Guush Berhane

Does Microfinance Reduce Rural Poverty? Evidence Based on Household Panel Data from Northern Ethiopia

This paper evaluates the long-term impact of microfinance credit from the intensity of participation in borrowing. We use a four-round panel data set on 351 farm households that had access to microfinance in northern Ethiopia. Over the years 1997-2006, with three-year intervals, households are observed on key poverty indicators: improvements in annual consumption and housing improvements. The relatively long duration in the panel enables to measure household poverty changes between consecutive periods and see the long-run effects of exposure to microfinance from the intensity of participation borrowing. The fixed-effects model is innovatively modeled to account for potential selection biases due to both time-invariant and time-varying unobserved individual household heterogeneities. Results show that microfinance borrowing indeed causally increased consumption and housing improvements. A more flexible specification that allows for the number of times the household has been in borrowing also shows that repeated borrowing is effectively increasing consumption: the longer the borrowing relationship the larger the effect partly due to lasting credit effects. Impact estimates that do not account for such dynamic effects may therefore undermine the effect of MFI borrowing.

Gender Differences in Access to Extension Services and Agricultural Productivity

Abstract Purpose: This article contributes new empirical evidence and nuanced analysis on the gender difference in access to extension services and how this translates to observed differences in technology adoption and agricultural productivity. Approach: It looks at the case of Ethiopia, where substantial investments in the extension system have been made, but the coverage and effect of these investments on female and male producers are not well-understood. This article employs a cross-sectional instrumental-variable regression method using a regionally representative data set of more than 7500 households in four major regions in Ethiopia during the 2010 main season. Findings: Female heads of households and plot-managers are less likely to get extension services through various channels and less likely to access quality services than their male counterparts after controlling for other factors. Receiving advice from extension agents is positively related to adoption of improved seed and fertiliser for both female and male, as hypothesised. However, beyond their influence through fertiliser and improved seed use, visits by or advice from agents are not significant or negatively significant in all productivity models estimated for females and males, which is in contrast to past studies. In some crop-productivity models estimated, it is the perceived quality of agents’ visits and access to radio that appear to be positively significant factors in explaining productivity levels for both females and males. Practical implications: Results highlight the need for stratified productivity models by gender and crop in future research. In terms of policy implication, results highlight the need to focus on quality of service and alternative channels of information, such as radio, to improve productivity. Originality/value: This article utilises a large-sample data set; uses the instrumental-variable regression method to address selection bias and endogeneity issues in productivity models; and stratifies the analyses to account for differentiated production functions by gender and crop.

Can Social Protection Work in Africa? The Impact of Ethiopia’s Productive Safety Net Programme

This study evaluates a large social protection program in rural Ethiopia, the Productive Safety Net Programme (PSNP). The effectiveness of the PSNP is of interest because the program was implemented at scale in one of Africa’s poorest countries, which has limited physical and communications infrastructure and scarce administrative resources. Using longitudinal survey data collected in 2006, 2008, and 2010 at the household and locality levels, we employ an extension of the propensity score matching method to continuous treatments to estimate the impact of transfers from the PSNP and a separate program on household food security. Against the formidable background of rising food prices and widespread drought, participation in the Public Works component of the PSNP has modest effects. The PSNP reduced the length of the last hungry season by 1.29 months among households that received transfers for 5 years compared to eligible households that received almost nothing. Five years of participation raises livestock holdings by 0.38 tropical livestock units relative to receipt of payments in only 1 year. There is no evidence that the PSNP crowds out private transfers. The joint impact of access to the PSNP along with a program that helps households to increase agricultural income and build assets is even higher. Having both of these programs reduced the length of the last hungry season by 1.5 months per year and increased livestock holdings by 0.99 tropical livestock units.

Smartphone Platform Survey-Scale Heart Rate Collection: a Performance Evaluation in Ethiopia

Heart rate variability (HRV), a common method of assessing human autonomic status calculated from the heart beat over time, has traditionally been collected in laboratory based models unsuitable for mass or survey-scale collection. Here, we field-trial a solution for the collection of heart rate data, using a photoplethysmographic sensor via a smartphone platform in a pilot sample (n=679). Internal and test-retest reliability of the data over time is excellent, reproduces expected demographic relationships (age/gender vs. HRV) and compares favorably to existing experimental models. The system is suitable for future work in development economics, to assess cardiac / autonomic health in parallel with survey measures of economic development.

Social Networks and Factor Markets: Panel Data Evidence from Ethiopia

Abstract We investigate the role of an indigenous social network in Ethiopia, the iddir, in facilitating factor market transactions among smallholder farmers. We use detailed longitudinal household survey data and employ fixed effects estimation approaches to identify the effect of iddir membership on factor market transactions among farmers. We find that joining an iddir network improves households’ access to land, labour and credit transactions. Our findings also hint that iddir networks may crowd-out borrowing from local moneylenders (locally referred as ‘Arata Abedari’), a relatively expensive credit source. These results suggest that non-market institutions can play crucial roles in facilitating market transactions.

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.