Credit Demand Research Articles

English

Agricultural finance is needed for sustainable agricultural production and improved farm income. The study analysed the accessibility of institutional credit among poultry farmers in Rivers State. Specifically, it described the socio-economic features of the farmers, identified the institutionally-based agricultural credit sources and credit amount requested by farmers. Data was analysed using descriptive statistics and logit regression. Results showed that majority of the farmers (71.85%) were male, averagely 40 years old. The average household size of the farmers was 4 persons. Majority (66.67%) indicated they had tertiary education. Most (60%) of the farmers had access to credit through institutional sources of which 40.74% of them got the credit through cooperatives. On the other hand, less number of farmers (40%) accessed credit from non-institutional sources. The variables: Sex, credit awareness, education, and credit demand were significant influencers of credit accessibility. Major constraints limiting farmers’ access to credit included lack of understanding of existing agricultural credit programs, loan transaction costs, granted credit amounts that were too little, and excessive interest rates. The study suggests that relevant agencies should engage in creating greater awareness and enlightenment on available agricultural credits and how to obtain the agricultural loans and more so, the farmers should be encouraged to participate in cooperative groups. Key words: Agriculture, credit access, financial institutions, poultry, smallholder farmers.

The influence of financial knowledge on the credit behaviour of small and micro enterprises: the knowledge-based view

PurposeThe rich financial knowledge of small and micro business owners helps to enhance the formal credit demand of small and micro enterprises and change the credit channel preference of small and micro enterprises. The purpose of this paper is to explore the relationship between financial knowledge and the credit practices of 290 small and micro enterprises in China’s Jiangsu and Shandong provinces based on their formal credit needs and preferred channels of credit.Design/methodology/approachTo measure the degree of the credit constraints of small and micro enterprises, this study applied questionnaire surveys to obtain information on the credit demand and supply of 363 small and micro enterprises in the Jiangsu and Shandong provinces. Firstly, a probit model is used to study the influence of financial knowledge on the formal credit demand and credit acquisition possibility of small and micro enterprises, and tool variables and a biprobit model are used to deal with the possible errors of endogenesis and sample selection. Secondly, a tobit model is used to study the influence of financial knowledge on the credit access of small and micro enterprises in different channels, and tool variables and a Heckman two-stage model are used to deal with endogenesis and possible errors in sample selection. Finally, this study carried out a series of robustness tests to make the conclusions more reliable.FindingsThis study is based on the perspective of the knowledge-based view to explore the impact of financial knowledge on the credit behaviour of small and micro enterprises. This study found that financial knowledge can increase a small and micro enterprise’s formal credit needs and drive the small and micro enterprise to actively apply for loans. Furthermore, financial knowledge has a significant and positive influence on the acquisition of formal credit and approved lines of formal credit and a significant and negative influence on the acquisition of informal credit and approved lines of informal credit.Research limitations/implicationsThe results indicated that increased financial knowledge can increase the likelihood of a small and micro enterprise to prefer formal credit and reduce the likelihood of it to prefer informal credit channels.Originality/valueFinancial knowledge is the ability to master basic economic knowledge and financial concepts as well as the ability to use knowledge to manage and allocate financial resources. The rich financial knowledge of small and micro business owners helps to enhance the formal credit demand of small and micro enterprises and change their credit channel preference. This paper offers a new perspective on the problems of credit constraint, low participation in formal credit markets and high participation in private credit markets among China’s small and micro enterprises and valuably supplements the research literature.

