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The purpose of this paper is to evaluate the rural credit demand by providing a theoretical and econometric framework which controls the problem of selection bias.

The study is conducted in Assam, India, and uses a quasi-experiment design to gather primary data. Heckman two-stage procedure and type 3 Tobit model are used to evaluate the rural credit demand.

It is observed that, in general, rural households’ credit demand is influenced by the ability and capacity to work, the value of physical assets of the borrowers as well as some other lenders’ and borrowers’ specific factors. But, the direction of causality of the factors influencing borrowers’ credit demand is remarkably different across credit sources.

The study recommends that it is possible to provide an efficient credit demand estimate through a correct theoretical and econometric framework. The possible limitation of the study can be due to the exclusion of the role of “traditional community based organizations” in rural Assam while evaluating the credit demand, and therefore, this limitation is left to future research.

The study contributes to the literature by assessing the probable differences among formal, semiformal and informal credit sources with respect to rural credit demand.

The aim of this paper is to develop a theory of sharecropping with cost sharing after allowing for an explicit role of a creditor. In the tenancy literature, the prevalence of sharecropping has remained an important issue. While most contributions have focussed only on output sharing, very few have studied the issue of cost sharing. Besides, the existing models have considered interactions only between a landowner and a tenant. The purpose of this paper is to extend this setup to a third player – creditor.

The authors adopt a static contract approach with full information and no uncertainty and model possible credit‐cum‐tenancy arrangements among a money‐lender, a landowner and a tenant under the restrictions that the money‐lender cannot charge a lump‐sum fee and the input choices are left with the tenant.

It is shown that all Pareto optimal arrangements between a creditor, a landowner and a tenant must involve interest rate discrimination between the tenant and the landowner and a share tenancy with cost sharing, or a fixed rent tenancy with cost sharing, or a mixture of the two. None of the polar contracts – wage or rent – is possible. Lending schemes that feature credit rationing or credit delegation can implement some Pareto efficient outcomes.

The model developed in the paper presents a framework for studying various tripartite arrangements observed in rural economies of developing countries. Also, it provides a benchmark for studying contracts under asymmetric information and uncertainty.

There are two important determinants in the banking system which directly affect the number of credit deliveries to the economy in the first round and impact the growth and developmental status of the economies in the second round. They are the amount of non-performing assets (NPA) and the number of banking funds invested in the governments’ securities. The present chapter, thus, focuses on the trends of these two and their associations with the credit, GDP and human development of the countries. First, it develops a basic theoretical structure of credit creation in the banking system and then develops theoretical linkages among the two lead variables, NPA and investment, in relation to the rest of the economy. Then, it goes for empirical exercises from the perspectives of the descriptive statistical analysis. The trends of NPA and investment show rising trends in almost all countries. Furthermore, it is found that the signs of correlation coefficients between the two with credit, GDP and HDI are positive in most cases of the list of developing countries and negative in some cases of the list of developed countries.

The purpose of this paper is to evaluate the impact of credit access on income and multidimensional poverty by providing an econometric framework.

The study is conducted in Assam, India and uses a quasi-experiment design to gather primary data. Econometric tools like Heckit procedure, Tobit selection equation and probit model are used for empirical purpose.

The paper finds that the level of individual welfare is influenced by equivalent factors. In addition, the study observes a larger incidence of poverty among treatment households of semiformal and informal borrowers. The study argues that formal sources are more effective in reducing the number of poor households by lifting those who are closest to the poverty line.

The study indicates a vicious circle of income and multidimensional poverty among semiformal and informal borrowers. By tradition, as rural Assam gets a dominant role of traditional community-based financial institutions, we should develop the banking structure by involving these institutions. The study excludes other probable explanatory variables while evaluating the impact of credit access on income and multidimensional poverty, and this limitation is left to future research.

This is probably the first empirical paper in Assam showing the impact of credit access on multidimensional poverty by adjusting for endogeneity and selection bias.

The purpose of this paper is to analyse how farm production and input use (land, variable inputs, labour, and capital) is related to farm access to credit in the Central and Eastern Europe (CEE) transition countries.

Drawing on a unique farm level panel data set with 37,409 observations and employing a matching estimator, this paper analyses how farm access to credit affects farm input allocation and farm efficiency in the CEE transition countries. The large size of the FADN data set has an additional advantage. It allows the authors to employ a semi‐parametric estimator based on the propensity score matching. Using more than 37,409 observations assures that the loss in efficiency of semi‐parametric estimates, as compared to parametric ones, is not a problem. This is important for at least two reasons. First, applying a semi‐parametric propensity score matching (PSM) estimator allows to control for any heterogeneity in the relationship between farm performance and their observable characteristics (in particular access to credit). Second, matching estimators are robust in situations where farms having access to credit systematically differ from those that do not.

