Credit Cultivation: A deep dive into the harmonies and dissonances of Macroeconomics impact on agricultural financing practices in Djibouti

Abstract

In this study, we investigate the impact of selected macroeconomic factors on agricultural financing practices in Djibouti. Therefore, the objective of this study is to understand how these factors influence the accessibility, distribution, and effectiveness of financial resources within the agricultural sector. To achieve this objective, we employed Autoregressive Distributed Lag (ARDL) and Wavelet Coherence Analysis on an annual dataset covering a span of 25 years, ranging from 1998 to 2022. The findings reveal that factors such as inflation, diminishing rural population, economic growth, and the institutional framework of the country exert negative pressures on the availability of funding for agriculture. However, amidst these challenges, we find that official development assistance serves as a positive mitigating factor, offering crucial support to the agricultural sector. These findings hold significant implications for policymakers in Djibouti by providing valuable insights into how to develop targeted interventions to support farmers, increase access to credit, and improve agricultural productivity, as it lays the foundation for investments in food security, technology adoption, and climate-resilient practices.