Formal Financial Market Research Articles

Impact of Formal Financial Market Participation on Farm Size and Expenditure on Variable Farm Inputs: The Case of Maize Farmers in Ghana

The study examined maize farmers’ participation in the formal financial market and its impact on farm size and expenditure on variable farm inputs. A multistage sampling method was used in selecting 595 maize farmers from the seven districts in Ashanti and Brong Ahafo Regions of Ghana. A structured questionnaire and interview schedule were used to elicit information from the respondents. The impact of formal financial market participation on farm size and expenditure on variable inputs was estimated using Propensity Score Matching (PSM) method. The results of the study showed that formal financial market participation has the potential to significantly increase expenditure on variable inputs by farmers and consequently use of improved technology. Therefore, formal financial market participation should be encouraged through education and promotional activities.

Factors Influencing Small Scale Farmers’ Attitude and Participation in Formal Financial Markets in Mahikeng Municipality, South Africa

This study focused on the participation of small scale farmers in formal financial market. The study investigated socio-economic characteristics of small-scale farmers, constraints and attitude towards formal financial markets in the Mahikeng municipality of the North West Province. Structured questionnaire were used to collect data from farmers and were analyzed with Statistical Package for the Social Sciences using, frequency counts, percentages and multiple regression. It was found that, commercial banks and insurance institutions were most popular among farmers. Household size (t=2.491), farming experience (t=-2.521) and membership of far mers group (t=2.36) significantly influence participation in formal financial markets. Educational level (t=2.205), farming experience (t=2.302) and extension contact (t=-1.969) were the determinants of farmer's attitude towards formal financial markets

An Analysis of the Structure of Interest Rates in Taiwan: An Application of the Vector ARIMA Model

The structure of interest rates in Taiwan is analysed through the vector ARIMA approach using monthly and quarterly data from 1978 to 1989. These rates are the regulated bank interest rate and unregulated money market interest rates in the formal financial market and the kerb rate in the informal market. The results show that the adjustments in the bank interest rate follow that of the money market interest rate. Furthermore, the time lag has been shortened from one quarter in the early stages of interest rate liberalization in Taiwan to only one month in the later stages. Increases in the money market interest rate might be followed by an increase in the kerb market interest rate because of partial market segmentation. In periods when there is excess supply of funds in the banking sector, an increase in the bank rate might be followed by a decrease of the kerb rate. The interest rates structure of Taiwan is relevant to developing countries which have an informal financial sector.

Segmentation in rural financial markets: the case of Nepal

Based on a farm household survey in Nepal, this study found that farm size and irrigation are major determinants of borrowing from formal institutions, whereas family size is the most decisive factor in borrowing from informal sources. Formal sector borrowing per hectare of cultivated area, however, initially increases and then decreases with farm size. Our analysis indicates that while very small farmers tend to be excluded from the formal financial market because of a lack of collateral, very large farmers choose to borrow less from that source because of lower production efficiency.

Socio-Economic Development Through the Informal Credit Market

While a number of in-depth studies have been carried out on the role of the formal financial market (Gurley and Shaw, 1955; Patrick, 1966; Porter, 1966; Goldsmith, 1969; McKinnon, 1973; Shaw, 1973, to mention a few), the informal or unorganized financial sector has largely been neglected. While discussions about the operations of the informal market were popular about 20 years ago (Geertz, 1962; Ardener, 1964; Anderson, 1966; Kurtz, 1973) they have gradually been relegated to the side-lines and this is despite the fact that the said market is neverthel ess of significant size and importance (as will be illustrated elsewhere in the paper).