Formal Credit-Assisted New Agricultural Business: A Multifactor Analysis Based on BP Neural Network

In recent years, the new agricultural business entities have grown rapidly in all parts of the country and have become an effective carrier to achieve the basic stability of China’s rural family operation system and moderate-scale agricultural operation. However, the systemic defects of rural financial market and the credit rationing of formal financial institutions make the capital needs of rural areas unsatisfied for a long time. Financial demand determines the direction of supply reform. Therefore, in order to improve rural financial supply and promote the transformation and development of agricultural economy under the current situation, it is necessary to effectively understand the formal credit demand and the impact factors of accessibility of the new agricultural business entities, which represents the direction of China’s agricultural development in the future. Based on back propagation (BP) neural network, this paper constructs the farmers’ formal credit availability prediction model and studies the formal credit demand and the impact factors of the availability of new agricultural business entities. The experimental results show that the farmers’ formal credit availability prediction model has good performance in prediction accuracy, prediction time, and mean squared error.

The power of employment: Effects of India’s employment guarantee on women empowerment

• I collect annual district level data across India to estimate the effect of MGNREGA employment on women empowerment. • I use annual district level data on women demand for microfinance through self-help groups and incidents of sexual harassment and interpersonal violence as my indicators for women empowerment. • Using a difference-in-differences model, results indicate that the demand for microfinance among women increases and violence against women decreases as MGNREGA employment increases in a district. • These results align with a broad literature on the benefits of MGNREGA, which identifies important changes to household decision-making as women earn income across India. In many countries, women do not share the same decision-making power as the men around them. This preexisting discrimination suggests an imbalance in decision-making power in the household, which makes empowering the role of women a necessity for the health and development of our communities. Studies have noted how income growth across genders can shift decision-making power in the household. To investigate income growth and its effect on women empowerment, I analyze the Mahatmas Gandhi Employment Guarantee Act of 2005, which offers guaranteed employment to rural households throughout India. Its gradual implementation in three phases over a two year period allows for the use of a difference-in-differences analysis regarding the effects of guaranteed employment by men and women across districts. I analyze two outcomes variables related to women empowerment beginning in 2002 to 2017, including the demand for microfinance and violence against women. Results show that as women take up employment in a district, the demand for credit and savings increases and violence against women decreases. Each result aligns with a broad literature that identifies how income growth and employment empowers the health, social, and economic of status of women.

Determining customer limits by data mining methods in credit allocation process

The demand for credit is increasing constantly. Banks are looking for various methods of credit evaluation that provide the most accurate results in a shorter period in order to minimize their rising risks. This study focuses on various methods that enable the banks to increase their asset quality without market loss regarding the credit allocation process. These methods enable the automatic evaluation of loan applications in line with the sector practices, and enable determination of credit policies/strategies based on actual needs. Within the scope of this study, the relationship between the predetermined attributes and the credit limit outputs are analyzed by using a sample data set of consumer loans. Random forest (RF), sequential minimal optimization (SMO), PART, decision table (DT), J48, multilayer perceptron(MP), JRip, naïve Bayes (NB), one rule (OneR) and zero rule (ZeroR) algorithms were used in this process. As a result of this analysis, SMO, PART and random forest algorithms are the top three approaches for determining customer credit limits.

Information and Financialization: Credit Markets as a New Source of Inequality

Driven by financialization and rising demand for credit, household sector debt in OECD countries has risen sharply. We argue that this rise in private debt has become a significant driver of inequality because access to, and the terms of, credit vary by the risk of default, which is closely tied to income. The effect is magnified by a trove of new data that allow lenders to more accurately assess individual risks, thereby linking interest rates more closely to the underlying risk distribution. This inequalizing logic is conditioned by social transfers and by government regulation of financial markets. We test our model with data on mortgage interest rates and access to credit, using the government takeover of Fannie Mae and Freddie Mac (FM/FM) in the United States (resulting in regulatory change) and the Hartz-IV reform in Germany (resulting in changes to social transfers) as exogenous changes in important parameters of our model.

