Agricultural Workers, Credit Rationing and Family Networks in Rural Mexico

Abstract

We use mixed methods and first-hand household data in Mexico to investigate credit practices by households engaged in agricultural wage employment. Quantitative analysis shows evidence of rationing in the formal sector but also suggests the existence of mitigating mechanisms. Qualitative analysis provides additional insights. First, income patterns associated with agricultural wage generate income smoothing needs that are sometimes better met by the informal sector. Second, family networks can perform key functions as gateways to the formal sector, through specific informal arrangements that inject flexibility into formal rules and procedures.

Why Do Poor People Co-Hold Debt and Liquid Savings?

“…Probably the poor cannot afford to hold unproductive liquid assets for consumption smoothing. Instead, they prefer to use low-cost strategies for managing risk, such as informal credit from family and friends and reciprocity-based networks (Heltberg et al, 2015;Bouquet et al, 2015).…”

Socio‐economic determinants of financial inclusion: An evaluation with a microdata multidimensional index

“…4 4 While the financial inclusion policy aims at including individuals into the formal financial system, the role of informal credit in developing countries still plays an important role (Bouquet et al, 2015; Guérin et al, 2013). However, such investigation is out of the scope of this paper.…”