Eleventh International Conference on Climate Change: Impacts & Responses

Abstract

Climate adaptation actions, like any other investment, require financial resources, which are likely to be in short supply in the rural sector in developing countries. The study in analysing the impact of credit constraints on choice of adaptation strategies to climate change, used a multistage sampling technique to collect cross-sectional data from 360 smallholder rice farmers in South-west Nigeria. The linkage between different forms of credit constraints and choice of climate adaptation strategies was estimated using a Generalized Method of Moments with instrumental variables (IV-GMM) and Seemingly Unrelated Regression model (SUR). A principal component analysis (PCA) was used to reduce the multidimensionality of the adaptation strategies and loading with highest eigenvalue was chosen and renamed as an improved technology. The results of the study show that credit constrained households are significantly less likely to adopt crop diversification and off-farm employment strategies, implying that the severity of credit constraints depends on the nature of the credit constraint. It could be recommended that policies that enhance and strengthen institutional support may also be valuable in enhancing the adaptation strategies of smallholder farmers.