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Open Access
Article
Publication date: 17 February 2022

Chi Aloysius Ngong, Chinyere Onyejiaku, Dobdinga Cletus Fonchamnyo and Josaphat Uchechukwu Joe Onwumere

This paper investigates the impact of bank credit on agricultural productivity in the Central African Economic and Monetary Community (CEMAC) from 1990 to 2019. Studies…

Abstract

Purpose

This paper investigates the impact of bank credit on agricultural productivity in the Central African Economic and Monetary Community (CEMAC) from 1990 to 2019. Studies’ results on the impact of bank credit on agricultural productivity are not conclusive. The studies demonstrate diverse outcomes which are debatable. The results are conflicting.

Design/methodology/approach

Agricultural value added (AGRVA) to the gross domestic product (GDP) proxies agricultural productivity while domestic credit to the private sector by banks (DCPSB), broad money supply, land, inflation (INF), physical capital (PHKAP) and labour supply are explanatory variables. The autoregressive distributed lag technique is utilized.

Findings

The co-integration test results show a long-run co-integration among the variables. The findings disclose that DCPSB, land and PHKAP impact positively on the AGRVA. Broad money supply, INF and labour impact negatively on the AGRVA to the GDP.

Research limitations/implications

The results suggest that the CEMAC governments should encourage effective ways to increase bank credit flow to private enterprises in the agricultural sector through efficient bank's intermediation.

Practical implications

The governments should create more agricultural banks and improve the operation of existing ones to ensure direct credit to agricultural activities. The Bank of Central African Economic and Monetary Community should apply aggressive policy which eliminates all the bottlenecks undermining credit flow to the private sector in mutualism with agricultural productivity.

Social implications

The commercial banks should give more credit to private sector to mutually benefit the agricultural sector and the banking sector. The governments of the CEMAC economies should expand funding into the capital market which considerably boosts agricultural productivity.

Originality/value

Studies’ results on the impact of bank credit on agricultural productivity are not conclusive. The studies demonstrate diverse outcomes which are debatable. The results are conflicting; some reveal positive impacts, some show negative impacts and others indicate U-shape behaviour. Hence, research is required to fill the lacuna.

Details

Asian Journal of Economics and Banking, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2615-9821

Keywords

Open Access
Article
Publication date: 3 August 2021

Laurent Oloukoi

The paper analyzes the response of agricultural value added to credit and real interest rate shocks in the West African Economic and Monetary Union (WAEMU) and make a…

Abstract

Purpose

The paper analyzes the response of agricultural value added to credit and real interest rate shocks in the West African Economic and Monetary Union (WAEMU) and make a short-term comparative effect analysis of credit granted to the agricultural sector on agricultural value added among member countries.

Design/methodology/approach

First, in order to estimate impulse response functions (IRFs) and study shocks, a panel VAR model is used. Second the paper uses an autoregressive distributed lag (ARDL) model with the associated error correction model to make a comparative analysis of the effect of agricultural credit on agricultural value added in the WAEMU.

Findings

Results shows that: (1) credit stimulates agricultural value added only in the medium and long term; (2) in the case of WAEMU, credit only becomes a means of lifting the constraint of capital underutilization after three years; (3) short-term credit granted to agriculture in WAEMU has a weak and differentiated effect on agricultural value added from one country to another.

Practical implications

It is imperative to implement a policy of lowering real short-term interest rates. Moreover, a monetary policy that favors direct financing of agriculture to the detriment of that oriented toward market financing is to be prioritized.

Originality/value

The originality of this paper is that it makes the link between macroeconomics and agriculture. It shows how the monetary instrument can be manipulated to improve the performance of agriculture. Actually, in WAEMU, the financing of agriculture is provided by the market. This paper proposes a new approach which is direct financing. The paper offers possibilities for the coordination of agricultural policies in the WAEMU.

Details

Journal of Economics and Development, vol. 24 no. 2
Type: Research Article
ISSN: 1859-0020

Keywords

Article
Publication date: 8 March 2018

Frank Gyimah Sackey

The purpose of this paper is to examine if credit rationing persists even in the era of financial liberalization, the extent to which individual, firm and loan…

Abstract

Purpose

The purpose of this paper is to examine if credit rationing persists even in the era of financial liberalization, the extent to which individual, firm and loan characteristics influence the rationing behavior of commercial banks and whether the agricultural sector is discriminated against in the commercial bank credit market.