Trade credit and financial crises in Kazakhstan

This paper studies the trade credit and delinquency behavior in Kazakhstan paying attention to the effects of two recent crises using a unique dataset of large firms and SMEs from the year 2009 to 2016. Our estimates suggest that the relationship between trade and bank credit is mainly substitutional except that it was complementary for large firms following the year 2014–5 crisis. This new piece of evidence on the non-uniform relationship between trade and bank credit during crisis might provide more insight into the mixed findings in the literature. We also discern that trade credit demand is more prevalent among capital-intensive firms. Kazakhstani firms pass along a sizeable portion of their delinquent receivable to their trade credit suppliers. The transmission of trade credit delinquency, additionally, is amplified during the year 2014–5 economic crisis but the year 2009 global financial crisis.

Smallholder Farmers’ Perceptions towards Agricultural Credit in Tanzania

Agricultural sector plays a pivotal role in the Tanzanian economy in such a way that it qualifies as the major trigger of sustainable and robust growth of the country’s economy. Though agriculture in Tanzania is largely under small scale, smallholder farmers earn little income and therefore demand credit necessary to initiate farming and adopt new technology. Hence, demand for agricultural credit is the willingness and ability of farmers to access existing sources of funds to meet farm investment needs. This study therefore aimed at assessing the smallholder farmers’ perceptions towards agricultural credit in Morogoro municipality, Tanzania. Rational choice theory was used in this study and given priority due to its importance in explaining the access of financial services as attributes of the individual heavily influence credit demand by smallholder farmers. A multi-stage sampling technique involving purposive sampling of 10 wards out of 29 wards based on their potential in crop production and presence of credit services was adopted, followed by a simple random sample of 300 smallholder farmers randomly chosen from the selected wards. The primary data were collected using questionnaire, interviews, Focus Group Discussion (FGD) and observation from the 300 sampled farm households in the study area while secondary data were obtained through documentary book reviews, ward office reports, online internet materials and journal articles. Findings show that, smallholder farmers’ attitude towards risk associated with agricultural credit were highly perceived by the majority of them. Also, results showed that inaccessibility of credit information, lack of education, bureaucratic procedures (i.e., lending procedures) and high repayment rate i.e., price of loan were perceived to be the main challenges that affected smallholder farmers’ decisions to demand and access agricultural credit from MFIs (Microfinance Institutions). Therefore, the perception of smallholder farmers that the application procedures are cumbersome and take a long time for the applicant to get a feedback, is having a negative influence on the probability of their demand for credit from MFIs. The study recommends education provision to smallholder farmers on agricultural credit use and improved market information systems. Also, credit institution should ensure effective provision of information on agricultural credit to boost their credit services to smallholder farmers.

Land disasters and farmers’ private credit

Using data from the China Land Economic Survey (CLES), we study the impact of land disasters on farmers’ private credit. The results show that land disasters significantly promote the probability of farmers’ private credit. The mechanism is that land disasters reduce farmers’ incomes and increase farmers’ expenditures for restoring production, which directly increase farmers’ demand for credit. In addition, the frequent occurrence of land disasters force farmers to unite to resist disasters, which increase mutual trust among farmers and provide a social foundation for the development of private credit. Finally, farmers have certain stratified characteristics in response to land disasters.

Credit-Fueled Demand and Shrinking Aggregate Supply: A Study on the Hyperinflation in Venezuela

ABSTRACT Money supply adapts to the demand of credit and has a crucial impact in determining production levels. However, at the same time, under certain conditions the issuance of money may also boost inflation. In this article, with the help of Shaikh's ‘classical theory’, we explain the main reasons for the recent hyperinflation experienced in Venezuela. On the supply side, we analyze the context of loss of competitiveness due to the overvaluation of the national currency. On the other hand, we explore how the credit to the oil company (PDVSA) has led to an exponential growth in aggregate demand.

