Managing credit risk in rural financial institutions: what seems to work

Wenner, Mark D.; Navajas, Sergio; Trivelli, Carolina; Tarazona, Álvaro Acevedo

doi:10.3362/1755-1986.2007.017

Cited by 9 publications

(6 citation statements)

References 3 publications

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“…González-Vega et al (2007) found that a production contract with the Hortifruti Company helped farmers in Central American countries to obtain fi nance from formal fi nancial institutions. Wenner et al (2007) found that many successful Latin American lenders required their agricultural clients to be part of value chains. Little analysis has been done, however, to examine how participation in a value chain actually contributes to making it possible for one actor within a chain to successfully lend to another.…”

Section: Value Chain Fi Nancementioning

confidence: 99%

Value chain governance and access to finance: Maize, sugar cane and sunflower oil in Uganda

Johnston¹,

Meyer

2008

Enterprise Development &Amp; Microfinance

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While fi nancial institutions have had relatively little success in overcoming the risks and costs of lending to agriculture, rising food prices and shortages have made it imperative to fi nd better ways of increasing fi nancial fl ows in support of increased agricultural production and marketing. Direct value chain fi nance transactions operate with the same logic as any other fi nancial transaction. The lender must engage in some form of client screening, client monitoring and contract enforcement. To successfully accomplish these tasks, direct value chain lenders can use information gained through their value chain relationships about their clients and their clients' businesses. The value chain governance structure infl uences how easily and successfully a value chain lender can accomplish these tasks.Value chain governance structures can be defi ned with a typology along a continuum of four types of relationships described generically as market based, balanced, directed and hierarchical. A market-based value chain provides little opportunity for a lender to screen or monitor clients or the conditions needed to enforce contracts. A balanced value chain has incentives for fi rms to share information, jointly ensure product targets are met and respect contracts that refl ect interdependencies. A directed value chain provides the lead fi rm with access to information, control over supplier production and the power to enforce contracts. Therefore, we expect to see more examples of successful direct value chain fi nancing in value chains with a directed governance structure, but fewer examples in value chains with a market governance structure.

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Section: Value Chain Fi Nancementioning

confidence: 99%

Value chain governance and access to finance: Maize, sugar cane and sunflower oil in Uganda

Johnston¹,

Meyer

2008

Enterprise Development &Amp; Microfinance

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“…This is even more so in low-potential dry environments with poor infrastructure where small-scale farmers produce low volume of marketable surplus that makes them less attractive especially to large-scale buyers. Poor access to output and credit markets are among the major bottlenecks that keep small-scale farmers in persistent poverty (Wenner et al ., 2007). Farmers’ ability to increase their income not only depends on their access to markets but also increasingly depends on their ability to compete in the market (Markelova et al ., 2009).…”

Section: Introductionmentioning

confidence: 99%

Determinants of Small Scale Dairy Sheep Producers’ Decisions to Use Middlemen for Accessing Markets and Getting Loans in Dry Marginal Areas in Syria

2013

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SUMMARYThe paper describes value chain actors and institutional arrangements along value chains, and identifies major determinants of farmers' decision making to work with middlemen/traders 'jabbans' (or cheese makers), and based on those identify short implications for research, development and policy processes. We hypothesize that small-scale sheep producers are more dependent on middlemen for market and loans than larger holders, leading to welfare losses. Our empirical findings based on a Heckman model applied for 120 farming households conducted in Khanasser region (Syria) show that despite unequal benefits, local arrangements are more blessing than curse for the poor. Small-scale sheep producers and middlemen developed intricate institutional arrangements that are mutually beneficial. Producers act collectively to pool sufficient quantity of milk to be attractive to traders (jabban) while gaining access to market and cash loans mainly for feed. This provides the middlemen needed supplies with reduced transaction costs. This suggests that development organizations should support local capacity of producing organizations to work together, small-scale producers to organize, develop small scale dairy processing workshops for pooling and possibly processing milk, support training for direct market access and facilitate access to loans. Finally, supporting organizations such as rural financial services and micro-finance need to ensure up-to-date market information is available to ensure fair prices are paid. They should also be able to negotiate favourable conditions for loans and reach out to these resource-poor rural populations where formal credit systems are absent.

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“…This is surprising on first sight since agro loans are regularly classified as particularly risky because of their highly correlated risks in case of natural disasters or commodity price fluctuations (e.g. Wenner, Navajas, Trivelli and Tarazona (2007)). In this economic slowdown, however, the agro businesses in Azerbaijan remain comparatively unaffected because they mostly grow fruits or vegetables or raise sheep for the local market.…”

Section: Introductionmentioning

confidence: 99%

Funding vs. Real Economy Shock: The Impact of the 2007-2009 Crisis on Small Firms' Credit Availability

Berg¹,

Kirschenmann²

2012

Policy Research Working Papers

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

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Managing credit risk in rural financial institutions: what seems to work

Cited by 9 publications

References 3 publications

Value chain governance and access to finance: Maize, sugar cane and sunflower oil in Uganda

Value chain governance and access to finance: Maize, sugar cane and sunflower oil in Uganda

Determinants of Small Scale Dairy Sheep Producers’ Decisions to Use Middlemen for Accessing Markets and Getting Loans in Dry Marginal Areas in Syria

Funding vs. Real Economy Shock: The Impact of the 2007-2009 Crisis on Small Firms' Credit Availability

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