A non-linear analysis of risk and agricultural financing decisions in Malawi
Malawi’s economy is heavily reliant on agriculture, with over 80% of the population engaged in small-scale farming. The sector is highly vulnerable to climate variability, making sustainable financing strategies critical for enhancing resilience and productivity. Understanding how climate and market...
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| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Elsevier
2025-09-01
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| Series: | Scientific African |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S2468227625002935 |
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| Summary: | Malawi’s economy is heavily reliant on agriculture, with over 80% of the population engaged in small-scale farming. The sector is highly vulnerable to climate variability, making sustainable financing strategies critical for enhancing resilience and productivity. Understanding how climate and market dynamics influence financing decisions is therefore essential for designing effective agricultural support systems.This study examines the impact of climate variability and market dynamics on agricultural financing decisions, with a specific focus on Malawi, zoning in on how temperature and rainfall influence loan uptake by small-scale farmers across two decades, from 2002 to 2022. A non-linear ordinary differential equation (ODE) framework is developed to model farmers’ utility, incorporating both market and climate factors, while considering associated risks such as crop failure and credit default. The model evaluates the interplay between individual and social utilities in financing decisions, highlighting the critical role of farmers’ groups utility in driving financing adoption, under a variety of conditions. Results reveal that farmers’ financing behavior is highly sensitive to farmers’ unionism, climate conditions and market viability, with implications for financing policy. This work provides a robust framework for assessing the risks and benefits of climate-based financing in small-scale agriculture and suitable for developing policy architecture for optimizing financing strategies in response to climate variability and market fluctuations. |
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| ISSN: | 2468-2276 |