Abstract:
Addressing global food security demands urgent improvement in agricultural productivity,
particularly in developing economies where market imperfections are perverse and resource
constraints prevail. While microcredit is widely acknowledged as a tool for economic
empowerment, its role in facilitating agricultural technology adoption and improving agricul-
tural incomes remains underexplored. This study examines the synergistic effects of micro-
credit access and agricultural technology adoption on the incomes of maize farmers in
Kenya. Using household-level data, we employ an endogenous switching regression frame-
work to control possible endogeneity in access to microcredit. Our findings shows that
microcredit access positively influences the adoption of advanced agricultural technologies.
Key determinants, including marital status, use of fertilizer application, access to extension
services, and cooperative membership, are identified as significant determinants of micro-
credit access. Notably, the Average Treatment Effect on the Treated (ATT) indicates a
40.52% increase in income among farmers who access microcredit, mainly driven by the
timely adoption of high-quality seeds, improved agricultural technologies, and enhanced
inputs. These results highlight microcredit’s role in promoting allocative efficiency and
enhancing Total Factor Productivity (TFP) within agricultural systems. Robustness checks,
including propensity score matching and sensitivity analyses, corroborate these findings.
The study recommends the implementation of targeted financial policies and educational ini-
tiatives meant to promote credit access, encourage savings, and enhancing financial liter-
acy, particularly for credit-constrained households. Integrating these measures could
strengthen rural financial markets and drive sustainable agricultural development across the
regions.