The impacts of microcredits : a case study from Kenyan agriculture

• Microcredits to agriculture have come into vogue in the past fifteen years and are frequently seen as an important way of increasing agricultural production in developing countries, but there has been surprisingly little research on what the effects on production actually are, or on what types of microlending work best. Inkind microcredits in the form of seelings, fertilizer etc., have the advantage of being directly tied to productive activities, but on the other hand they have the drawback of limiting the scope of choices available to the farmers taking the loans. In this paper, we estimate the respective impacts of cash and in-kind microcredits on milk and coffee production in a Kenyan farming region, and compare these effects to those that we estimate would have occurred if no microcredits had been available and if all microcredits had been in cash or in kind, respectively. We find that, in these two types of farming, cash credits boost production considerably more than in-kind lending does.

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