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A loan for the lean season


For farmers in rural Zambia, payday comes only once a year, at harvest time. This fact has an impact on almost every aspect of their life, but until now researchers had not realized the true extent.

Economist Kelsey Jack, Associate Professor at UC Santa Barbara, sought to study how this extreme seasonality affects the livelihoods of farmers, as well as development initiatives aimed at improving their condition. She and her co-authors conducted a two-year experiment in which they offered loans to help families in the months leading up to the harvest.

The researchers found that small loans during the lean season resulted in a better quality of life, more time invested in one’s own farm, and greater agricultural production, all of which contributed to higher wages in the labor market. The study, which appears in the American Economic Review, is part of a new wave of research reassessing the importance of seasonality in rural agricultural settings.

Jack came to this research topic through his personal experience of working with rural communities in Zambia over the past 12 years. She often asked people what made their life more difficult, and she kept hearing the same story. These farmers depend on rainfall rather than irrigation for their crops. Thus, their harvest follows the seasons. This means that all of their income comes in at once, at harvest time in June.

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“Imagine getting your paycheck once a year and then having to keep it going for the remaining 11 months,” Jack said. This leads to what is locally called the hunger season, or lean season, in the months leading up to the harvest.

When households run out of food and cash, they rely on selling labor in a practice known as ganyu to make ends meet. Instead of working on their own farms, family members work on other people’s farms, essentially reallocating the workforce from poor families to richer ones – though not always the same people in the world. these positions from year to year.

When Jack spoke about it with his collaborator Günter Fink at the University of Basel, Switzerland, he mentioned hearing the same story while working in the area. They contacted another colleague, Felix Masiye, chairman of the economics department at the University of Zambia, who said that although this phenomenon is known in Zambia, no one has yet researched it. The three decided to validate the story of the farmers and quantify its effects.

“It’s basically the farmers newspaper,” Jack said. “They told us to write it down and we did. And that turned out to be a really interesting story.

A rural village in eastern Zambia.

Photo credit: NICK SWANSON

Even before launching this project, the researchers met with the communities and conducted a comprehensive one-year pilot study in 40 villages. They designed the experiment based on the information received, including loan amounts, interest rates, payment terms, etc. Throughout the project, the team worked with village leadership and the district agricultural office, and had their proposal evaluated by institutional review panels in the United States and Zambia.

The experiment consisted of a large randomized controlled trial with 175 villages in the Chipata district of Zambia. It basically covered the entire district, Jack said. The project lasted two years and involved more than 3,100 farmers.

The researchers randomly divided the participants into three groups: a control group in which business went as usual, a group that received cash loans, and a group that received loans in the form of corn. The loans were designed to feed a family of four for four months and were issued at the start of the lean season in January, with payments due in July, after the harvest.

“They were designed to coincide with people’s real income streams,” Jack said. She compared this with most loans and microfinance in rural areas, which do not take into account the seasonality of income.

The project provided loans to approximately 2,000 families in the first year and approximately 1,500 in the second year. Some households were divided into different groups during the second year to measure the duration of the persistence of the loan effect.

In addition to collecting data on parameters such as crop yields, ganyu wages, and defect rates, the team conducted thousands of surveys during the study to learn more about behaviors such as than consumption and work.

Farmers participating in the study take their maize loans home.


Overall, the results confirmed the importance of seasonal variability for the livelihoods of rural farmers and the impact of any economic intervention. “Transferring money to a rural farm family during the hunger season is much more precious to that family than transferring money at harvest time,” said Jack.

The most striking result of the experience was simply the number of people who took out the loan. “The participation rates that we saw were absolutely astounding,” exclaimed Jack. “I don’t think there is an analog for this in any type of loan intervention.”

98% of eligible households took out the loan in the first year, and more surprisingly, the second year. “If the only measure of whether this intervention helped people was whether they wanted it again, that alone would be enough to say people are doing better,” said Jack.

For the most part, the farmers were able to repay their loans. Only 5% of families defaulted in the first year, although this figure increased slightly to around 15% in the second year. Although she can’t be sure, Jack believes poorer growing conditions in the second year may have contributed to this increase.

Of course, the use of loans was far from the only promising sign the researchers saw. Food consumption during the lean season increased by 5.5% for the households in the treatment groups, compared to the control group, which essentially made up the difference between the hunger season and the harvest season.

Families who received loans were also able to devote more energy to their own fields. These households reported a 25% drop in the total number of working hours for ganyu, which translated into around 60 hours of extra work on their own land during the season. This saw agricultural production increase by around 9% in households eligible for the loan, which was greater than the value of the loan itself.

Farmers working in the fields during the rainy season.

Photo credit: NICK SWANSON

With fewer people selling their work, those who chose to make ganyu saw their wages increase by 17-19% in villages where the program was offered. This was supported by a 40% increase in hiring of those who received loans, which helped tackle economic inequalities in the community.

In addition, Jack and his colleagues found little difference in the results between families in the cash group and those who received shipments of corn. This was a welcome find, as cash is much cheaper to deliver than bags of corn, although far from cheap.

In fact, a huge challenge that researchers faced was simply the cost of making and collecting small loans. In rural Zambia, the population is dispersed, financial institutions are rudimentary, and infrastructure such as roads are underdeveloped.

“If it was profitable to get these loans to the farmers, people would give them loans,” Jack said. “But loans for things like food, school fees and other basic needs just don’t exist at reasonable interest rates.”

To account for the significant transaction costs, a lender could simply increase the amount of its loans. This way, the same interest rate earns more money to cover fixed costs. But according to Jack, most families don’t want to shoulder the burden of a large loan.

The alternative is to charge higher interest on smaller loans. The interest rates for the study loans were 4.5% per month for six months, which equates to an interest rate of 30% on the six-month loan. This is steep compared to most lenders in countries like the United States; however, it was significantly lower than the 40-100% monthly interest rates otherwise available in these communities.

Several other factors contribute to these exorbitant interest rates in addition to transaction costs, including high risks and difficulty in enforcing contracts. In addition, the low availability of creditors makes it essentially a market of lenders. Economists continue to seek solutions to these challenges.

An attic where people store food.

Photo credit: JACK KELSEY

Until recently, economists had largely ruled out seasonality as an important factor in rural development, Jack explained. But the results of this study highlight how everything – from grain prices and wages to labor distribution – fluctuate around whether everyone is poorer at some point of the year and better off. to another.

“As a result, there are potentially large gains for interventions that help people smooth out their very scarce incomes over the rest of the year,” she said. These can take many forms besides loans, irrigation and new crops to bank accounts and agricultural cooperatives – essentially anything that helps smooth resources or allows income to flow more frequently.

The result is that governments and NGOs can increase their impact by incorporating seasonality into their interventions. Better use of resources is particularly critical in light of budget cuts and economic hardships caused by the COVID-19 pandemic.

In fact, many of Jack’s current plans have been disrupted by the pandemic, including another randomized controlled trial that sought to build on the knowledge gained from that experience. She hopes to resume these studies, as well as discussions with various governments, as conditions improve.

Nonetheless, this study provided a wealth of information in its own right. “Crucially, the value of a dollar depends a lot on how many dollars you have,” said Jack, “so you want to direct aid to the times of the year when it will be most useful. ”


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