Modelling the effect of farming attitudes on farm credit use: a case study from Ireland

Abstract

Purpose

By examining the role of farming attitudes and motivations, the aim of this paper is to provide a framework for better understanding farmers' behaviour in relation to the decision to obtain credit.

Design/methodology/approach

Using a nationally representative survey of farm operators in Ireland, this paper derives explanatory variables (based on a factor analysis of respondents mean ratings of 13 attitudinal statements) representing three different farming motivations. An ordered logit model is then formulated to examine the effect of farming attitudes as well as personal characteristics and farm structural variables on the degree of indebtedness.

Findings

Personal characteristics of the farmer such as age and education as well as farm structural variables such as farm size and farm system were all found to strongly affect decisions in relation to credit use. The study identified how farmers are not just driven by business related goals such as maximising profits but are also strongly motivated by productivist tendencies and perceived lifestyle benefits associated with farm work. These underlying farming motivations were, in turn, found to have a differential impact on credit use. Specifically, business orientated attitudes were found to provide a prime incentive for farmers to borrow funds. On the other hand, farmers who strongly value the benefits associated with the farming lifestyle were less likely to look for credit.

Originality/value

Past research has focused on the effect of socio‐demographic characteristics and farm structural variables in examining differences in farm indebtedness. This study extends this literature by specifically examining the role of farming attitudes. Obtaining a deeper understanding of the factors that affect the level of farming debt will be important as the degree of indebtedness has been found to affect farmers' management decisions. Outside of explaining farm credit use, farming attitudes and motivations may have an important impact on farmers' behaviour in relation to a variety of farm activities.

Citation

Howley, P. and Dillon, E. (2012), "Modelling the effect of farming attitudes on farm credit use: a case study from Ireland", Agricultural Finance Review, Vol. 72 No. 3, pp. 456-470. https://doi.org/10.1108/00021461211277286