Financial Vulnerability and Climate Change Adaptation Practices of Smallholder Farmers: An Example of Southwest Nigeria

Abstract

In many developing countries, smallholder farmers face several challenges in raising productivity, especially in the face of climate change risks, while access to requisite financing has continued to be challenging. This study estimated the financial vulnerability of smallholder farmers in the study area to assess their exposure as well as their ability to undertake climate-resilient practices in the face of possible climate change hazards. Cross-sectional data were obtained from 300 plantain farmers in Southwest Nigeria and collected data were analysed using the Stochastic frontier function and the Harold-Dorma equation to first determine their productivity and financing gap while Foster Geer-Thorbecke (FGT) equation was used to determine their financial vulnerability. Findings showed that farm size, herbicides, plantain suckers, and capital were positively significant to plantain production in the study area while the mean technical efficiency was 0.53. The mean financing gap of the farmers was $310 and the Vulnerability index was $409.6. More than two-thirds (84%) of the farmers were financially vulnerable, with 36% being severely incapacitated financially. Factors determining climate change adaptation strategies were examined using a Multivariate Probit Regression and findings showed that age, farming experience, credit access, farm size, market distance, extension contact, off-farm income, and land ownership all significantly impacted climate change adaptation strategies adopted by the farmers. However, credit access and Off-farm income determined the use of more adaptation strategies than other variables. Measures addressing improved access to finance are therefore imperative to increase the adaptive capacity of smallholder farmers for sustainable production.

Keywords: Vulnerability, Financing Gap, Adaptation, Smallholder, Credit Access, Climate change

DOI: 10.7176/JESD/14-12-03

Publication date:June 30^th 2023