.

Accounting Methods and Differential Stock Market Response to the Announcement of Earnings

The objective of this study is to assess the extent to which previously documented cross-sectional differences in stock market responses to earnings announcements are associated with firms' in-place voluntary accounting method choices. The possibility that managers may manage reported earnings via the choice of accounting policies provides a motivation for the study. Some conjectures about differences in “noise” in earnings signals generated under alternative accounting methods are developed and tested by estimating firm-specific earnings response coefficients. Both individual method choices (e.g., LIFO versus FIFO) and accounting method portfolios (conservative versus liberal sets of depreciation, inventory, and investment tax credit accounting alternatives) are examined. Overall there is little empirical support for the proposition that voluntary accounting method choices have a pervasive first-order effect on stock market reactions to earnings announcements.

The Ex Ante Information Content of Accounting Information Systems

This study examines the effect of the particular set of accounting methods used by a firm (its information system) on the ex ante information content of its earnings announcements. The results suggest that reported income figures produced from a system consisting of inventory, depreciation, and tax credit accounting methods which are consistent in their effects on net income are more informative than when those effects are inconsistent. Informativeness of an earnings announcement is estimated by the expected increased variability in share prices at the earnings announcement date, using the option-pricing methodology introduced by Patell and Wolfson [1979; 1981]. An accounting information system can be defined by the product of managers' choices with respect to alternative methods of accounting for various items (Demski [1972]). For example, managements can choose between last-in, first-out (LIFO) and first-in, first-out (FIFO) for determining the cost of inventory; between straight-line (SL) and accelerated (ACC) to account for depreciation; and between deferral (DEF) and flowthrough (FT) to account for the investment tax credit. The collective choice from alternative methods constitutes a firm's accounting information system (e.g., LIFO-ACC-FT). Prior research has indicated that annual and interim accounting reports are informative.' There have also been attempts to assess the * Oklahoma State University. I wish to acknowledge the support of Professors T. Williams, W. Frank, R. D. Nair, J. Hickman, and W. Taylor in the completion of the dissertation on which this article is based. The comments of J. Boatsman, N. Dopuch, K. Schipper, R. Leftwich, the participants of the accounting workshop at Oklahoma State University, and anonymous referees are appreciated. 1 Beaver [1968], May [1971], and Gonedes [1974], for example.

Ruin Considerations: Optimal Working Capital and Capital Structure

At any point in time a firm must decide both the level of working capital consistent with its productive assets and how to finance these assets. Academic theorists in business administration have traditionally approached decision making of the firm on a segmented rather than on a global basis and have been satisfied with developing suboptimizing decision rules. Thus there has been concern about managing working capital and concern about choosing the optimum capital structure, but traditionally the two decisions have not been made jointly. And even if they were made jointly, decisions would still remain in the working capital area involving inventories, credit granting, and marketable securities. This article is an attempt to interrelate working capital and capital structure decisions with working capital used not only as a buffer to avoid ruin but also to affect sales via changing inventory levels and credit policies. The possibility of ruin introduces a discontinuity that precludes perfect elimination of leverage effects via a market. In this article the acquired working capital serves as a buffer against ruin, as well as a means of increasing earnings, while the debt used to finance the working capital increases the size of the fixed payment obligations, and the cost of debt tends to reduce the total earnings of stockholders.

Financing Business and Consumer Needs Without Inflation

"Needs" for short-run inventory credit formed the basis of a particular school of thought regarding monetary policy early in the nineteenth century in England, and this phi losophy imbued the Federal Reserve in the United States at its inception. In the early 1930's, a swing of the pendulum in the opposite direction brought into dominance the Quantity Theory, which denied any relevance of business and consumer needs to desirable credit policy. The state was supreme in these matters and could, through appropriate central bank op eration, control the quantity and availability of bank credit and hence—it was thought—the evolution of prices and production. Nowadays the position is less simple. Nonbank financial or ganizations and firms can create near moneys, and the needs of producers for credit may be satisfied outside the banking sys tem. This may reduce the efficacy of Federal Reserve control of inflation; but the control exercised by the Federal Reserve over money may be sufficient to master the situation in all money and credit markets. On the other hand, effective control of inflation does in fact seem to be jeopardized by monopoly pricing by industries and by labor unions; a "need" for money is thus created which is not easily denied by the monetary authority. Some types of direct control of monopoly practices may become unavoidable.