Too much of a good thing? Households’ macroeconomic conditions and credit dynamics

Abstract Favorable macroeconomic conditions, accompanied by optimistic consumer confidence, can stimulate and shape households’ expectations in such a way that they gradually extrapolate the view of good times lasting “forever”. As a consequence, households can then be inclined to accept a much higher level of indebtedness – higher than they would be willing to take on if they were to correctly perceive a discontinuation of the positive trend in the future. This paper documents the empirical link between the macroeconomic conditions faced by households, the confidence of households as investors and consumers, and households’ demand for credit on a sample of 21 European countries. The well-known procyclicality of household credit is found to grow stronger when favorable macroeconomic conditions are met with optimistic consumer confidence. While household credit goes hand in hand with the improving economy during an economic upturn, it is found to be sticky on the way down. Estimates show that households tend to extrapolate recent and current macroeconomic trends to the future and over-estimate the persistence of favorable or adverse conditions.

Effects of climate on bank default

Developing countries are more vulnerable to the consequences of climate change. The access to credit has been highlighted as crucial to the investment in adaptation strategies and to build resilient economies, but bank lending behavior in response to climatic shocks is still not well understood. The demand for credit is expected to increase in periods of extreme climate events, but loan delinquency rates would likely go up as well. In recent decades, Brazil has already experienced unusual climate variability with severe droughts in the Northeastern region, the most populous semiarid area in the world. The Bank of the Northeast (BNB), a public bank that has been used to implement local development policies, has lent over US$ 20 billion since the earmarking of funds for regional development in the Constitution of 1988. This study examines the impact of climatic shocks on the BNB’s credit operations and delinquency rates when several climatic events occurred over the period of 2002-2013. The econometric regressions method was used with fixed-effects panel data and its estimates indicate that deviations of temperature and precipitation from their annual mean increased default rates considerably. One of the factors that affects bank defaults may be the reduction in agricultural production, since default rates are higher in this sector, which suffers from the income reduction of producers whom are affected by these climate variations.

Collateral and asymmetric information in lending markets

We study the benefits and costs of collateral requirements in bank lending markets with asymmetric information. We estimate a structural model of firms’ credit demand for secured and unsecured loans, banks’ contract offering and pricing, and firm default using credit registry data in a setting where asymmetric information problems are pervasive. We provide evidence that collateral mitigates adverse selection and moral hazard. With counterfactual experiments, we quantify how an adverse shock to collateral values propagates to credit supply, credit allocation, interest rates, default, bank profits, and document the relative importance of banks’ pricing and rationing in response to this shock.

‘By a silken thread’: Regional banking integration and credit reallocation during Japan's lost decade

Regional banking integration allows credit to be reallocated to regions with high credit demand. Using the natural experiment of Japan's lost decade, we show that this reallocation channel mitigated the real effects from the bank liquidity shock in prefectures with many bank-dependent small firms. We propose an instrument for modern-day regional banking integration that exploits the fact that regional segmentation of banking markets in Japan goes back to the institutions set up for silk export finance in the late 19th century. We illustrate how the difference between the OLS and IV estimates can provide information about unobserved cross-regional heterogeneity in bank-firm matches when only aggregate regional data is available. Our results highlight that well-integrated banking markets are important and complementary to bond markets in limiting macroeconomic asymmetries in a monetary union, in particular during major financial crises.

Bank lending networks and the propagation of natural disasters

AbstractWe study how syndicated lending networks propagate natural disasters. Natural disasters lead to an increase in corporate credit demand in affected regions. Banks meet the increase in credit demand in part by reducing credit to distant regions, unaffected by disasters. Capital constraints play a key role in this effect as lower‐capital banks propagate disasters to unaffected regions to a greater extent. While shadow banks offset the reduction in bank credit supply on term loan syndicates, they do not offset the loss in credit line financing. As a result, corporate credit in unaffected regions falls by approximately 3%.

The Effects of Mortgage Credit Availability: Evidence from Minimum Credit Score Lending Rules

This paper uses changes in mortgage lenders’ minimum credit score thresholds to credibly identify the effects of access to household credit. Falling under these thresholds has very large negative effects on borrowing for up to two years, and these effects fail to reverse within four years. The effects are particularly concentrated among individuals who have relatively high credit demand and face relatively large contractions in credit supply. In addition, access to new mortgage credit reduces delinquency on nonmortgage debt and appears to spill over to demand for auto loans. (JEL G21, G51, R21)

Regulatory Support for Biosequestration Projects in Australia: A Useful Model for Transition to Net-Zero Emissions?

