Gashaw Tadesse Abate

Impact of Agricultural Cooperatives on Smallholders’ Technical Efficiency: Evidence from Ethiopia

Using household survey data from Ethiopia, this paper evaluates the impact of agricultural cooperatives on smallholders’ technical efficiency. We utilize propensity score matching to compare the average difference in technical efficiency between cooperative farmers and similar independent farmers. The approach assumes exogenous cooperative formation and similar farm technology across households. The results show that agricultural cooperatives are effective in providing support services that significantly contribute to members’ technical efficiency. These results are found to be insensitive to hidden bias and consistent with the idea that agricultural cooperatives enhance members’ efficiency by easing access to productive inputs and facilitating extension linkages. Based on the findings, increased participation in agricultural cooperatives should further enhance efficiency gains among smallholder farmers.

Financial Sustainability and Outreach of Microfinance Institutions in Ethiopia: Does Organizational Form Matter?

Growing commercialization and competition in microfinance drives the focus of micro lenders from outreach per se to achieving financial sustainability in serving the poor. Such a goal can conflict with the traditional social mission of microfinance � outreach to the poor. In places where credit markets are inefficient, attaining financial sustainability while serving the poor depends largely on the ability of lenders to overcome the costs of market contracts and constraints. Such ability of cost containment often varies by lending terms and organizational forms. Using disaggregated data of microfinance providers in Ethiopia, we compared financial cooperatives and specialized or non-bank microfinance institutions on their outreach, financial performance and ability to achieve financial self-sufficiency together with outreach to the poor. The results show that nonbank microfinance providers perform relatively well in terms of breadth and depth of outreach, but face higher cost, which creates tension between outreach and financial sustainability. In contrast, there exists a positive complementarity between outreach and financial viability for financial cooperatives. On average, financially self-sufficient cooperatives lend small size loans and serve larger proportions of women borrowers, implying a greater depth of outreach together with achieving financial sustainability. While non-bank microfinance providers do better in expanding outreach, based on the findings, financial cooperatives better contain their costs, balance social and economic goals and enable the microfinance industry to fulfill its full promise �serving the poor on cost-covering basis.

HOW SHOULD RURAL FINANCIAL COOPERATIVES BE BEST ORGANIZED? EVIDENCE FROM ETHIOPIA: RURAL FINANCIAL COOPERATIVES IN ETHIOPIA

What is the optimal size and composition of Rural Financial Cooperatives (RFCs)? With this broad question in mind, we characterize alternative formation of RFCs and their implications in improving the access of rural households to financial services, including savings, credit, and insurance services. We find that some features of RFCs have varying implications for delivering various financial services. The size of RFCs is found to have a nonlinear relationship with the various financial services RFCs provide. We also show that compositional heterogeneity among members, including diversity in wealth, is associated with higher access to credit services, while this has little implication on households’ savings behavior. Similarly, social cohesion among members is strongly associated with higher access to financial services. These empirical descriptions suggest that the optimal size and composition of RFCs may vary across the domains of financial services they are designed to facilitate. This evidence provides suggestive insights on how to ensure financial inclusion among smallholders, a pressing agenda and priority of policy makers in developing countries, including Ethiopia. The results also provide some insights into rural microfinance operations which are striving to satisfy members’ demand for financial services.

The impact of the use of new technologies on farmers’ wheat yield in Ethiopia: evidence from a randomized control trial

Abstract In 2013, Ethiopias Agricultural Transformation Agency introduced the Wheat Initiative to increase smallholder productivity. In this article, we measure the impacts of the Wheat Initiative package of technologies, and its marketing assistance component alone, on yields among a promotional group of farmers. The package includes improved techniques, improved inputs, and a guaranteed market for the crop. Relying on crop‐cut measures and farmers’ own assessments, we find that full package led to an average 14% higher yields. Implementation of the Wheat Initiative was successful in making certified seed and fertilizer accessible to farmers and increasing their uptake, though only 61% of the intervention group adopted row planting and few farmers received marketing assistance. The measured yield difference may underestimate the true yield difference associated with the technology because of incomplete adoption of the recommended practices by intervention farmers and adoption of some practices by control farmers.

Cost Efficiency and Outreach of Microfinance Institutions in Ethiopia: Do They Contrast with Financial Cooperatives?

Using a stochastic frontier approach, we analyse the imposition of financial sustainability requirement on the traditional social mission of microfinance – outreach to the poor. We also address whether the way ownership is organised and practiced affects the costs of microfinance delivery. Based on a disaggregated 107 sample microfinance providers in Ethiopia, the results suggest that outreach to the poor and achieving financial sustainability (as measured by cost efficiency) are contradictory objectives. Microfinance providers that are closer to the best practicing cost frontier are those with higher average loan sizes and lower proportion of women borrowers. The results also indicate that financial cooperatives are better in cost containment compared to specialised microfinance institutions.

Financial Sustainability and Outreach of MFIs in Ethiopia: Does Ownership Form Matter?

The way ownership is organized and its effects on social and economic performance have been at the centre of policy discussions in microfinance (Mersland, 2009; Mersland and Strom, 2009). Over the last decades, shareholder-owned microfinance institutions have been promoted as an efficient ownership form over non-government and member-owned microfinance providers (Pischke, 1996; Armendariz and Morduch, 2010). Proponents of the financial systems approach, in particular, subscribe to policies that entail the transformation of nongovernment and member-owned microfinance institutions into shareholder firms (Christen, 2001; Fernando, 2004; Rhyne and Otero, 2006; Frank, 2008). The rationale is that private ownership in microfinance can act as an external control mechanism or corporate governance system that can curb excess costs and attract commercial funds and deposits, which may improve efficiency and expand outreach to the poor (Christen, 2001).