Interlinked Transactions Research Articles

Agricultural Indebtedness and Livelihood Diversification in Uttar Pradesh: A Study of the Eastern and Bundelkhand Regions

The study aims to address the issue of indebtedness among agrarian households and the associated livelihood diversification using the cases of the Eastern and Bundelkhand regions of Uttar Pradesh. It raises the following broad questions: What is the nature and extent of the debt burden experienced by the farmer households of the study areas? How do these households diversify their livelihood strategies? And what explains the livelihood outcomes of these households? It is argued that the skewed distribution of productive resources in the study regions leads to various kinds of interlinked transactions among agrarian classes in the context of production and exchange. Such interlinkages are essentially exploitative, resulting in lower crop productivity and lower returns from cultivation. In the face of lower returns from cultivation, farmers are compelled to take recourse to borrowing. The majority of these borrowings, especially by the poorer classes, are from informal sources, exposing them to usurious extortions at the hands of money lenders, traders and rich peasants/farmers, leading to difficulties in meeting payment obligations and, finally, to indebtedness. The higher debt burden has resulted in an increased livelihood diversification by agrarian households in recent years, mostly to the informal sector. We term it forced livelihood diversification, because such diversification is not the natural outcome of a development process but is forced upon the peasantry because of the non-viability of cultivation.

Tobacco Farmers and Their Communities: Interlinkages, Gains and Losses in Mazowe, Zimbabwe

This article investigates spillover effects from the interlinked transactions arising from smallholder tobacco farmers’ participation in contract farming arrangements in the Mazowe district of Mashonaland Central. The case study is based on data from a household survey conducted in the district and includes both tobacco farmers and households that do not produce tobacco. Interviews, participant observation and a review of statistical data and grey literature helped trace dynamics of production, intra-household relations and changing communal relations. The study explores how social relations and power imbalances shape the distribution of benefits, costs and losses resulting from the adoption of contract farming in the production of tobacco. The paper argues that the adoption of contract farming leads to a range of interlinked transactional outcomes, such as the diversification of agricultural production and new investments into non-farm activities by the poorer members of the community. In turn, these interlinked transactions generate jobs and increase food consumption and effective demand for services at the community level. However, it is also the case that the gains from these interlinked transactions are highly skewed against the poorer people in the district and that wealthier and better-connected farmers gain more from adopting tobacco than their less wealthy and less well-connected peers. This could lead to increased inequality in the community. The paper shows how agricultural dynamism generates spillover and multiplier effects that benefit communities in an unequal and poorly understood manner.

The persistence of credit–labor interlinked transactions in rural Myanmar: The case of Kanyingu Village in Ayeyarwady Delta

Financial inclusion has been one of the key agendas for poverty reduction in development practices since the mid-2000s. However, informal finance has clearly not been completely replaced by formal finance in the Global South. This study examines labor-tying credit, which is one type of informal finance, and based on a case study in the Delta region of Myanmar, the study explores the reason for which it persists despite the promotion of financial inclusion policies.This paper found that credit–labor interlinked credits or advance wage payments from farmers to agricultural laborers persist because subsistence is still the key element of life for the poor in rural Myanmar. Formal finance, which includes microfinance and conventional types of informal finance such as credit from money lenders, is only a partial substitution. The poor must stabilize consumption or meet other basic needs in the lean season, and there is no better option or credit source available. In the reality of the subsistence-oriented poor, “How much is left?” is more important than “How much is taken?” Therefore, the high interest rates involved in labor-tying credit is not the major concern of its recipients because of the immediacy of such advances.

Intermediaries, transport costs and interlinked transactions

AbstractFarmers in developing countries often encounter difficulties selling their products on local markets. Inadequate transport infrastructure in rural areas and large distances between areas of production and consumption mean that farmers find it costly to bring their produce to the market and this very often results in small net margins and poverty among farmers who are geographically isolated. Agriculture in developing countries is characterized by the presence of intermediaries that have a cost advantage over farmers. Because of their market power, these intermediaries are able to impose interlinked contracts and are free to choose the spatial pricing policy they use. In this paper, we develop a model of input–output interlinked contracts between an intermediary and geographically dispersed farmers. We establish when the intermediary uses either uniform or mill pricing policies, as opposed to spatial discriminatory pricing. For each pricing policy, we analyze what the welfare implications are in terms of an increase in farmers' income and a reduction in poverty in rural areas. We also establish how the choice of a spatial pricing policy impacts geographically isolated farmers and how it influences the participation by farmers.

