Formal Credit Research Articles

Determinants and Constraints of Access to Credit by Poultry Egg Farmers in Ogun State Nigeria

Access to credit is crucial for the advancement of the poultry industry in Nigeria, yet a significant portion of poultry farmers lack access to formal credit sources. This study investigates determinants and constraints to credit access among poultry egg farmers in Ogun State, based on data collected from 180 farmers using a multi-stage sampling technique. Descriptive statistics and a Logit regression model were employed for analysis. About 33.3% of the farmers were within the age range of 41-50, poultry farmers of 62.2% within the region were more of male farmers while 75.6% of the farmers were educated up to tertiary level. Only 45% of respondents had credit access, with varying sources: 19.8% from commercial banks, 37% from cooperatives, 18% from microfinance banks, 2.5% from the Bank of Agriculture, 6.2% from government sources, and 12.3% from private organizations. The Logit model revealed that farming experience and flock size significantly influence credit access (p<0.01). For each year of farming experience, there is a 4.8% increase in the likelihood of credit access. Similarly, for each unit increase in flock size, there is approximately a 0.04% rise in credit access likelihood. Descriptive statistics highlight constraints to credit access: lack of awareness (5.1%), absence of collateral (30.3%), lack of interest (5.1%), loan denial (12.1%), high interest rates (27.2%), regulatory hurdles (8.1%), and inadequate documentation (12.1%). It is recommended that policymakers and financial institutions develop tailored credit products for poultry farmers, addressing specific challenges such as collateral requirements and high interest rates, this is because once financial barriers are removed production is likely to improve. Additionally, enhancing farmer awareness of available credit options and simplifying application processes can improve credit accessibility in the sector.

EVALUATING NON-PERFORMING ASSETS IN SELF-HELP GROUP-BANK LINKAGE PROGRAMME: ECONOMIC INSIGHTS FROM CENTRAL AND NORTHERN REGIONS OF INDIA

The Self-Help Group Bank Linkage Programme (SHG-BLP) plays a crucial role in providing affordable and timely credit to India’s impoverished and vulnerable populations, who are often excluded from formal credit delivery systems. However, the high incidence of Non-Performing Assets (NPAs) within this sector poses a significant barrier to the continued availability of formal loans, as elevated NPAs disrupt the credit cycle and undermine efforts to alleviate poverty. Historically, the central and northern states of India have recorded NPAs above the national average within the SHG-BLP framework. In this study, we employ multiple linear regression analysis to identify the factors contributing to high NPAs in these regions. Our findings reveal a positive correlation between larger loans and higher NPAs, emphasizing the need for thorough risk assessment and ongoing monitoring when extending substantial credit to SHG members. Additionally, the regression analysis underscores the importance of considering gender dynamics within SHGs. Although women-led SHGs generally perform well, there are inherent credit risks, particularly as both loan size and group size increase. Targeted interventions to support women-led SHGs could enhance repayment rates and reduce NPAs, given that the majority of SHG loans in these regions are managed by female-led groups. KEY WORDS: Non-Performing Asset, Self-Help Group, Bank-Linkage Programme, Loan, Financial Inclusion, Multiple Linear Regression.

What makes this online course tick?

The Community of Inquiry (CoI) (Garrison, Anderson & Archer, 1999; 2010) is well-established, widely accepted, and practical framework. It highlights social, cognitive and teaching presences in effective online learning communities. 23 Things International (23T) is an online, flexible course for research students and early career researchers. The course is self-directed and promotes the building of academic and research networks, familiarity with resources underpinning research, and establishing professional profiles. It was first implemented in 2020 and has been refined annually to better meet needs of participants. One of the features of the programme is the ‘pod group’ arrangement. Participants are connected to each other in groups (the pods) based on research interests. The size of the pods is kept to about ten, so to facilitate manageable and meaningful communication and discussion of topics within the programme. Each year, 23T participants have reported pleasing satisfaction levels. Using the CoI, this investigation examined possible reasons why. The study aimed to: (a) identify practices and structural mechanisms that seem to underpin the experienced success of 23T; and (b) articulate plans for more targeted evaluation-review-development. Data sources included: annual reports (2020-2023) on the course containing integrated analyses of participant evaluation data; the outline and structure of 23T, showing the fabric of the course, how it is organised and arranged and how it implemented; facilitators’ knowledge and experiences of conducting 23T. Data were organised using a simple matching process (Garrison et al, 1999). CoI elements were matched with practice examples from implementation, and evidence from the data. Positives, negatives, possibilities and conclusions were drawn about gaps and potential. Examples of evidence drawn the from the data sources about the 23T programme include: Teaching Presence: including the use of prompts built into the material presented online and the facilitators’ spoken and written interactions with participants through live activities and through blogs (boosting authentic participant application of their learning); Social Presence: pod groups and how they were arranged and supported; Cognitive Presence: range of topics covered and the participant activity surrounding the topics. To build on theoretical work investigating 23T (Stein, Sim & Rose, 2023), this study is helping us to pinpoint concrete elements that seem to be influencing online course effectiveness and enabling identification of ways to strengthen 23T’s future flexibility and attractiveness. This is pertinent because of the uniqueness of 23T, namely, that it is online, flexible and self-guided and has no formal assessment expectations and does not provide formal credit. Gauging what counts as effectiveness and success is quite different therefore from award courses normally offered by higher education institutions. Similar application of the CoI using our matching approach may be helpful for others in different contexts and settings who are planning and/or implementing online courses.

