In‐kind credit provision through contract farming and formal credit markets

Ruml, Anette; Parlasca, Martin C.

doi:10.1002/agr.21726

Cited by 11 publications

(8 citation statements)

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“…The greater the age of the head of the household, the more uncertain the future will be. Therefore, the risk increases regardless of whether 10.3389/fpsyg.2022.961862 relatives, friends, or financial institutions are unwilling to give money (Ruml and Parlasca, 2022).…”

Section: Discussionmentioning

confidence: 99%

Research on farmers’ households credit behavior and social capital acquisition

Song

2022

Front. Psychol.

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Farmer’s credit is significant to growing the farmer’s revenue and the progression of the rural economy. Several scholars have focused on the impact of social capital on the farmers’ credit availability, but the research deduction is still not combined. In addition, credit behavior is an important element that researchers pay attention to. However, the study mainly focuses on the effects of social capital on the credit behavior of farmer households and its large positive effect, a scientific approach for measuring farmer households’ social capital was presented. The strategy attempted to develop an empirical model of farmer households’ loan behavior based on business performance and the role of social capital. Through regression analysis of the influence of social capital on the channels of farmer households’ access to credit, it was determined that the error correlation coefficients of the credit by the formal channel and the informal channel were 0.153, 0.158, and 0.152, respectively, for the three models. The significance levels of the correlation coefficients were all greater than 1 percent, showing that the regression results were relatively accurate and passed the significance test. However, these results indicated that financial channels pay attention to farmers’ credit and social capital acquisition to reduce the risk of advancing. Moreover, informal money lenders such as friends and relatives focused on the social capital of the farmer. The study is helpful for policymakers to make the strategies for the farmer to get credit behavior from financial institutions. Moreover, this study is beneficial in highlighting some limitations and giving future directions to researchers.

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Section: Discussionmentioning

confidence: 99%

Research on farmers’ households credit behavior and social capital acquisition

Song

2022

Front. Psychol.

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“…In addition to their own equity, farms depend heavily on debt and external finance to fund new investments and current operations (Cadot, 2013; Martins et al, 2022; Mugera & Nyambane, 2015; Ruml & Parlasca, 2022; Sabasi et al, 2021), for example, for purchasing high‐tech machineries or obtain seeds and fertilizers on credit. A farm's demand for external finance depends on key factors, such as the availability of internal liquidity, technological changes in production methods, and on risks associated with agricultural production (Sabasi et al, 2021).…”

Section: Introductionmentioning

confidence: 99%

External finance and agricultural productivity growth

Khafagy

Vigani

2022

Agribusiness

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We propose a new method to estimate the impact of external finance on productivity. Using a nested constant elasticity of substitution production function, finance has an indirect influence on productivity through its effect on capital augmenting-technological change and depends on the elasticity of substitution between equity and debt, as well as on the quantity and price of external finance and net value added. We develop and test a theoretical model using Farm Accountancy Data Network regional data covering all EU Member States and different subsamples by EU regions, size of farms, and farm types. In the 2004-2018 period, land, labor, and capital complemented each other but had a decreasing or stagnating productivity, reaffirming the importance of external finance to improve productivity. Results suggest that external finance and productivity follow an inverted U-shaped curve, with a positive impact on less capitalized farms with lower debtto-equity ratios, while capital-intensive farms are not benefiting from excess finance. Rethinking the general assumption that agricultural growth has a positive and linear effect with access to credit lead to different

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“…Financial institutions in developing economies are often reluctant to provide credit to farmers due to the high transaction costs that prevail in the agricultural sector. The behavior of these institutions remains rational due to the risky characteristics of the agricultural sector (Ruml and Parlasca, 2021). This situation has shaped the credit profile available to farmers.…”

Section: Introductionmentioning

confidence: 99%

“…The current issue and full text archive of this journal is available on Emerald Insight at: https://www.emerald.com/insight/0002-1466.htm and Parlasca, 2021). This situation has shaped the credit profile available to farmers.…”

Section: Introductionmentioning

confidence: 99%

“…This situation has shaped the credit profile available to farmers. Brul e-Francoise et al (2016) and Ruml and Parlasca (2021) pointed out the dispersion of agricultural enterprises in the production zones as a determinant of the high level of transactions for financial institutions. These transaction costs also justify the small share of credit supplied by commercial banks in SSA.…”

Section: Introductionmentioning

confidence: 99%

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Identifying farmers' preferences for types of credit and its market structure in rural Benin using the conjoint analysis approach

Sonehekpon

Fiamohe²

2022

AFR

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PurposeThis study analyzes farmers' preferences for agricultural credit and its market structure in rural Benin using the conjoint analysis approach.Design/methodology/approachThe data used come from primary sources collected from 228 randomly selected farmers. The conjoint analysis approach was used to produce the results. The bias associated with the heteroscedasticity of the error terms was fixed using the weighted least squares estimation method. Agricultural credit markets were segmented using the Calinski algorithm.FindingsThe study results reveal that farmers prefer a long-term agricultural credit with a low interest rate received via mobile banking. The interaction between a type of credit with collateral and a low interest rate is positively correlated with farmers' credit demand. The authors also found that agricultural credit markets are heterogeneous because of the heterogeneity in farmers' credit demand. This result has led to three different rural credit market segments identified in the selected study's sites. The market share simulation reveals a significant market share for the type of credit preferred by farmers in two segments.Research limitations/implicationsThe proven evidence from this study can guide the development of appropriate agricultural financial products that promote financial inclusion among farmers in rural Benin. More specifically, agricultural financial policies that promote digital long-term credit with low interest rate and appropriate guarantee mechanisms can promote financial inclusion among farmers and reduce the problem of asymmetric information in agricultural credit market. The study also calls for the promotion of differentiated policies across the three identified segments in order to positively impact the welfare of all farmers.Practical implicationsThe use of agricultural financial products that include digital long-term credit with low interest rate and appropriate guarantee mechanisms promote financial inclusion and reduce asymmetric information problems in agricultural credit markets in rural Benin.Social implicationsThe promotion of long-term digital and cheap credit improves farmers household's wellbeing in rural Benin.Originality/valueThis study contributes to a better understanding of the structure of rural credit markets. It also reveals the most preferred characteristics of rural credit profiles by farmers. Besides, it validates the importance of the use of guarantee as an appropriate mechanism which minimizes the problem of asymmetric information between financial agents and farmers.

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In‐kind credit provision through contract farming and formal credit markets

Cited by 11 publications

References 57 publications

Research on farmers’ households credit behavior and social capital acquisition

Research on farmers’ households credit behavior and social capital acquisition

External finance and agricultural productivity growth

Identifying farmers' preferences for types of credit and its market structure in rural Benin using the conjoint analysis approach

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