Credit constraints and productivity in Peruvian agriculture

Guirkinger, Catherine; Boucher, Stephen R.

doi:10.1111/j.1574-0862.2008.00334.x

Cited by 187 publications

(168 citation statements)

References 25 publications

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“…24 24 Recently collected data from an agricultural region in Peru indeed shows that the land titling was accompanied by a shift in the credit rationing regime boundaries consistent with figure 3. Guirkinger and Boucher (2006) report that between 1997 and 2003, individual titles were provided to 40% of the sample farmers. Quantity rationing in this area fell from 50% to 15% of all farmers.…”

Section: Land Titling and The Incidence Of Nonprice Rationingmentioning

confidence: 99%

Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agricultural Development

Boucher

Carter

Guirkinger

2008

American J Agri Economics

Self Cite

223

157

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We develop a model that shows that asymmetric information can result in two types of credit rationing: conventional quantity rationing, and "risk rationing," whereby farmers are able to borrow but only under high-collateral contracts that offer them lower expected well-being than a safe, subsistence activity. After exploring its incidence with respect to wealth, we show that risk rationing has important policy implications. Specifically, land titling will be only partially effective because it does not enhance producers' willingness to offer up the collateral needed to secure loans under moral hazard constraints. Efforts to enhance agricultural investment and the working of agricultural credit markets must step beyond land titling and also deal with risk.Key words: asymmetric information, credit rationing, land titling, moral hazard, risk rationing.In a competitive world of symmetric information and costless enforcement, credit contracts could be written conditional on borrower behavior. Borrowers would then have access to loans under any interest rate-collateral combination that would yield lenders a zero expected profit. However, as a large literature has shown, information asymmetries and enforcement costs make such conditional contracting infeasible and restrict the set of available contracts, eliminating as incentive incompatible high interest rate, low collateral contracts.1 This contraction of contract space can result in quantity rationing in which potential borrowers who lack the wealth to fully collateralize loans are involuntarily excluded from the credit market and thus prevented from undertaking higher return projects. This paper theoretically demonstrates that the contraction of contract space induced by asymmetric information can result in another form of nonprice rationing, one that we label "risk rationing." Risk rationing occurs when

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Section: Land Titling and The Incidence Of Nonprice Rationingmentioning

confidence: 99%

Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agricultural Development

Boucher

Carter

Guirkinger

2008

American J Agri Economics

Self Cite

223

157

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“…The agricultural finance market is subject to highly asymmetric information, which triggers different rations from lenders that leads to credit constraints on farmers and small agricultural farms [20,21]. Asymmetric information forces lenders to exert extra effort in evaluating and monitoring the financial performance of rural borrowers, consequently increasing financial cost [19].…”

Section: Agricultural Financementioning

confidence: 99%

“…Lenders impose high interest rates to farmers, blocking them from affordable financing, and this lack of access contributes to financial exclusion in the agricultural financial market [22]. Researchers call for the specialization of agricultural financial lenders [19,23] to reduce the adverse influence of credit constraints on resource allocation and productivity and realize the positive effect of credit availability on productivity growth [21,24].…”

Section: Agricultural Financementioning

confidence: 99%

Innovative Financial Approach for Agricultural Sustainability: A Case Study of Alibaba

Zhou

Chen

2018

Sustainability

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Sustainability and agricultural finance are two important issues attracting attention from industry and academia. This research adopts an in-depth case study methodology to investigate the agricultural finance initiatives of Alibaba Group, and explores how the agricultural finance practices of an e-commerce platform facilitate its sustainability goal. A reference framework is proposed to prove the adoption of agricultural finance. The influence of three moderating variables, namely, IT support, financial attractiveness, and cooperation with other entities, is analyzed. We find that advanced IT support and financial attractiveness are two indispensable enablers for agricultural finance initiatives, and collaboration with other entities is necessary in adopting agricultural supply chain finance.

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“…Directly, it affects the purchasing power of cocoa farmers to procure farm implement, and make farm related investments which they can fall back on to help them overcome credit constraints difficulty. Indirectly, it affects the risk behaviour of cocoa farmers (Eswaran & Kotwal, 1990;and Guirkinger & Boucher, 2005). Furthermore, a credit www.ccsenet.org/ibr International Business Research Vol.…”

Section: Access To Credit and Agricultural Productivity In Nigeriamentioning

confidence: 99%

Metafrontier Analysis of Access to Credit and Technical Efficiency among Smallholder Cocoa Farmers in Southwest Nigeria

Awotide¹,

Kehinde²,

Akorede³

2014

IBR

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It has been identified that limited access to timely credit has been a major constraint militating against increased agricultural productivity by farmers. Studies have shown that a large percentage of farmers faced with credit constraints have low production efficiencies. This study empirically investigated access to credit and technical efficiency (TE) of cocoa farmers in southwest Nigeria. The Study was conducted in Ogun State, southwest Nigeria. Primary data used for the study were collected in 2012 through a multi-stage sampling technique to select 240 cocoa farmers in the four (4) divisions of Ogun State. Data collected were analyzed using descriptive statistics, and Stochastic Metaproduction Frontier analyses. Tobit Regression Model was used to analyze the relationship between access to credit and technical efficiency among cocoa farmers in the study area. The study revealed that majority of the cocoa farmers did not have access to credit from formal institution implying negative consequences for agricultural productivity and household income generation. Most of the farmers borrowed relatively small size of loans for short duration. Estimates of the stochastic frontier models showed that cocoa farms in Ogun State had mean technical efficiency scores of 0.41, 0.94, 0.32 and 0.71 for farms in Yewa, Ijebu, Remo and Egba respectively. The results for the inefficiency model showed that age, education, experience, membership association, marital status, occupation, livelihood income, household size, and labour cost had significant effect on cocoa farmers in at least one division. The values of the Technology Gap Ration (TGR), together with the technical efficiencies obtained from the divisional stochastic frontiers (TE) and the metafrontier (TE*) were computed for all farmers in Ogun State. These results implied that the mean producer in Ijebu and Egba, if he or she were technically efficient, could still increase output by 6% and 29%, if he or she were to adopt the most efficient meta-technology for the division. Finally, there was a significant relationship between access to credit and technical efficiency of cocoa farmers. Evidence from the study revealed that majority of the poor cocoa farmers do not have access to credit from formal institution. Evidence from the metaproduction frontier showed that the mean productivity potential and technical efficiency ratios give additional explanation compared to the analysis based only on individual stochastic production frontiers. The productivity potential ratio plays an important part in explaining the ability of cocoa farmers in one division to compete with other farmers from different division at the state level. Based on the results, policy environment whereby individual cocoa farmers may have access to formal credit from banks and other agency, by forming groups, by means of using land use right certificates and also guarantor as a collateral would be a right direction in boosting cocoa production in the sub-region.

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Credit constraints and productivity in Peruvian agriculture

Cited by 187 publications

References 25 publications

Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agricultural Development

Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agricultural Development

Innovative Financial Approach for Agricultural Sustainability: A Case Study of Alibaba

Metafrontier Analysis of Access to Credit and Technical Efficiency among Smallholder Cocoa Farmers in Southwest Nigeria

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