Evaluating the Differential Role of Public-Private Credit Sources in Financing Climate Change Adaptation Technologies for Rural Farmers in Delta State, Nigeria

This study analyses the differential role of public and private credit sources in financing climate change adaptation technologies among rural farmers in Delta State, Nigeria. A multiple-stage random sampling procedure was utilized, and data were collected from 338 farmers employing a semi-structured questionnaire. The investigation uncovered that the average income from formal credit sources (N212,553.85) was essentially higher than from informal sources (N137,514.79). Variables impacting the volume of credit from informal sources included farming experience, marital status, cooperative participation, credit access, interest rates, and income. Conversely, education level, cooperative membership, credit access, and income were key determinants of credit volume from formal sources. The Chow test results indicated a significant structural difference between the two groups, with a calculated statistic of 369.48 exceeding the critical value of 1.936 at the 5% significance level. This highlights a significant difference in the sum borrowed and access to credit between formal and informal sources, underscoring the significant role of formal credit in enhancing climate adaptation among rural farmers.

Determinants of Microfinance Demand (Evidence from Chiredzi Smallholder Resettled Sugarcane Farmers in Zimbabwe)

Despite the MFI insurgency, agricultural financing remains critically low, even though microcredit is widely accepted as both a substitute and compliment to formal credit. Zimbabwe is an agro-based economy and very little is known about the determinants of microcredit demand and microcredit size in smallholder resettled sugarcane farmers. Research is concentrated in short-term agriculture activities. Thus, this study aims to fill the unattended gap in lagged returns agriculture activities such as sugarcane production which takes at least a year to mature, hence, the greater need for agriculture financing alternatives such as microfinance. The study examined the determinants of both microcredit demand and loan size (magnitude of microcredit participation) by smallholder resettled A2 sugarcane farmers in Chiredzi. Primary data from 370 smallholder resettled sugarcane farmers (214 borrower participants and 156 non-borrower participants) were used. Probit and Tobit regression models were used for data analysis in STATA. Operational costs, interest rate, grace period, and land size significantly affect both the demand for microcredit and microcredit size, while education, household farming assets, extension services, and payback period significantly affect microfinance demand, and risk attitude/perception additionally determine microcredit size. Special microfinance schemes best suitable for the agriculture sector and crop/plant-specific agriculture financing schemes, currency, and macroeconomic stability are the major policy recommendations.

Growth and Performance of Self Help Group’s - An Exploratory Study

Today there are Mainstream Micro Finance Institutions like National Agricultural Bank for Rural Development (NABARD), Small Industries Development Bank of India (SIDBI) etc., which are creating micro credit, in rural areas by extending micro finance to Self Help Group (SHG’s) with the help of formal credit institutions, making it an effective poverty reducing strategy and simultaneously promoting rural development. SHG’s were initiated to empower the economically disadvantaged people, who were neglected by formal credit and savings institutions. Micro finance has shown that poor people, when given access to timely and responsive financial assistance, use the proceeds to not only increase their assets and income, but also repay their debts. NABARD, through its Micro Credit Innovations, is the facilitator and mentor of microfinance initiatives in the country. The model of Self help group- bank linage programme (SBLP) has evolved as a cost-effective mechanism for providing financial services to the unreached and deserving poor households. The initiative started as a pilot to link around 500 SHGs of poor to the formal financial institutions during the year 1992-93.The success of the pilot program has shown that Micro Finance can go beyond poverty reduction, to addresses issues of health, education, gender and over all development The present paper is a comparative study of the agency wise i.e. commercial banks, regional rural banks, and cooperative banks, performance in the SHG’s - bank linkage program in Telangana, from2014-18,. The paper also presents an in-depth, analysis of the number of self-help groups, Amount of savings outstanding, amount of loan outstanding of the SHGs, , and total loans disbursed to them through SBLP, generating micro credit to reduce poverty and boost rural development. Key words: NABARD, Micro Finance, SHG’s, SBLP, poverty reduction, rural Development,