Design/methodology/approach

The study employed a probit model with marginal effects and a generalized Blinder-Oaxaca decomposition estimation on a randomly selected data of 1,239 entrepreneurs from eight commercial banks’ credit records about their individual, firm and loan characteristics.

Findings

The study revealed that credit rationing persists and that applying for a relatively longer payment period, providing collateral and guarantor, being illiterate, being relatively older and being in the agricultural sector increases the likelihood of being credit rationed, while having some relationship with the bank, having non-mandatory savings and applying from a bank with relatively high interest rates reduce the likelihood of being credit rationed. The study also revealed a credit gap of 17.77 percent and a positive discrimination against borrowers in the agricultural sector as the gap was largely being influenced by unexplained factors.

Research limitations/implications

The research was intended to cover a large number of commercial banks in Ghana. However, most of the banks were unwilling to provide such information about their borrowers; hence, the research was limited to only eight commercial banks who provided the author with the information needed for the study.

Practical implications

The study concludes that policies that enhance human capital, women, and older access to credit and agricultural-oriented financial services and others, will go a long way to reduce rationing and increase access to credit, especially to the agricultural sector.

Social implications

The research proposes the use of group lending as a form of collateral and monitoring to ease risks and default, and hence supports sustainable funding to increase access and outreach.

Originality/value

The paper looks at the comprehensive way about the various factors determining credit rationing in that it considers not only the individual, economic/firm and loan characteristics but also the extent to which discrimination toward the agricultural sector exists in the commercial banks credit market.

Details

Agricultural Finance Review, vol. 78 no. 3
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 18 December 2019

Samuel Sekyi, Paul Bata Domanban and George Kwame Honya

The purpose of this paper is to examine the impact of informal credit access on agricultural productivity in rural Ghana.

Abstract

Purpose

The purpose of this paper is to examine the impact of informal credit access on agricultural productivity in rural Ghana.

Design/methodology/approach

Data sets from the Ghana Feed the Future baseline survey involving a total sample of 2,437 rural farm households were used. In order to address the problem of endogeneity and sample selectivity bias, the endogenous switching regression (ESR) model was employed to examine whether rural farm households’ with access to informal credit and those without access differ in terms of their productivity levels and whether access to informal credit affects agricultural productivity.

Findings

Estimates from the ESR show that access to informal credit significantly promotes agricultural productivity. Specifically, farmers with access to informal credit were able to achieve a yield of 48.42 kg/ha more than their counterparts without informal credit access. In terms of the counterfactual, farmers without informal credit access would have increased their yield by 57.61 kg/ha if they were to have access to informal credit.

Research limitations/implications

The study was restricted to the savannah ecological zone of Ghana. This limits the extent of generalisation of results.

Originality/value

This study provides a rigorous econometric analysis of the impacts of access to informal credit on agricultural productivity in rural Ghana. The study contributes to the current debate on the link between access to informal credit and agricultural productivity and provides valuable input for policymakers.

Details

African Journal of Economic and Management Studies, vol. 11 no. 2
Type: Research Article
ISSN: 2040-0705

Keywords

Open Access
Article
Publication date: 14 August 2018

Abbas Ali Chandio, Yuansheng Jiang, Feng Wei and Xu Guangshun

The purpose of this paper is to evaluate the impact of short-term loan (STL) vs long-term loan (LTL) on wheat productivity of small farms in Sindh, Pakistan.

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Abstract

Purpose

The purpose of this paper is to evaluate the impact of short-term loan (STL) vs long-term loan (LTL) on wheat productivity of small farms in Sindh, Pakistan.

Design/methodology/approach

The econometric estimation is based on cross-sectional data collected in 2016 from 18 villages in three districts, i.e. Shikarpur, Sukkur and Shaheed Benazirabad, Sindh, Pakistan. The sample data set consist of 180 wheat farmers. The collected data were analyzed through different econometric techniques like Cobb–Douglas production function and Instrumental variables (two-stage least squares) approach.

Findings

This study reconfirmed that agricultural credit has a positive and highly significant effect on wheat productivity, while the short-term loan has a stronger effect on wheat productivity than the long-term loan. The reasons behind the phenomenon may be the significantly higher usage of agricultural inputs like seeds of improved variety and fertilizers which can be transformed into the wheat yield in the same year. However, the LTL users have significantly higher investments in land preparation, irrigation and plant protection, which may lead to higher wheat production in the coming years.

