A study from the Yale Economic Growth Center (EGC) finds that credit constraints prevent African farmers from taking advantage of seasonal price fluctuations in agricultural markets, but access to integrated financial solutions can enable grain storage, channel returns into forward-looking investments, and smooth seasonal prices to benefit the broader community.
Jackson School professor and EGC affiliate Lauren Falcao Bergquist co-authored the study, published in the Journal of Development Economics in October 2024. In partnership with the One Acre Fund (OAF), Bergquist and her co-authors — including Yale economics professor Edward Miguel — conducted a two-year study in Western Kenya testing whether providing small cash loans at harvest time could enable farmers to store their grain and sell it later at higher prices.
According to the study, large seasonal price fluctuations in African grain markets often imply low prices for the majority of farmers who sell immediately after harvest and high prices for consumers buying in the lean season. Prices can rise by 25–40% between the harvest and lean seasons in major markets — and by even more in remote areas.
“Rural farmers and household consumers often refer to this period as the ‘hunger season,’” Bergquist explained. “Food prices are so high that people literally go hungry.”
The study shows that farmers offered loans stored about 25% more grain, with inventories jumping in the post-harvest period and gradually releasing in the lean season. While this initially reduced net maize revenues in the post-harvest period (as treated farmers held off selling their crops), they were significantly higher in the lean season as the stored maize was sold at higher prices. In total, this increased net revenues and yielded a 29% return on the loan.
The study showed that the timing of the loan was key. “Access to finance is crucial, but what really matters is timing,” Bergquist said. “It’s not enough to just give someone a loan — it has to be the right kind of loan, at the right time, for it to have a real impact.”
In testing whether the impact from individual farmers had an effect on market-level prices, the authors found evidence that improved access to credit and greater storages for some farmers has positive spillover effects for the broader community.
“Even though these are micro-level [randomized controlled trials], they have a large-scale impact,” Bergquist said. “Dampened seasonal price fluctuations in isolated rural markets have the potential to benefit entire communities. This is about more than just individual transactions.”
For policymakers, the findings from this research highlight the critical need for a more nuanced and integrated approach when designing financial products for rural communities in low- and middle-income countries. “The overarching theme of this research is how finance interacts with local markets — specifically, how it affects rural agricultural economies,” said Bergquist.
Currently Bergquist is expanding upon her research with a large-scale randomized controlled trial studying a mobile marketplace in Uganda to connect buyers and sellers of agricultural commodities.
“It’s designed to reduce search costs, a potentially important component of trade costs,” she said. “The results have some parallels to what we see in the maize storage project, though they’re about arbitrage across space rather than time. We find that prices in surplus areas rise but drop in deficit areas. These results show how interventions can affect both producers and consumers.”