Digital Financial Inclusion and Inclusive Growth ––Empirical evidence based on the China Household Panel Survey

As an innovation in traditional inclusive finance, digital inclusive finance is an important way to coordinate the income gap between urban and rural areas, popularize financial products and services, and promote the digitalization process. Therefore, this study matches the digital inclusive finance index with the Chinese household tracking survey, uses a panel data econometric model, a mediation effect model, and a moderation effect model to control for the characteristics of heads of households and families, and explores the impact mechanism of the development of digital inclusive finance on inclusive growth in urban and rural areas in China, with a view to providing a scientific basis and policy suggestions for promoting inclusive growth. The study finds that: First, digital inclusive finance has a significant income-increasing effect on both urban and rural households, among which it has a greater impact on rural households, which is conducive to narrowing the income gap between urban and rural areas; Second, digital inclusive finance improves rural household income and narrows the income gap between urban and rural areas by promoting rural household entrepreneurship and business activities and alleviating the formal credit constraints of rural households; Third, digital inclusive finance can generally promote families with access to the Internet, a strong ability to use digital tools, and small information constraints to start businesses and obtain formal credit. This study innovatively incorporates entrepreneurial quality into the research of the transmission mechanism; three theories of the "digital divide" are put forward and tested. Research value: Clarifying the transmission mechanism of digital inclusive finance to promote inclusive growth, and providing policy suggestions for the development of digital inclusive finance.

Credit Choices in Rural Egypt: A Comparative Study of Formal and Informal Borrowing

Access to finance is essential for fostering financial inclusion, improving household economic well-being, and stimulating economic growth. However, if not prudently managed, it can become a double-edged sword, increasing the risk of over-indebtedness, particularly among low-income households. This paper investigates the borrowing behavior of rural households in Egypt, exploring whether it is motivated by the optimization of intertemporal consumption or reflects deeper financial vulnerabilities. The study enhances our understanding of rural households’ financial behavior in Egypt and contributes to the literature by introducing perceived general self-efficacy as a key behavioral factor. The paper employs a quantitative methodology using a probit analysis of the Egypt Labor Market Panel Survey to explore the factors affecting the demand for formal loans, informal borrowing, and Rotating Saving and Credit Associations (RoSCAs). The results show that informal credit plays a dominant role in meeting rural households’ financial needs. A significant positive relationship between formal and informal credit suggests they are complementary. Elderly, married, less educated, and poorer individuals are more likely to seek both forms of credit, with employment stability being a key differentiator. Self-efficacy also has a significant positive effect. No significant regional differences are observed, except in the case of informal borrowing, with rural households in Upper Egypt showing less reliance, suggesting that social image may influence financial behavior in this region. The results suggest that demand for credit is driven by economic and financial vulnerability of rural households. The paper highlights key policy implications. First, to enhance participation in formal credit market, credit policies should offer more affordable, tailored credit relevant to starting a business rather than financing consumption, part of which is conspicuous. Second, the low self-efficacy among the rural poor suggests a need for policies that combine credit access with financial literacy and debt management support to prevent over-indebtedness.

