Credit markets are key instruments by which liquidity-constrained smallholder farmers may finance productive investments. However, the documented low demand and uptake of agricultural credit by smallholder farmers in sub-Saharan Africa pose challenges for energizing rural transformation in the region. In this paper, we investigate the impact of rainfall uncertainty—a major source of production risk—on the uptake of credit by rural farm households in Ethiopia. We further examine whether rainfall uncertainty explains credit rationing among those households not participating in rural credit markets. We find that rainfall variability discourages the uptake of agricultural credit. We also find that rainfall variability is associated with credit risk rationing, expressed as low demand for agricultural credit. We show that our findings are robust to alternative ways of constructing rainfall variability (inter-annual or inter-seasonal) and a battery of robustness checks. For instance, we show that rainfall variability is a strong predictor of credit uptake in rural areas while less relevant in urban areas. We also document heterogeneous responses to rainfall variability; those households living in the arid and semi-arid lands of Ethiopia, which are believed to be more vulnerable to recurrent weather shocks, are more responsive to rainfall variability in terms of reduced uptake of agricultural credit. Our results highlight the impacts of uninsured production risk on the demand for agricultural credit and hence smallholder agricultural investments. Our findings suggest the importance of interventions aimed at relaxing smallholders’ credit rationing while also reducing their production risk.

中文翻译：

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降雨变化是否可以解释农业信贷的低吸收？来自埃塞俄比亚的证据

信贷市场是流动性受限的小农为生产性投资融资的关键工具。然而，记录在案的撒哈拉以南非洲小农对农业信贷的低需求和吸收对该地区的农村转型带来了挑战。在本文中，我们调查了降雨不确定性（生产风险的主要来源）对埃塞俄比亚农村农户获得信贷的影响。我们进一步研究了降雨的不确定性是否解释了那些不参与农村信贷市场的家庭的信贷配给。我们发现降雨变化不利于农业信贷的吸收。我们还发现降雨变化与信贷风险配给相关，表现为对农业信贷的低需求。我们表明，我们的研究结果对于构建降雨变异性（年际或季节际）和一系列稳健性检查的替代方法是稳健的。例如，我们表明降雨变化是农村地区信贷吸收的一个强有力的预测因素，而在城市地区则不太相关。我们还记录了对降雨变化的不​​同反应；那些生活在埃塞俄比亚干旱和半干旱地区的家庭，被认为更容易受到经常性天气冲击的影响，就减少农业信贷的吸收而言，这些家庭对降雨变化的反应更大。我们的研究结果强调了无保险生产风险对农业信贷需求以及小农农业投资的影响。