It is found that farms are asymmetrically credit constrained between inputs. The use of variable inputs and capital investment increases up to 2.3 percent and 29 percent, respectively, per 1,000 EUR of additional credit. The authors' estimates suggest also that farm access to credit increases the total factor productivity up to 1.9 percent per 1,000 EUR of additional credit, indicating that an improved access to credit results in adjusting the relative input intensities on farms. This finding is further supported by a negative effect of better access to credit on labour, suggesting that these two are substitutes. Interestingly, farms are found not to be credit constrained with respect to land.

To the best of the authors' knowledge, the present paper is the first to investigate the importance of access to credit for farm performance in the CEE region as a whole.

This article analyzes farmers' preferences for different nonindexed crop insurance alternatives, using discrete choice experiment data on cocoa farmers from southern Ghana. We examine farmers' attendance to attributes by comparing self-reported attribute nonattendance (ANA) to the behavior inferred from the choices.

We utilize the latent class endogenous attribute attendance (EAA) model to address potential endogeneity by jointly modelling farmers' attribute processing strategies with their choice of attributes of the insurance products.

The results show that premium levels, mode and length of indemnity payouts tend to influence farmers' preferences for crop insurance products. The findings also reveal that credit-constrained farmers attend more to premium and payment mode attributes of the crop insurance products and that credit-constrained farmers tend to exhibit lower willingness-to-pay estimates for the crop insurance attributes.

The findings from the study suggest that credit constraints do not only limit input use, but also tend to have statistically significant impact on farmers' cocoa insurance participation decisions.

The study examines the impact of credit constraints on farmers' crop insurance preferences while accounting for ANA.

This study aims to render a fundamental assessment of the Basel II internal ratings-based (IRB) approach by taking readings of the Australian banking sector since the implementation of Basel II and comparing them with signals from macroeconomic indicators, financial statistics and external credit ratings. The IRB approach to capital adequacy for credit risk, which implements an asymptotic single risk factor (ASRF) model, plays an important role in protecting the Australian banking sector against insolvency.

Realisations of the single systematic risk factor, interpreted as describing the prevailing state of the Australian economy, are recovered from the ASRF model and compared with macroeconomic indicators. Similarly, estimates of distance-to-default, reflecting the capacity of the Australian banking sector to absorb credit losses, are recovered from the ASRF model and compared with financial statistics and external credit ratings. With the implementation of Basel II preceding the time when the effect of the financial crisis of 2007-2009 was most acutely felt, the authors measure the impact of the crisis on the Australian banking sector.

Measurements from the ASRF model find general agreement with signals from macroeconomic indicators, financial statistics and external credit ratings. This leads to a favourable assessment of the ASRF model for the purposes of capital allocation, performance attribution and risk monitoring. The empirical analysis used in this paper reveals that the recent crisis imparted a mild stress on the Australian banking sector.

Given the range of economic conditions, from mild contraction to moderate expansion, experienced in Australia since the implementation of Basel II, the authors cannot attest to the validity of the model specification of the IRB approach for its intended purpose of solvency assessment.

Access to internal bank data collected by the prudential regulator distinguishes this paper from other empirical studies on the IRB approach and financial crisis of 2007-2009. The authors are not the first to attempt to measure the effects of the recent crisis, but they believe that they are the first to do so using regulatory data.

Recalling that the introductory chapter (Chapter 1) wanted to carry out similar types of analysis for the major states in India. Thus, the present chapter tries to examine the trends of a bank branch, deposit, credit, the credit–deposit ratio, sectoral shares of credit, magnitudes of banking transactions, credit concentration, etc., for the selected 15 states and Delhi as the only union territory for the period 1972–2019. The study period covers the pre-reform period from 1972 to 1992 and the post-reform period 1993–2019. The observations show that the branch, deposit and credit did not grow significantly during the post-reform period. As a result, the credit–deposit ratio did not increase significantly during the reform period. But, the magnitude of banking transactions increased in most of the states during the reform period. Regarding the sector-wise share of credit, AP, Maharashtra, UP and TN are the leading states in agricultural credit, WB, Gujarat and Maharashtra are in industrial credit and Kerala, Assam and Delhi are in the service sector. On the other hand, the study finds rising magnitudes credit concentrations of the states during the post-reform period in contrast to the declining concentration in the pre-reform period. Maharashtra is the state which holds around 25 per cent of all states’ credit throughout the entire period of 1972–2019. Hence, there are the notions of rising disparity and inequality in credit as well as incomes of the states and all India levels.