Climate Risk Management among Smallholder Farmers: A Comparative Analysis of Flood-prone Alappuzha and Drought-affected Gondia in India

Climate change poses significant risks to agricultural systems worldwide, particularly in developing countries where smallholder farmers have limited adaptive capacity. This study examines the socioeconomic and demographic factors influencing climate risk management practices among smallholder farmers in two contrasting regions of India: the flood-prone Alappuzha district in Kerala and the drought-affected Gondia district in Maharashtra. Using data collected from 150 rice farmers, the research analyzes economic, social, technical, and physical dimensions shaping adaptive responses. Key findings reveal significant regional disparities in adaptive strategies. Alappuzha farmers exhibit greater resilience due to higher incomes, better compensation mechanisms, and stronger community networks. Their strategies primarily involve strengthening bunds, improving drainage infrastructure, adopting flood-resistant rice varieties, and relying on formal credit for support. Conversely, Gondia farmers face lower adaptive capacity, driven by limited access to credit, inadequate compensation, and weaker institutional support. Their climate risk management approaches include drip irrigation, planting drought-resistant crop varieties, and pursuing income diversification to reduce vulnerability. Education levels, access to insurance, and the use of localized weather information also play crucial roles in shaping adaptive capacity across both regions. The study underscores the need for targeted interventions to strengthen institutional support, expand educational programs, facilitate community networks, and improve access to localized weather information to enhance agricultural resilience to climate risks. These findings provide practical policy recommendations aimed at addressing region-specific challenges and leveraging local strengths to bolster adaptive capacity.

Concentrated bank market and SMEs’ collateral issues: a study of the firms of developing Asian countries

Collateral is a significant challenge for small and medium enterprises (SMEs) in acquiring formal credit. Bank market concentration can cause to increase collateral demand through enhancing bank market power. This study explores the relationship between bank market concentration and the collateral challenges faced by SMEs in accessing bank credit by employing a probit regression model. The analysis utilizes a sample of over 25,000 firms from 19 developing Asian nations. The datasets combine firm-level data sourced from the Business Environment and Enterprise Performance Survey (BEEPS) with country-level financial data obtained from the Global Financial Development Data (GFDD) which are provided by the World Bank. The results reveal a significant positive correlation between bank market concentration and the collateral challenges encountered by SMEs in developing Asian countries. In markets characterized by high levels of banking concentration, financial institutions tend to exhibit risk-averse behavior, manifesting in an increased propensity to demand collateral for both SME and large enterprise loans. Consequently, this heightened bank concentration exerts additional pressure on SMEs in acquiring bank credit. To foster an environment conducive to SME financing, countries with high levels of banking concentration should enact regulatory measures aimed at managing and constraining market concentration levels.

The Impact of Financial Inclusion on Household Incomes in China: An Empirical Study

Financial inclusion is considered one of the important determinants for improving the incomes of households. This research analysis is to estimate the impact of financial inclusion on household incomes in China. The data was obtained from China Household Financial Survey (CHFS) for the year 2017. This paper measures financial inclusion through its four dimensions, namely formal account, formal saving, formal credit, and formal insurance, based on the definition of financial inclusion by the World Bank, 2017. Three different econometric techniques, namely Ordinary Least Squares, Quantile Regressions, and Instrumental variable methods, are used to empirically test the influence of inclusive finance on income in China. The instrumental-variable method was used to cope with the problem of endogeneity. The results of this research showed a significant relationship between households’ incomes and formal accounts, formal savings, formal credit, and formal insurance in China. This study found that the main driver of household income is financial inclusion, as these two are positively correlated. The main determinants of financial inclusion are significant variables for households’ incomes in China. Thus, this study concluded that financial inclusion helps to reduce income inequality. Hence, this research work recommended that policymakers in China should devise such policies to further improve the status of financial inclusion, ensuring a reduction in income inequalities.

Factors Influencing the Use and Choice of Formal Agriculture Credit Sources among Rice Farmers in Chitwan District, Nepal

Agriculture credit is important to sustain and further improve farming practices among rice farmers in developing countries like Nepal. Agriculture credit from formal sources safeguard farmers from fraud and misconduct which are common in informal sources. An investigation was carried out in Chitwan district of Nepal during January, 2023 to identify the factors influencing the use of formal agriculture credit among rice farmers. Further, factors influencing choice of sources among formal agriculture credit users was also assessed. Using random sampling, 59 formal agriculture credit users and 46 informal agriculture credit users were used for the study. Descriptive statistics and logit model were used to interpret the findings. Results revealed that use of formal agriculture credit increases with availability of off-farm income source and membership to agricultural cooperatives among farm household. Efforts should be made to promote participation in agricultural cooperatives to increase usage of formal agriculture credit among farm household. Similarly, choice of cooperatives over bank and microfinance increases with less formal education of the household head and non-availability of off-farm income source among farm household. Likely, choice of bank increases with no participation in agricultural cooperatives and choice of microfinance increases with higher contact with extension workers. Agriculture cooperatives should be further strengthened to provide timely and adequate credit, as it seems to support formal credit users characterized by lower formal education and no off-farm income source.

