Why don't lenders finance high-return technological change in developing-country agriculture?

Most of the literature attributes credit constraints in small-farm developi ng-country agriculture to the variability of returns to investment in this sector. But the literature does not fully explain lenders' reluctance to fi nance investments in technologies that provide both higher average and less variable returns. This article develops an information-theoretic credit ma rket model with endogenous technology choice. The model demonstrates that l enders may refuse to finance any investment in a riskless high-return techn ology-regardless of the interest rate they are offered-when they are imperf ectly informed about loan applicants' time preferences and, therefore, abou t their propensities to default intentionally in order to finance current C onsumption.