Research limitations/implications

In the present study, only those wheat farmers were considered who obtained agricultural loans from formal financial institutions like Zarai Taraqiati Bank Limited and Khushhali Bank. However, in the rural areas of Sindh, Pakistan, a considerable proportion of small-scale farmers take credit from informal financial channels. Therefore future researchers should consider the informal credits as well.

Originality/value

This is the first paper to examine the effects of agricultural credit on wheat productivity of small farms in Sindh, Pakistan. This paper will be an important addition to the emerging literature regarding effects of credit studies.

Details

Agricultural Finance Review, vol. 78 no. 5
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 18 August 2020

Nguyen Tuan Anh, Christopher Gan and Dao Le Trang Anh

This study investigates the short-run and long-run impacts of agricultural credit on Vietnam's agricultural GDP over the period 2004:Q4–2016:Q4, with the incorporation of…

Abstract

Purpose

This study investigates the short-run and long-run impacts of agricultural credit on Vietnam's agricultural GDP over the period 2004:Q4–2016:Q4, with the incorporation of agricultural labor, public investment and rainfall as important determinants of agricultural GDP.

Design/methodology/approach

This study applies the indicator saturation (IS) break tests and the autoregressive distributed lag (ARDL) bounds test with structural breaks to examine the creditagricultural performance nexus. The causal relationships among variables are explored through the Toda–Yamamoto Granger causality test.

Findings

The results indicate that agricultural credit positively influences agricultural GDP in both the short-run and long-run. A unidirectional causal relationship running from credit to agricultural GDP is confirmed. The results also discover the positive and significant effects of labor and rainfall on agricultural GDP in the long-run.

Practical implications

The results imply that the government should focus on expanding agricultural credit as well as enhancing the efficiency of agricultural credit. Furthermore, formal credit institutions should be encouraged to work closely with farmers and agricultural enterprises to offer flexible lending periods and amounts to meet the real situation of agricultural production.

Originality/value

This study is the first to examine the creditagricultural performance relationship at the macro-level in Vietnam. Based on the empirical results, the study provides crucial implications for policymakers to optimize the effectiveness of agricultural credit and enhance nationwide agricultural performance.

Details

International Journal of Social Economics, vol. 47 no. 9
Type: Research Article
ISSN: 0306-8293

Keywords

Article
Publication date: 27 May 2022

Masaood Moahid, Ghulam Dastgir Khan, M.D. Abdul Bari and Yuichiro Yoshida

Natural calamities impair agricultural households' ability to invest in their farms. Facilitating access to agricultural credit may assist farmers in the face of negative…

Abstract

Purpose

Natural calamities impair agricultural households' ability to invest in their farms. Facilitating access to agricultural credit may assist farmers in the face of negative revenue shocks. The aim of this study is to investigate the impact of agricultural credit on the agricultural input expenditure of disaster-affected farmers in Bangladesh.

Design/methodology/approach

The study utilizes data on 2,519 disaster-affected farming households from Bangladesh's Household Income and Expenditure Study (HIES) 2016–2017, which employs a nationwide representative five-year interval survey. Further, propensity score matching (PSM) identification strategy is used to estimate the average treatment effect on the treated (ATET), and Mahalanobis distance matching (MDM) is used for the robustness test. In addition, heterogeneous analysis has been conducted to explore the impact of agricultural credit on different types of farming households.

Findings

The findings reveal that access to agricultural credit has a favorable and significant effect on farm input expenditure for disaster-affected farmers. Therefore, agricultural credit accessibility could be utilized as a policy tool to assist disaster-affected farmers in improving their investment capacity, and hence, agricultural output.

Originality/value

This study, using a quasi-experimental design of access to agricultural credit on agricultural input expenditures of the disaster-affected farming households in coastal areas of Bangladesh to estimate the causal effect.

Details

Agricultural Finance Review, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 19 January 2021

Masaood Moahid, Ghulam Dastgir Khan, Yuichiro Yoshida, Keshav Lall Maharjan and Imran Khan Wafa

This research measures the causal effects of pertinent agricultural credit policy attributes on farmers' participation probability and their willingness to pay (WTP) for…

Abstract

Purpose

This research measures the causal effects of pertinent agricultural credit policy attributes on farmers' participation probability and their willingness to pay (WTP) for agricultural credit and its associated services.

