Demand and supply constraints of credit in smallholder farming: Evidence from Ethiopia and Tanzania

Balana, Bedru; Mekonnen, Dawit; Haile, Beliyou; Hagos, Fitsum; Yimam, Seid; Ringler, Claudia

doi:10.1016/j.worlddev.2022.106033

Cited by 30 publications

(13 citation statements)

References 52 publications

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“…It was found to be statistically significant at 5%. This is contrary to the findings of Balana et al (2022), who found that farmers with outstanding loans had no reason to seek credit in Ethiopia and Tanzania. Furthermore, poultry training was found to be a determining factor that affects farmers seeking informal credit.…”

Section: Informal Sourcescontrasting

confidence: 99%

“…It was found to be statistically significant at 5%. This finding is in line with Balana et al (2022), who found that difficulty in getting loan factors such as interest rate, location and inadequate collateral security reduced credit demand in Tanzania and Ethiopia.…”

Section: Uh Ukpe Bf Ewung! !supporting

confidence: 88%

“…In contrast, the coefficient of easier access to a loan was significant and negative, implying that the easier it is to get a loan, the more likely it is for the farmers not to seek a loan from informal credit sources. This finding is in line with Balana et al (2022). The coefficient of outstanding loans was found to be positively related to informal credit demand.…”

Section: Informal Sourcessupporting

confidence: 87%

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Determinants of Demand and Participation by Poultry Farmers in Formal and Informal Credit Markets in Cross River State, Nigeria

Ukpe,

Ewung

2023

PRS

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A typical challenge for over 65 percent of the Nigerian population living in rural areas and surviving through agricultural activities is access to credit facilities needed to procure technological inputs that trigger productivity. This has consequently limited the capacity of small and micro agro-enterprises - especially poultry enterprises - to develop. Therefore, this study was undertaken to analyse factors affecting the demand and participation of agro-entrepreneurs, particularly poultry farmers, in formal and informal credit markets in Cross River State, Nigeria. Purposive and random sampling techniques were used to select 295 poultry farmers. Data were collected for the 2022 production cycle using structured questionnaires and interviews, and the results were analysed using a multinomial logit model. The results revealed that socioeconomic and enterprise characteristics such as educational level, gender, farm capacity, poultry training, and household assets were significant factors that influenced the participant's choice of credit institution in the study area. Also, favourable terms, outstanding loans and easier access to loans were the institutional factors that affected credit demand. Training and workshop programmes should be organised by government and corporate financial institutions to encourage participation in credit markets so that the abundant available funds can be efficiently utilised in the production process.

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Section: Informal Sourcescontrasting

confidence: 99%

Section: Uh Ukpe Bf Ewung! !supporting

confidence: 88%

Section: Informal Sourcessupporting

confidence: 87%

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Determinants of Demand and Participation by Poultry Farmers in Formal and Informal Credit Markets in Cross River State, Nigeria

Ukpe,

Ewung

2023

PRS

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“…Prior research has largely utilized binary logit or probit models to analyze farmers' borrowing behavior [67,69,70]. In this research, the dependent variable of farmers' formal borrowing behavior is a dichotomous variable, Y = 1 if farmers take loans through formal channels, and Y = 0 if farmers do not take loans or if farmers do not take loans through formal channels.…”

Section: Benchmark Regression Modelmentioning

confidence: 99%

Digital Literacy Level and Formal Credit Constraints: Probit Analysis of Farm Households’ Borrowing Behavior in China

Zhou,

Li,

Chen

et al. 2024

Agriculture

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With the rapid evolution of the rural digital economy, analyzing the impact of digital literacy level on farm households’ formal borrowing is crucial for easing credit constraints and fostering rural economic growth. Leveraging the data from the 2020 China Family Panel Studies (CFPSs) and applying binary probit models and the Karlson–Holm–Breen (KHB) method, this study delineates the positive correlation between the digital literacy level and increased formal borrowing among farm households. The findings, which were robust against endogeneity and robustness tests, underscore the role of digital literacy level in augmenting farmers’ earnings and social networks, with a notably stronger mediation by earnings. The effects are particularly significant for middle-aged and older, less educated males in the central and western regions, in contrast with younger, highly educated females in the east. This research advocates for enhancing rural digital infrastructure and education, alongside financial system reforms, to advance rural financial development and support sustainable rural revitalization.

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“…With the depth of theoretical research, scholars found that, based on their demand repression, cognitive bias, and risk aversion, some borrowers with loan application conditions would actively withdraw from the credit market to form new credit rationing [13], and that, in addition to supply-based quantity rationing, there existed two other forms of demand-based rationing, namely risk rationing and transaction cost rationing [10]. Most of the later related studies classified farm credit rationing into two categories, supply-based rationing, and demand-based rationing, according to the different sources of credit rationing [29,30,33].…”

Section: Farmers' Credit Rationing Definitionmentioning

confidence: 99%

Can Joining the Agricultural Industry Chain Alleviate the Problem of Credit Rationing for Farmers?

Zhao

2023

Agriculture

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To solve the problem of credit rationing for farmers that shackles the transformation and upgrading of the agricultural industry and to improve the effect of agricultural industry chains in helping farmers, this paper empirically examines the effect of joining agricultural industry chains on supply-based and demand-based credit rationing for farmers, using the probit and tobit models based on the microscopic research data of 991 farmers in Shaanxi Province, China, and explores its specific effect mechanism. The study finds that agricultural industry chains can increase farmers’ credit by reducing the information asymmetry between farmers and banks, reducing agricultural business risks, and forming effective collateral and guarantee mechanisms, and that they have significant mitigating effects on farmers’ supply-based quantity rationing and demand-based price rationing, risk rationing and transaction cost rationing. Credit enhancement mechanisms such as information systems, commercial credit, orders, guarantees, production services and government support in agricultural industry chains have significant effects on alleviating farmers’ credit rationing, while insurance has limited effects on alleviating farmers’ credit rationing. There are differences in the effects of agricultural industry chains on alleviating various types of credit rationing of heterogeneous farmers in terms of scale, and the effects of joining agricultural industry chains on alleviating supply-based and demand-based credit rationing of large-scale farmers are more obvious than those of small farmers. Compared with the existing studies, this paper incorporates the credit rationing produced from farmers’ own reasons into the analysis framework, and introduces credit-enhancing variables of agricultural industry chains to test their specific mechanisms on farmers’ credit rationing. The findings of this study can provide a theoretical basis for promoting the innovation of financial models of agricultural industry chains, which is of great practical significance for improving the system of agricultural industry chains in developing countries, strengthening the role of industrial chains in absorbing small farmers, and promoting the modernization of agricultural industries with financial assistance.

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Demand and supply constraints of credit in smallholder farming: Evidence from Ethiopia and Tanzania

Cited by 30 publications

References 52 publications

Determinants of Demand and Participation by Poultry Farmers in Formal and Informal Credit Markets in Cross River State, Nigeria

Determinants of Demand and Participation by Poultry Farmers in Formal and Informal Credit Markets in Cross River State, Nigeria

Digital Literacy Level and Formal Credit Constraints: Probit Analysis of Farm Households’ Borrowing Behavior in China

Can Joining the Agricultural Industry Chain Alleviate the Problem of Credit Rationing for Farmers?

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