The nexus between credit rationing and the adoption of climate-smart agricultural practices: Implications for agricultural household revenue in Togo

This paper analyzes the effect of credit rationing on the adoption of climate-smart agriculture practices (CSAPs) in Togo . Additionally, it examines the impacts of credit rationing and the adoption of CSAPs on agricultural households’ revenue in Togo . Using a multivariate Probit model and endogenous-switching regression method, we analyze data from the Harmonized Survey on Household Living Conditions. We distinguish between two types of credit rationing: Type 1, where households require credit but do not apply for it, and Type 2, where applications are made but credit is denied. The results indicate that credit rationing significantly impedes the adoption of CSAPs and reduces household income. Type 1 rationing results in a decrease of USD 14.86 in farm income, while Type 2 rationing leads to a reduction of USD 436.64. Conversely, adopting improved seed and organic fertilizer increases household income by USD 46.76 and USD 119.34, respectively, while intercropping reduces income by USD 83.82 per hectare. Households experiencing Type 2 rationing are more likely to use organic fertilizers, while Type 1 households are more inclined to adopt organic fertilizers and intercropping. The likelihood of adopting CSAPs is higher among households with land ownership , membership in associations, and access to markets. The complementary relationship between organic fertilizers and intercropping suggests that these practices can enhance agricultural productivity . These findings highlight the need for public policies aimed at improving credit access for agricultural households, which would facilitate CSAPs adoption and income growth. Furthermore, the private sector should develop tailored financial products for farmers. Policies should also expand extension services to support the effective implementation of CSAPs, integrating resilient traditional practices.