Evaluating The Effect of Formal Financial Intermediation on Climate Change Resilience Among Rural Farm Households
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Abstract
The aim of this study is to assess the effect of formal financial intermediation on rural farm households’ resilience to climate change using 480 respondents selected through a five-stage multi-stage sampling procedure. Primary data were collected using a structured questionnaire administered as an interview schedule. Data were analysed using descriptive statistics, Tobit regression, endogenous switching regression and exploratory principal component factor analysis. Results showed that 58.5% of the respondents were males, with a mean age of 41 years. Most (58.8%) were married, 59.1% were graduates, and the mean farm size and annual farm income were 2.1 ha and ₦642,343.8, respectively. About 66.0% reported that formal financial institutions were not available in their communities, while 86.9% had not received financial aid during the previous 12 months. The forms of financial intermediation received included subsidies, cash loans and input supplies. The endogenous switching regression results showed a significant overall Wald test (Wald χ² = 59.9, p < 0.001), while the LR test of the index equations was also significant (χ² = 48.02, p < 0.001). The estimated treatment effect indicates that the expected climate resilience index among households that accessed formal financial intermediation was 63.09, compared with 4.81 among households that did not. The average treatment effect on the treated was 57.06 index points. Exploratory factor analysis, using a minimum factor-loading threshold of 0.40, grouped constraints into economic, institutional, infrastructural and technological dimensions. The study concludes that formal financial intermediation is associated with substantially higher climate resilience among rural farm households in the study area, while limited financial access, institutional weaknesses, infrastructure deficits and technological constraints remain important barriers to resilience...
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