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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

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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

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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

Content available
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.

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

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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

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Article
Publication date: 6 August 2020

Todd Kuethe and Todd Hubbs

This study examines the relationship between economic fluctuations and financial distress in the US agricultural sector, which is associated with a large degree of…

Abstract

Purpose

This study examines the relationship between economic fluctuations and financial distress in the US agricultural sector, which is associated with a large degree of financial instability.

Design/methodology/approach

The authors developed a parsimonious model of economic fluctuations in the US agricultural sector. The authors used statistical filter methods to identify the co-movement in cyclical fluctuations in real, cumulative growth rates in farm real estate values, farm sector debt and leverage.

Findings

The proposed model closely approximated the financial evolution of the US agricultural sector between 1960 and 2018. In addition, the authors proved that the proposed model is an early warning indicator of farm loan delinquencies and farm bankruptcies.

Originality/value

This study exploits recent advances in economic theory and empirical macroeconomic modeling to develop a model that is a robust predictor of financial distress in the agricultural sector. Further, the authors demonstrate that the policy interventions following the 1980s farm financial crisis demonstrate the likely long-run economic response to the policies enacted following the 2008 financial crisis.

Details

Agricultural Finance Review, vol. 81 no. 1
Type: Research Article
ISSN: 0002-1466

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Article
Publication date: 10 December 2019

Alexandre Gori Maia, Gabriela dos Santos Eusébio and Rodrigo Lanna Franco da Silveira

The purpose of this paper is to evaluate the impact of a Brazilian rural credit program, The National Program for Strengthening Family Farming (PRONAF), on small family…

Abstract

Purpose

The purpose of this paper is to evaluate the impact of a Brazilian rural credit program, The National Program for Strengthening Family Farming (PRONAF), on small family farming production.

Design/methodology/approach

The method is based on a quasi-experimental approach (propensity score matching) applied to 4.1m family farmers in Brazil.

Findings

Results show that farmers accessing PRONAF tended to be positively selected in terms of several observable characteristics, such as land size and agricultural practices. Moreover, PRONAF had positive and differentiated impacts on agricultural production. The impact was larger in the poorest region when compared to the regions characterized by intensive and commercial farming.

Research limitations/implications

The rural credit information was restricted to one crop year, making impossible to analyze the mid- and long-term impacts of the credit program on agricultural production.

Practical implications

The study provides some practical implications for policies of rural development. First, rural credit does matter for agricultural production of small family farmers. Nonetheless, since credit programs are large subsidized by the rest of the population, further studies are still needed the aggregate costs and benefits of these schemes. Results also revealed that PRONAF may have contributed to reduce regional inequalities, since the impact was larger in the poorest NE region.

Originality/value

This study provides a comprehensive analysis of how rural credit has impacted small-farm agricultural production, using large and representative data – the whole population of Brazilian family farmers.

Details

Agricultural Finance Review, vol. 80 no. 2
Type: Research Article
ISSN: 0002-1466

Keywords

Content available
Article
Publication date: 14 July 2020

Abbas Ali Chandio, Yuansheng Jiang, Abdul Rehman, Martinson Ankrah Twumasi, Amber Gul Pathan and Muhammad Mohsin

In the developing countries, formal credit has dominant role for the development of agriculture sector. It increases the farmer's purchasing power for better farm inputs…

Abstract

Purpose

In the developing countries, formal credit has dominant role for the development of agriculture sector. It increases the farmer's purchasing power for better farm inputs and agricultural technology for high crop productivity. The main purpose of this study is to examine the influence of socioeconomic characteristics of smallholder farmers for credit demand in Sindh, Pakistan.

Design/methodology/approach

A cross-sectional data set randomly collected from 90 smallholder farmers in Thatta district, Sindh, Pakistan, is examined. Descriptive statistics, correlation and the OLS regression method were used to demonstrate the important factors affecting the demand for formal credit.

