Credit Constraints, Agricultural Productivity and Household Welfare in Burkina Faso: A Gender-based Perspective

In this paper, we investigate how different types of credit constraints affect male and female farmers’ household welfare. Because credit constraints are endogenous and their effects are expected to depend on farmers’ characteristics, we specify an endogenous switching regression model. We define three credit constraint levels (high, medium and low) based on household survey data from Burkina Faso and verify the effects of non-linear credit constraints on women’s welfare. More specifically, relaxing credit constraints on male farmers from a high constraint level to a medium one increases per capita consumption by about 6%, whereas female farmers experience a non-significant effect. Full relaxation from a medium constraint level to a low one improves men’s welfare by another 6%, whereas women exhibit a non-linear improvement of about 12%. We find evidence that the welfare improvement may be the result of credit diversion from agricultural productivity loans.