The crucial role of bioimage analysts in scientific research and publication.

Bioimage analysis (BIA), a crucial discipline in biological research, overcomes the limitations of subjective analysis in microscopy through the creation and application of quantitative and reproducible methods. The establishment of dedicated BIA support within academic institutions is vital to improving research quality and efficiency and can significantly advance scientific discovery. However, a lack of training resources, limited career paths and insufficient recognition of the contributions made by bioimage analysts prevent the full realization of this potential. This Perspective - the result of the recent The Company of Biologists Workshop 'Effectively Communicating Bioimage Analysis', which aimed to summarize the global BIA landscape, categorize obstacles and offer possible solutions - proposes strategies to bring about a cultural shift towards recognizing the value of BIA by standardizing tools, improving training and encouraging formal credit for contributions. We also advocate for increased funding, standardized practices and enhanced collaboration, and we conclude with a call to action for all stakeholders to join efforts in advancing BIA.

Informal Credits in India’s Agriculture Sector: Debt Incidence, Size and Distribution across Major Farm-size Groups

Until recently, studies on agricultural finance in India mostly focus on farmers’ access to formal credits, thereby largely sidelining their informal borrowings. This study makes an effort to present an analysis of farmers’ informal debts and their distribution across the major farm-size groups in India. The study uses unit-level data from the 77th round ‘Situation Assessment Survey (SAS)’ of agricultural households conducted by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MOSPI), Government of India (GOI), during January–December, 2019. Data were collected for the reference period of July 2018–June 2019. We use descriptive statistics and multivariate regression procedures for analysis. Results show that about one-half of the borrowers continue to depend on informal credit sources—partially or fully. Informal sources also account for about one-third of the total debt of the agricultural households. Informal debt incidence (IDI) and informal debt share (IDS) are found to be higher among the smallholders. Our findings are imperative of policy measures to improve the current state of the antecedents of formal credit access to benefit the otherwise high default risk and credit-rationed smallholders. Future studies may focus on formal credit rationing, informal credit terms and repayment burden of the agricultural households in India.

Women entrepreneurs in rural Nigeria: formal versus informal credit schemes

PurposeThis study examines why low-wealth women entrepreneurs forgo mobile enabled money services and government supported micro finance for informal, community-based revolving loans in rural Nigeria.Design/methodology/approachThematic analysis of 25 interviews with women in rural, south-west Nigeria. Entrepreneurial ecosystem theory, in the gendered context of micro finance and community-based lending, is employed.FindingsThis study explains the paradox of forgoing seemingly accessible mobile enabled credit, and formal credit schemes (e.g. micro-finance programs) for informal, one-on-one borrowing. Convenience and trust-based relationships with respected community members ease the burden of time scarcity and vulnerability associated with formal capital. Flexible terms, autonomy, self-reliance and knowing who one is dealing with make Esusu a preferred source of finance. Findings are discussed in the context of gendered entrepreneurial ecosystems in which participants conduct business.Research limitations/implicationsThe sample is not representative of women entrepreneurs in rural Nigeria. Survivorship bias is acknowledged. Further research is needed on the psychological risks of informal capital and the benefits of community-based lending.Practical implicationsMeasures to scale mobile enabled credit, without commensurate interventions to address time management and other structural issues that confront women traders, limit their utility and impacts. Power differentials between women traders and lenders must also be considered in the design of lending products. Training of women traders and formal lenders should incorporate curricula about gender gaps in capital markets and systematic gender challenges to support entrepreneurs who seek to grow beyond subsistence enterprises.Originality/valueThis study documents decision criteria that motivate informal rural women traders to employ community-based revolving credit or Esusu. Findings inform measures to increase women entrepreneurs' access to capital in a rural sub-Saharan Africa contexts.