Findings

The results revealed that formal education, experience of farming, landholding size, road access and extension contacts positively and significantly influenced the demand for formal credit.

Originality/value

This study is the first, to the best of authors' knowledge, to demonstrate the influence of various socioeconomic characteristics of smallholder farmers on demand for formal credit in Sindh, Pakistan. It also illustrates the imperative contribution to the literature regarding credit access and demand to improve the agricultural productivity.

Details

Journal of Asian Business and Economic Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2515-964X

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Article
Publication date: 15 June 2020

Sohel Mehedi, Habibur Rahman and Dayana Jalaludin

The paper aims to examine the level of agricultural credit by commercial banks and the determinants that influence the commercial banks to the increased level of…

Abstract

Purpose

The paper aims to examine the level of agricultural credit by commercial banks and the determinants that influence the commercial banks to the increased level of agricultural credit through the pressures of the institutional environment.

Design/methodology/approach

The study selects seventeen sample commercial banks following the market capitalization method and investigates a total of 85 annual reports during the period from 2013 to 2017. The study conducts a pooled regression to conclude the proposed hypotheses.

Findings

The present study finding indicates that the average of agricultural credits to total credits is 2.25% among the sample commercial banks. The study finds a positive significant association between board gender diversity, foreign director, management team and agricultural credit. Furthermore, the study has found that the role of the deposit in enhancing agricultural credit is positive. On the other hand, the association between independent directors, profitability and agricultural credits is negative.

Research limitations/implications

The study is based on secondary data with five firm-year observations of commercial banks. The study finding is based on commercial banks, so it should not be generalized to non-bank financial institutions.

Practical implications

The study emphasizes policymakers’ attention towards the level of agricultural credit and determinants that influence the level of agricultural credit by commercial banks in emerging markets.

Originality/value

The key contribution of the study is to focus on the reformist role of the determinants in promoting the increased level of agricultural credit in the emerging markets.

Details

International Journal of Social Economics, vol. 47 no. 7
Type: Research Article
ISSN: 0306-8293

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Article
Publication date: 17 April 2020

Haruna Issahaku, Ishaque Mahama and Reginald Addy–Morton

The purpose of this study is to assess the impact of credit constraints on agricultural labour productivity as well as the impact of credit constraints and agricultural

Abstract

Purpose

The purpose of this study is to assess the impact of credit constraints on agricultural labour productivity as well as the impact of credit constraints and agricultural labour productivity on rural households' consumption in Ghana.

Design/methodology/approach

This study uses the Ghana Living Standard Survey round six (GLSS 6) as the main source of data, which happens to be one of the most comprehensive household datasets in Ghana. Quantitative estimation techniques (namely: Endogenous Switching Regression and Two Stage Least Squares) are used to address possible endogeneity and selection into credit markets.

Findings

First, large households are prone to credit constraints while age (experience) and compliance with extension advice reduce credit constraints. Second, the determinants of agricultural labour productivity for both constrained and unconstrained households are age, sex, farm equipment, herbicide and farm size. Third, household size, education and livestock rearing influence agricultural labour productivity of constrained households. Fourth, credit constraints, irrespective of how they are measured, impede agricultural labour productivity while access to credit fosters labour productivity. Lastly, credit constraints robustly reduce consumption while agricultural labour productivity strongly enhances rural households' consumption.

Originality/value

The first contribution is that, unlike most previous studies, we do not focus on the widely used measure of productivity – output per unit land, but on agriculture labour productivity in particular. Secondly, unlike most previous studies which examine the effect of credit constraints either on productivity alone or consumption alone, our study examines the impact of credit constraints on both. Thirdly, unlike the existing literature which uses one or two measures of credit constraints, we use a wide range of measures of credit constraints – seven different measures of credit constraints. Lastly, our empirical strategy solves at least two critical econometric problems – sample selection bias and endogeneity.

Details

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

Keywords

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