Design/methodology/approach

A randomized conjoint field experiment is conducted in three districts of Nangarhar Province, Afghanistan, capturing stated-preference data of 300 farmers. Each survey participant was provided with two hypothetical choices and one opt-out option to generate rankings based on their preferences. The levels of six attributes—namely, the credit service provider's location, the time required to obtain credit, the frequency of installments, the type of loan security, the provider of the credit services and the annual membership fee to participate in the proposed policy—are randomly assigned to produce the alternative choices.

Findings

The results reveal that farmers support the suggested agricultural credit services policy (ACSP), and the lower bound of their WTP for participation in the policy is as high as 5% of their average annual income.

Practical implications

This study provides evidence-based policy input for designing effective agricultural credit policies in Afghanistan, which can be extended to other countries with a similar context.

Originality/value

This is the first study estimating the causal effects of formal agricultural credit policy attributes on farmers' participation probability. Further, this study nonparametrically measures farmers' WTP for participation in the proposed policy.

Details

Agricultural Finance Review, vol. 81 no. 4
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 2 May 2017

Calum G. Turvey

The purpose of this paper is to provide a review of major historical developments in agricultural finance, with particular emphasis on agricultural credit. It reviews the…

1380

Abstract

Purpose

The purpose of this paper is to provide a review of major historical developments in agricultural finance, with particular emphasis on agricultural credit. It reviews the development of Raiffeisen and related banks that emerged in Germany and Europe throughout the nineteenth century and how the cooperative banking system made its way into the banking system of the USA in the early twentieth century. The paper emphasizes the role of the state in the developing of agricultural credit, especially with respect to farm mortgages, securitization, and bond structures.

Design/methodology/approach

This paper presents a historical synthesis of historical literature on agricultural credit.

Findings

This paper shows the direct linkage between the developments in Raiffeisen credit cooperatives and the Farm Credit System (FCS) and details the emergence of the land banks, farm credit banks, agricultural bonds and the role of joint-stock banks in agricultural credit policy.

Originality/value

In total, 2016 marks the 100th anniversary of the passing of the 1916 Federal Farm Loan Act which set in motion the USs’ first Government Sponsored Enterprise and catalyzed the formation of the FCS as it operates today to provide credit to farmers and rural communities on a cooperative basis. Although there are a few wonderful books written on certain aspects of the FCS the story of how the FCS was initiated and the many struggles it faced up to the 1933 Act has not been told often enough. This paper tells the story of the evolution of agricultural credit that ultimately led to the formation of the FCS.

Details

Agricultural Finance Review, vol. 77 no. 1
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 26 July 2013

Ron Weber and Oliver Musshoff

Using a unique dataset of a commercial microfinance institution (MFI) in Madagascar, the purpose of this paper is to investigate how credit access probabilities and loan…

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Abstract

Purpose

Using a unique dataset of a commercial microfinance institution (MFI) in Madagascar, the purpose of this paper is to investigate how credit access probabilities and loan volume rationing magnitudes for farmers change if the MFI switches to offer flexible microfinance loans, which can account for agricultural production specifics.

Design/methodology/approach

The authors estimate probit models for the probability of receiving a loan and Heckman models to investigate the magnitude of volume rationing for all micro loan applications and disbursements of the MFI, differentiating between farmers with standard microfinance loans and farmers with flexible microfinance loans.

Findings

The results reveal that agricultural firms with flexible microfinance loans have significantly higher credit access probabilities than non‐agricultural firms and agricultural firms with standard microfinance loans. Furthermore, it was found that agricultural firms with flexible microfinance loans are stronger volume rationed than non‐agricultural firms and agricultural firms with standard microfinance loans.

Research limitations/implications

Even if the authors can show that access to credit for agricultural firms in Madagascar can be enhanced by the provisioning of flexible microfinance loans, the investigated MFI only introduced flexible microfinance loans in 2011 and currently only offers them through five branch offices. Thus, the product is new to the MFI, and results might change with increasing outreach to other geographic regions in Madagascar. Furthermore, the conditions for agricultural production in Madagascar are unique, and the results might change in different country contexts.

Practical implications

The paper's findings suggest that flexible microfinance loans can contribute to the financial inclusion of farmers with seasonal production types. They also suggest that standard microfinance loans seem to be adequate for farmers with less seasonal production types, e.g. animal husbandry.

Originality/value

To the best of the authors' knowledge, this is the first paper to investigate the effects of flexible microfinance loan provision for credit access of small agricultural firms in developing countries in general, and in Madagascar in particular.

Details

Agricultural Finance Review, vol. 73 no. 2
Type: Research Article
ISSN: 0002-1466

Keywords

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