Assessment of Technical Efficiency and Its Potential Determinants among Small-Scale Coffee Farmers in Rwanda

Abstract

Coffee production is the main economic activity for smallholder farmers in Rwanda; it is also a major export crop. However, Rwandan coffee production has been facing structural changes with a significant decline in production. Considering the importance of the coffee sector to rural livelihoods and its potential role in export earnings, there is a need to ensure that small-scale coffee farmers efficiently use scarce resources in their production activities. Thus, this study estimates the technical efficiency and possible sources of inefficiency in small-scale coffee farming in the Northern Province of Rwanda. Three hundred and twenty coffee farmers are sampled to carry out a simultaneous estimation of the stochastic production frontier and technical inefficiency model. The results indicate that the mean technical efficiency among small-scale coffee farmers is 82 percent, implying a potential to increase coffee production by 18 percent with the current level of resources and technology. Coffee production displays increasing returns to scale and factors such as education, access to credit, extension services, improved variety of coffee trees, cropping system, and land consolidation have a positive and significant effect on technical efficiency. Thus, development policies in the coffee sector might focus more on enhancing the accessibility of farmers to extension services and credit facilities. In addition, adoption of high-yielding and disease-resistant coffee varieties, better cropping systems, and management of coffee plantations in land consolidation might reduce technical inefficiency among coffee farmers in the Northern Province of Rwanda.