Abstract
Micro-credit has become a frequently used a tool to reduce poverty by targeting the poor through a variety of indicators. The efficiency of this type of micro-credit is not measured in the literature. This study proposes an efficiency index for credit programmes that target the poor, calculated based on the effectiveness of the target indicators. The efficiency index, which is calculated for agricultural credit, measures the percentage of the total envelope that reaches the poor. The results indicate that targeting farming has the potential of enabling agriculture credit to reach at least 89% of the monetarily poor households, with an efficiency index of less than 42%. This eligibility of the poor falls to 13.2% of poor households in 1998 and 22% in 2003 when targeting actual applicants for agricultural loans. Ultimately, agricultural credit reaches fewer than 11% of the monetarily poor households, with an actual efficiency of at most 42%. The large gap between potential and real eligibility indicates the eviction of the poor due to a variety of implicit indicators whose in-depth analysis will allow credit programmes to be better adapted to the target group. Targeting on the basis of other indicators, such as the major grains (e.g. sorghum), small ruminant breeding or the possession of farmland, is effective when it comes to the eligibility of poor households but inefficient in eliminating those who are not poor, which yields an efficiency index of at most 42%, even if the financial administration is effective in transferring the funds to the poor. To reach many more of the poor, agricultural credit still needs to be adapted to the conditions of the poorest, while agrarian reform that would give legal value to land, would offer the poor greater access to credit.
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Notes
- 1.
The Poverty Reduction Strategy Documents (PRSD) of Benin (2002), Burkina Faso (2000 et 2004), Ghana (2003), Cameroon (2003), Guinea (2000), Mali (2002), Niger (2002) and Senegal (2002) provide for the development of financial services and notably micro-finance as a poverty-reduction tool(MEDEV (2004), MEF (2000, 2002), MF (2003), MINEPAT (2003), SP/CNDLP (2002) and SP/SRP (2002)).
- 2.
We can cite the INSD (1996, 2000a, 2000b, 2003) in Burkina Faso, Grootaert and Kanbur (1990), Grootaert (1996) in Côte d’Ivoire, Geda et al. (2001) in Kenya, Datt and Jolliffe (1999) in Egypt and the Poverty Reduction Strategy Documents (PRSD) developed between 2002 and 2006 (cf. see above notes and the references for more details).
- 3.
The efficiency of credit refers to the percentage of the overall expenditure (envelope) that reaches poor households, while the effectiveness measures how much the beneficiaries’ standard of living increases.
- 4.
The PWR index is built in a community meeting. The meeting participants are divided into three to five groups. Each group is responsible for placing the community’s households into wealth and well-being categories. The poor category gets the highest score and the richest the lowest. The households are then ranked based on the average scores obtained by the three to five groups.
- 5.
The PAT is implemented in five steps: (1) carrying out a survey an a sample that includes MFI clients and non-clients who serve as a control, (2) generating a poverty index or score for each household by applying the analysis of the principle components, (3) dividing the control population into quantiles, the first of which corresponds to the poverty index within the population, (4) determining the “threshold scores” that enable a reproduction of the quantiles obtained in step 3 and (5) producing the frequencies of the MFI clients analysed in each class of scores identified in step 4.
- 6.
Agricultural credit is primarily the realm of the Caisse Nationale de Crédit Agricole (CNCA), which was founded in 1980 and became the Banque Agricole et Commerciale du Burkina (BACB) in 2002. The Société des Fibres Textiles (SOFITEX) and the MFI also participate in providing agricultural credit. A farmer’s access to credit is essentially linked to joint backing from the grouping to which he belongs. Generally, villages have at least one grouping that can provide backing.
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Kaboré, S.T. (2012). Efficiency of Credit That Targets the Poor: Measures and Application of Agricultural Credit in Burkina Faso. In: Ayuk, E., Kaboré, S. (eds) Wealth through Integration. Insight and Innovation in International Development, vol 4. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-4415-2_10
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