@article{Owuor:126624,
      recid = {126624},
      author = {Owuor, George and Shem, A.O.},
      title = {Informal Credit and Factor Productivity in Africa: Does  Informal Credit Matter?},
      address = {2012},
      number = {1007-2016-79559},
      pages = {12},
      year = {2012},
      abstract = {It is widely documented that credit is an important  instrument among resource poor farmers in
developing  economies. However, accessing loans from formal credit  institutions has proved almost
impossible for small and  resource poor farmers leading to reliance on the least  regulated informal
credit sources such as the Grameen type  institutions (Micro-Finance Institutions-MFIs) that  peg
lending to memberships in social networks such as  groups. In spite of the growing preference to this
type of  lending, very little is known on their contribution among  farm related productive activities in
Kenya. This paper  attempts to illuminate the role of lending via groups on  economic performance of
smallholder farmers via changes in  purchased factor use between borrowers and non-borrowers.  We
employ endogenous switching regime approach  (accomplished via heckman selection correction
model) on a  sample of 401 respondents made up of 180 borrowers and 221  non-borrowers from two
districts in Kenya. Results show  significant effects of group based lending on production  via
improved factors such as fertilizer, planting materials  and crop chemicals, as well as on investment
in non-farm  businesses, hired labour, and in renting in more land.  However, descriptive results
indicate high fungibility of  this type of credit, with over 20% use on non-productive  activities, which
infringe on expected output effects.  Supervision and or issuing of credit in form of inputs  could
generate expected impact.},
      url = {http://ageconsearch.umn.edu/record/126624},
      doi = {https://doi.org/10.22004/ag.econ.126624},
}