Welfare impacts of drought adaptation strategies in John Taolo Gaetsewe district, Northern Cape Province, South Africa

Drought is a global problem that presents a negative impact on the welfare of millions of people in both industrialized and developing nations. In South Africa, poor rural households, who depend on rain-fed subsistence agriculture for their livelihoods are the most susceptible to drought, and have the least ability to absorb its impacts. The primary goal of this study was to analyse the effects of drought adaptation strategies on rural households’ welfare and to compute the welfare enhancement impacts that are associated with each adaptation method. The study was conducted in John Taolo Gaetsewe district, Northern Cape province. Multistage sampling technique was used to sample 360 rural households, who were affected by drought. The results showed that the average age of households’ heads was 52 years. Only 41% of the households’ heads had an education level between Grades 8 and 12, and about 63% were male. Average farming experience was 7.67 years and pensioners made up about 47%. Also, 65% of households’ heads depended on government assistance, while 85% lacked access to formal credit. The 2SLS results showed that household income, household size, pension, grant, and use of crop diversification significantly influenced per capita consumption expenditure. The results showed that average treatment effect (ATE) from crop diversification was R497.16 and statistically significant (p<0.05). It was concluded that many drought adaptation methods are not influencing households’ welfare, and efforts to promote adaptation should focus on crop diversification with specific assistance given to social grant holders. Res. Agric. Livest. Fish. Vol. 11, No. 2, August 2024: 185-196

The impact of formal and informal credit institutions on entrepreneurship

Purpose How do informal lending institutions affect entrepreneurship? This paper aims to investigates the role of formal and informal credit market institutions in the decision to become an entrepreneur over the life cycle. Design/methodology/approach The author developed a dynamic Roy model in which a decision to become an entrepreneur depends on the access to formal and informal credit markets, nonpecuniary benefits of entrepreneurship, career-specific entry costs, prior work experience, education, unobserved abilities and other labor market opportunities (salaried employment and nonemployment). Using detailed Russian panel microdata (the Russia longitudinal monitoring survey) and estimating a structural model of labor market decisions and borrowing options, the author assesses the impact of the development of informal and formal credit institutions. Findings The expansion of traditional (formal) credit market institutions positively impacts all workers’ categories, reduces the share of entrepreneurs who borrow from informal sources and incentivizes low-type entrepreneurs to switch to salaried employment. The development of the informal credit market reduces the percentage of high-type entrepreneurs who borrow from formal sources. In the case of default, a higher value of the social network or higher costs of losing social ties demotivate low-type entrepreneurs to borrow from informal sources. The author highlights the practical implications of estimates by evaluating policies designed to promote entrepreneurship, such as subsidies and accessibility regulations in credit market institutions. Originality/value This study contributes to the literature in several ways. Unlike other studies that focus on individual characteristics in the selection for self-employment [Humphries (2017), Hincapíe (2020), Gendron-Carrier (2021), Dillon and Stanton (2017)], the paper models labor and borrowing decisions jointly. Previous studies discuss transitions between salaried employment and self-employment, taking into account entrepreneurial earnings, wealth, education and age, but do not consider the availability of financial institutions as a driving factor for the selection into self-employment. To the best of the author’s knowledge, this paper shows for the first time that the transition from salaried employment to self-employment is standard and consistent with changes in access to financial institutions. Another feature of this study is incorporating both types of credit markets – formal and informal. The survey by the European Central Bank on the Access to Finance of Enterprises (2018) shows 18% of small and medium enterprise in EU pointed funds from family or friends. Therefore, the exclusion from consideration of informal credit markets may distort the understanding of the role of the accessibility of credit markets.

Credit in agrarian India: narrative policy struggles over farmer surplus

Debt is fundamental to agrarian life across the world. In India, over half of agricultural households are indebted and borrow from myriad credit sources. Formal institutional credit (e.g., bank loans) has historically, and up to the present day, been proposed as a tool for rural development and to eliminate exploitative informal moneylenders. This is true in India, where despite decades of state policies to displace informal lending using formal credit, informal lending persists and increasing debt is an ever-present symptom of the agrarian crisis. Informal lending made up 30% of farmers’ credit sources in 2019; for farmers who owned less than 0.01 ha of land, this was 71.8%. In this paper we provide an historical examination of the numerous state responses to the proliferation of agrarian debt, surveying lending policy as a state development tool in India. We analyze how moneylending has been treated in different historical periods and the increasing participation of the state (from colonial to present times) in agrarian debt and use a Narrative Policy Analysis to synthesize the underlying “narratives” that characterize evolving policy forms. In the process, we reveal not only a consistent narrative assuming the displacement of informal credit with formal credit, one contradicted by the situation on the ground: an absolute increasing trend in borrowing, and a crucial propagation of the number and variety of credit sources. This we observe to be precisely a result of the largely fruitless state effort to formalize credit and to eliminate informal lending. This persistent discourse that posits formality as a solution to informality, we further conclude, is not only a cultural project of the colonial, post-colonial, and modernization state, but one essential for the circulation and accumulation of capital, enhancing its urgency. The failed effort to eliminate informal lending has resulted, furthermore, in a decline in farmer autonomy and the creation of a state-underwritten struggle − between multiple actors in the credit sector − over the redistribution of agrarian surplus.

