The Impact of Credit Market Imperfections on Farm Investment in Poland

Abstract

The objective of this article is to confirm the presence of imperfections on the rural credit market in Poland in the second half of the transition period, and to identify farms that were the most affected by these imperfections. For this, an investment accelerator model augmented with a cash flow variable was used on panel data for individual farms during 1996-2000. The cash flow coefficient was found to be significant and positive, indicating a poorly functioning rural credit market, in the sense that for some farms internal funds were the only source of funds (for farms facing credit rationing) or a less expensive source (for farms facing high borrowing costs) than debt. Farms facing more severe credit constraints were then identified by splitting the sample into two groups according to a single criterion but also by creating classes with a multiple component analysis. Farms less collateralisable were found to have experienced the most severe constraints. This finding is in line with other existing studies on Polish farms and is in contradiction with Polish government intervention that favoured subsidised loans rather than guaranteed credit during the period studied.

Access to finance for organic producers in Serbia: Demand side

“…Literature on access to inance in the agriculture and organic production in transitional countries is mainly focused on the supply side of the problem, usually including banks and microinance institutions. Development organizations (USAID, EBRD, OECD) are mainly dealing with the constraints and statistics, while researchers are focused on the relationship between credit supply and farm productivity, farm inputs and outputs, investments and other aspects of rural development (for details see Swinnen, Gow, 1999;Swinnen, 2007;Latruffe, 2005;Latruffe et al, 2010). It is reasonable to expect that almost all studies have found positive relationship between an increased access to inance and improvement of analyzed parameters.…”

Short communication: East-West European farm investment behaviour - The role of financial constraints and public support

“…Previous research provides evidence of capital market imperfections in Central and Eastern European (CEE) countries during transition and after accession to the European Union (EU) (Latruffe, 2005;Bojnec & Latruffe, 2011). Some papers tested the persistence of soft budget constraints in transition economies.…”

“…There is a wealth of research on farm investment (e.g., Bierlen & Featherstone, 1998;Benjamin & Phimister, 2002;Petrick, 2004a,b;Latruffe, 2005;Bakucs et al, 2009;Bokusheva et al, 2009;Zynch & Odening, 2009;Latruffe et al, 2010;Hüttel et al, 2010;Bojnec & Latruffe, 2011;Kallas et al, 2012). However, studies dealing with agriculture are generally limited to one country and exclude cross-country comparisons, except for Benjamin & Phimister (2002), who compared France and the United Kingdom.…”

Credit Market Imperfections and the Distribution of Policy Rents: The Common Agricultural Policy in the New EU Member States

“…Credit constraints were a major problem for growth and restructuring during transition (Swinnen and Gow, 1999) and were still considered an important problem at the time of accession in several of the NEMS (Bezemer, 2003;Latruffe, 2005;Petrick, 2004;Petrick and Latruffe, 2003;World Bank, 2001). …”