10. Efficiency of Credit That Targets the Poor: Measures and Application of Agricultural Credit in Burkina Faso

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.