Self-selection out of formal credit markets: evidence from rural Vietnam

PurposeThis paper examines why farmers self-select out of formal credit markets even though they need external funds.Design/methodology/approachWe use probit and Bayesian probit estimators to detect the determinants of self-selection behavior based on a primary dataset of 2,212 rice farmers in Vietnam. After that, we use the multinomial probit (MNP) and Bayesian MNP estimators to reveal the impact of relevant factors on the decision to self-select for farmers belonging to each self-selection category.FindingsThe probit and Bayesian probit estimators show that the decision to self-select depends on household head age, income per capita, farm size, whether or not to have relatives or friends working for banks, the number of previous borrowings, risks related to natural disasters, diseases, and rice price, and the number of banks with which the farmer has relationships. The MNP and Bayesian MNP estimators give further insights into the decision of farmers to self-select in that determinants of the self-selection behavior depend on the reasons to self-select. In concrete, farm size and the number of previous borrowings mitigate the self-selection of farmers who did not apply for loans due to having access to other preferred sources of credit. The self-selection of farmers not applying for loans because of unfavorable loan terms is conditional on household head age, farming experience, income, farm size, the number of previous borrowings, natural disaster risk, and the number of banks the farmer has relationships with. Several factors, including education, income, the distance to the nearest bank, whether or not having relatives or friends working for banks, the number of previous borrowings, risks, and the number of banks the farmer has relationships with, affect the self-selection of farmers not applying for loans because of high borrowing costs. The self-selection of farmers not applying for loans because of complex application procedures depends on income and the number of previous borrowings. Finally, the household head’s age, gender, experience, income, farm size, the amount of trade credit granted, the number of previous borrowings, natural disaster risk, and the number of banks the farmer has relationships with are the determinants of the self-selection of farmers not applying for loans because of a fear not being able to repay.Practical implicationsThis paper fills the knowledge gap by investigating why farmers self-select out of formal credit markets. It provides evidence of how the farmers’ subjective perceptions of rural credit markets contribute to their self-selection.Originality/valueThis paper shows that demand-side constraints are also vital for farmers’ access to bank credit. Improving credit access via easing supply-side constraints may not increase credit uptake without addressing demand-side factors. Given that finding, it recommends policies to improve access to bank credit for farmers regarding the demand side.

An Economic Analysis of Credit Utilization Pattern and Credit Gap for Grape Cultivation and Value Addition (Raisin Making) in Vijayapura District of Karnataka, India

Credit is an important factor triggering agricultural growth when it is utilized properly. The present study aims to analyze the credit utilization pattern and credit gap for grape cultivation and value addition (raisin making) in Vijayapura district, which is having the highest area under grape cultivation in Karnataka state. As the grape requires high maintenance expenses, its economic analysis is of great importance in its present status. The primary data was collected from 90 respondent grape farmers in the study area. The finding of the study revealed that the sample farmers borrowed an average of ₹ 1,46,883 from all the institutional sources for grape cultivation, and the utilization of borrowed institutional credit for grape production was ₹ 1,09,376 (74.5%), and ₹ 37,507 (25.5%) of borrowed institutional credit was diverted for raisin production. For raisin making the sample farmers borrowed a total of ₹ 1,67,372 in credit from non-institutional sources in the study area. ₹ 138,440 (82.72%) of borrowed non-institutional credit was utilized for raisin making and ₹ 28,932 (17.28%) of borrowed credit was diverted other purposes by the sample farmers. The total credit gap was found to be 58.49, 59.97, and 59.12 per cent from commercial banks, regional rural banks, and cooperative bank/societies respectively. The findings also indicated that the sample farmers used the borrowed institutional and non-institutional credit more effectively to increase their revenue, diverting it less often for other uses. Many farmers do not receive institutional credit in an adequate quantity, at the appropriate time, or at a reasonable cost. Therefore, there is a need to focus on existing access and the quantum of formal credit used for agricultural purposes by different farmers in rural areas of Vijayapura district.