In the second year of the evaluation, twenty villages from the comparison group who had not received loans in the previous year were provided either cash or maize loans (ten each). Additionally, 29 villages that received cash loans and 28 villages that received maize loans in year one did not receive loans during the second year of the study. This rotation was designed to measure the persistence of results for villages after just one year of receiving loans and isolate these effects from the impact of receiving loans both years.
Eligible villages were offered the loans at the start of the lean season in . Farmers had the option to repay ZK 260 in cash or with four bags of maize after harvest each year (in July), although farming households from a few villages were randomly selected to repay the loan in cash only. Researchers conducted follow-up surveys predominantly during the lean season each year to measure outcomes related to labor allocation, daily earnings, agricultural output, and food consumption.
Participation in the evaluation was voluntary and if farmers were unable to repay their loans, three attempts were made to request repayment, but no penalties were levied for defaults on the loans. Loan details, including size of the loans, interest rates and timing of both delivery and repayment, were designed through focus groups and vignettes that invited input from farmers in the study region.
Results and policy lessons
Overall, increasing access to credit during the lean season helped farming households allocate labor more efficiently, leading to improvements in productivity and well-being.
Take-up and repayment: Households had high demand for both cash and maize loans; 99 percent of farmers offered the loans took them up in the first year and 98 percent in the second year. Similarly, the repayment rate was 94 percent for both types of loans the first year, and 80 percent in the second. Researchers speculate that the decline in second year repayment rates may have been driven by volatile rainfall patterns and lower overall agricultural output in 2015.
Labor supply and wages: Households that had access to a loan in the first year were 4.8 percentage points (14 percent) less likely to do any casual, off-farm labor, and sold 1.14 fewer hours (a 24 percent decrease) of casual labor per week during the lean season on average. Household members also spent more time working in their own fields: family labor invested on the farm increased by about 4.9 additional hours (10.6 percent) per week, on average. As a result of the reduced supply of casual laborers and increase in hiring, daily wages increased by 17 to 19 percent in loan villages in year one.
Agricultural output: In villages with access to loans, farming households increased agricultural output by around 9 percent on average relative to households in comparison villages. The impact on agricultural output was substantially larger in the first year of the program when the rains were good. Researchers suggest that the reallocation of family labor, from casual labor to the family farm, contributed to most of the increase in agricultural output and harvest value several months later. Households that had the fewest resources and reported high interest rates before the program had the largest increases in agricultural output after the first year of receiving loans.
High take-up and repayment suggest that farmers were not only interested in seasonal loans, but were also willing and generally able to repay them with interest
Food consumption: When offered food or cash loans, households had a 5 percent increase in the number of months with adequate food, experienced an improvement of 0.3 standard deviations in an index of households’ perceived food security (whether they were worried about food or felt that they had enough food during the hungry season) , and consumed more meals relative to the comparison group. Further, there was no effect of loan access on consumption outcomes at harvest. This lack of consumption effect in the harvest period, along with the increase in food consumption during the hungry season indicates an overall increase in consumption and reduction in consumption seasonality. Households with the fewest resources at baseline experienced https://www.paydayloansohio.net/cities/waterford/ the largest increase in food consumption.