Use of financial diaries to understand smallholder investment finance - a cross country analysis in Mozambique, Tanzania and Pakistan
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Purpose: This paper evaluates the relative importance of different sources of finance for agricultural and non-agricultural investments using unique Smallholder Financial Diaries collected by CGAP in Mozambique, Pakistan, and Tanzania at the individual and household level.
Design/methodology/approach: Following the analytical framework of variance decomposition developed in Samphantharak and Townsend (2010), this study develops a method to quantify how much each cash deficit associated to investments and expenses of interest co-move with different financing sources.
Findings: This paper finds that self-finance, rather than formal or informal finance from external providers, is the main financing source for long-term and short -term smallholder agricultural investments. Further, the paper finds that the main source of self-finance varies depending on the economic opportunities faced by smallholders, with non-agricultural income as the dominant financing source for some, while agricultural income dominating for others.
Practical implications: These findings imply that financial inclusion policies specifically targeting smallholders and the agricultural sector would benefit from enabling the development of an ecosystem of diverse financial services that respond simultaneously to both agriculture and nonagriculture needs.
Originality/values: This paper furthers our knowledge on how smallholder households are financing their agricultural investments. Moreover, it develops a new methodology and uses it exploiting a unique data set.
|Author||María del Puerto Soria, Emilio Hernández and Riccardo Ciacci|
|Year of Publication||2019|
|Publisher||Food and Agriculture Organization of the United Nations (FAO), Rome, Italy; Consultative Group to Assist the Poor (CGAP), Washington D.C, United States of America; Universidad Loyola Andalucía, Seville, Spain|
|Number of Pages||29 pages|
|Region / Country||Global, Africa, Asia / Mozambique, Tanzania and Pakistan|
|Primary Language||English (en)|
|Keywords||smallholder investment finance, financial diaries, agricultural investments, non-agricultural investments, smallholders|