Effect of Equipment Credit on the Agricultural Income of Cotton Producers in Mali

Abstract

In Mali, lack of access to agricultural credit becomes a factor behind low farmer income and even rural poverty. However, agricultural credit is seen as a tool to increase production as well as farm income. The objective of this research is to evaluate the effect of equipment credit on the income of cotton producers in Mali. To this end, a survey was carried out among 400 producers in 2019, 127 of whom had had their equipment credit applications accepted, compared to 273 who had not had their equipment credit applications accepted. The survey was carried out in the areas of the Compagnie Malienne de Développement de Textiles (CMDT) of Fana and Koutiala in Mali. The method of analysis is the estimation of the instrumental variables multiple regression model of credit, implementing the estimation method of Heckman (1979) to account for the zero profit for 16% of the producers. The results of the econometric model estimates show that the variables that lead to an increase in income at the 5% threshold are: access to credit, quantity sold of cotton, costs of material goods used on the farm, total area sown, quantity sold of other crops, selling price of other crops. In other words, access to equipment credit could enable cotton producers to improve their income by 35%. Equipment credit entitles farmers to use more capital goods on the farm. This use of equipment increases agricultural productivity and yields, and in turn increases farm income.Based on these results, we can make some policy recommendations to boost cotton production, make other crops more beneficial to producers andgrant more equipment credit.