Determinants of institutional agricultural credit access and its linkage with farmer satisfaction in India: a moderated-mediation analysis

Abstract

PurposeThe study assesses the relationship between institutional credit access and farmer satisfaction using contextual mediating and moderating variables. This study identifies various socioeconomic, service features and service quality determinants impacting institutional credit access.Design/methodology/approachThe authors used the stratified random sampling method and selected 512 farmers from 40 villages in Maharashtra, India. Initially, the study employed probit regression analysis to identify the credit adoption determinants. Subsequently, the relationship between institutional credit and farmer satisfaction is identified through moderated-mediation analysis using the Statistical Package for the Social Sciences and Analysis of a Moment Structures (SPSS - AMOS model).FindingsProbit model's results suggest that socioeconomic variables like education and bank distance; service quality variables like prompt service and employee behavior; and service characteristics variables like the interest rate, loan sanction time, repayment period, and documents for loan application significantly affect institutional credit adoption across the smallholders. Subsequently, the results of the moderating-mediation analysis show that working capital, perceived value and risk perception partially mediate the association between credit adoption and farmer satisfaction. The mediated effects are further moderated by farm advisory services and financial knowledge and skills.Research limitations/implicationsThe study is restricted in opportunity due to primary data, and it considers only farmers' perspectives to measure service quality and service features as constraints for institutional credit access.Practical implicationsThe government, nongovernment organizations, civil societies and private institutions should provide sufficient financial knowledge and training to the farmers via extension services to utilize the borrowed capital effectively to bring economic welfare and mental satisfaction.Originality/valueThe existing literature rarely considered banking service quality and service features (demand side) variables as determinants of credit access. Further, the study brings novelty in examining how the capital management cognitive factors of the formal credit adopters influence the relationship between credit access and satisfaction.

A Bibliometric Analysis of Borrowers’ Behavior

“…The borrowers' behavior at the loan application stage has not been extensively researched. Nonetheless, socioeconomic variables, such as service quality, bank distance, education, and service characteristics significantly affect credit adoption (Dey et al 2023). Moreover, risk perception, perceived value, and working capital have a moderate mediating effect on credit adoption and borrower satisfaction.…”

Identifying Credit Accessibility Mechanisms for Conservation Agriculture Farmers in Cambodia

“…High lending rates, repayment methods, collateral requirements, document processing and credit processing time affect the ability to access credit [52][53][54] and are proven to be agricultural credit challenges for farmers. For instance, costly interest rates have been discovered to be a significant factor and the complicated application process for accessing credit greatly impacts how smallholders use institutional credit, while the biggest challenge preventing the use of agricultural credit is the limited structure of the credit process [55][56][57][58][59][60][61][62]. Limited information on credit, owned production land, monthly income, and distance to lenders also pose challenges to farmers' credit accessibility.…”