This paper considers the effectiveness of Australian regulatory measures to support storing atmospheric carbon in plants and organic matter in soils (biosequestration), a central element of the Australian greenhouse gas (GHG) emission policy through the Emissions Reduction Fund (ERF). Eligible methodologies under the ERF are broader than those in other jurisdictions. Hence Australian experience may have international application. The functionality of Australian regulation to achieve GHG emissions reduction is considered, focusing on provisions relating to additionality, permanence, monitoring, reporting and verification of emissions bio-sequestration. This analysis is conducted by reviewing key publications by research organisations, academics, government departments, industry organisations, environmental organisations and private sector consultancies. While the integrity of Australian biosequestration offsets is generally well regarded, persistent issues have been identified with regard to the additionality of avoided deforestation methane capture in intensive agriculture and landfill gas projects. The proportion of Australian emissions represented by existing biosequestration offset projects is deficient. These issues must be addressed in order to scale up biosequestration projects as an effective element of Australia's net-zero emissions strategy. It can best be achieved by tightening Safeguard Mechanism baselines to drive demand for carbon credits and funding the Clean Energy Regulator to implement effective, independent MRV. Ongoing regulatory reform will be necessary to address such issues as they arise in the course of the implementation of specific methodologies. Nonetheless, ongoing emissions risks relating to biosequestration and other offset projects can only be adequately addressed by complementary policy to reduce emissions at the source.

THE DEPOSIT AND CREDIT ACTIVITY OF INDIVIDUAL FARMERS IN POLAND DURING THE COVID-19 PANDEMIC

The article aimed to assess the direction and strength of the impact of the COVID-19 pandemic on the deposit and credit activity of farmers in Poland. The research method was a comparative analysis of the value of farmer deposits and debt time series. The National Bank of Poland was the data source. The research shows that at the beginning of the pandemic, the NBP significantly eased monetary policy. As a result, interest rates in the economy were falling till August and then stabilized. Despite the decline, farmer bank deposits increased. Current deposits in PLN dominated. The drop in interest rates did not increase the farmers’ credit demand. Although the debt value climbed at the beginning of the pandemic, it next fell considerably. What is worth underlining is that the debt value trend was similar to such trends in the past. Short term debt decreased mostly, which proves that farmers tried to adapt in this way to the increased uncertainty of farming conditions.

Perbandingan Algoritma SVM, Random Forest Dan XGBoost Untuk Penentuan Persetujuan Pengajuan Kredit

Credit is an option for seeking funding for most economic activities. The demand for credit is currently growing very rapidly, in line with the increasing financial needs of the community, especially in developing countries such as Indonesia. Credit analysis needs to be carried out to achieve proper and safe lending. Credit analysis is an observation to see the feasibility of a credit problem. From this analysis, the creditworthiness of the recipient will be known. This study uses the CRISP-DM methodology which consists of 6 stages, namely Bussines Understanding, Data Understanding, Data preparation, Modeling Evaluation, and Deployment by applying the classification method by comparing the SVM, Random Forest, and XGBoost algorithms. This research uses an open source dataset obtained from Kaggle. The results of the research using the SVM, random forest, and XGBoost algorithms get the highest accuracy, recall, precision values in the XGBoost model with 82% accuracy, 70% recall, and 92% precision.

Government spending and interest rates

Most macroeconomic models imply that increases in government spending cause interest rates to rise, but empirical evidence from the U.S. generally fails to support this prediction. We propose a novel explanation for how government spending can have a zero or negative temporary effect on interest rates: the increased demand for credit associated with government spending is offset by an increase in the supply of credit due to higher aggregate income. We demonstrate this mechanism theoretically and provide evidence consistent with the model’s predictions.