Interlocking Factor Market in Agrarian Economy of Sri Lanka

Informal credit market plays a crucial role in the rural sector in developing countries. Prices of goods and services, in general, in the competitive markets are determined by the market forces but, prices of factors of production in agrarian economy are interlinked, thus reward of land, labour and credit also are determined by the interlockers.. An interlinked transaction is one in which the parties trade in at least two markets on the condition that the terms of all trade between them are jointly determined (Bell and Srinivasan, 1989). Agriculture sector is the foremost economic activity in Sri Lanka. Nearly 70 percent of total population living in rural areas depends completely or partially on agriculture sector. The main objective of the study is to examine the incidence of different types of linkages prevalent in the developed and backward villages among paddy farming households in Sammanthurai Divisional Secretariat area of Ampara district in Sri Lanka. This study is based on primary data and the data related to the year 2011-2012 (2011 Yala and 2011-2012 Maha). According to the results 95 per cent of the households in backward villages and 65 per cent of households in developed villages are involved in interlinked credit transactions, Hence, the result exhibits that interlinked credit transaction is higher in backward villages than that of developed villages. The results further reveal that Cash-to-Labour and Kind-to-Labour transactions in developed villages are allowed free of charge. Kind-Cash and Input-to-Output transactions are completely seen in the backward villages. Input-to-Output market link which is foremost in the backward villages and it is found to be exploitative to the paddy farmers.

Accessibility of Bank Credit by the Muslim Minorities in West Bengal – A Case Study

The study on credit facilities to Muslim minority community in West Bengal initially deals with some aspects of credit facilities that the Muslim minority community of West Bengal, may avail of. Issues related to availability, accessibility and utilization of such facilities from the different sources are taken up. The two main sources of credit namely the formal and the informal, the constituent components of which include the banks, financial institutions, govt. organizations, money lenders, friends, relatives etc. are touched upon in this study. The study derives its theoretical background from the rich body of the literature that has developed over the years on credit transactions formal as well as informal in the agrarian economy. The primary focus of this research is on interlinked transactions. It has been examined whether interlinked transactions may exist in the non-agrarian sphere of the activity profile of the Muslim minority community, so far as their relations are concerned. The main aspects of the study are formal credit sector versus informal credit sector dichotomy, comparative strength of the informal sector, sources of formal and informal credit, accessibility and functioning of formal and informal credit & market interlinkages.

Interlinked contracts and social power: Patronage and exploitation in India's waste recovery market

Interlinked contracts have been examined almost exclusively in the context of the rural sphere. This article describes the nature of exchange regimes between two sets of primary collectors of recyclable waste, that is, waste pickers and itinerant buyers, and their dealers, in the city of Delhi. Far from the casualised labour transaction commonly described for the unorganised urban sector, the findings portray a picture of personalised and surprisingly long-term exchange between the parties. While a new institutional economics approach might explain the underlying motivation and consequent general form of the implicit contracts, it cannot explain the differential nature of each. It is suggested that in order to do that a political economy approach must be taken. This would understand interlinked transactions as being embedded within and consequently influenced by the particular social context, in this case of an inequitable and impermeable caste hierarchy amongst those that engage in waste work.

Operation Barga, ‘Efficiency’ and (De)interlinkage in a Differentiated Structure of Tenancy in Rural West Bengal

Operation Barga in West Bengal caused a decline in the institution of tenancy over a period of two decades. Contrary to conventional wisdom, the field-level data shows that the tenant households are placed in a highly heterogeneous and differentiated manner in society, which is similar to that of the pattern of distribution of general (tenant plus non-tenant) households. We find that tenant households are less productive than the general category of households and, therefore, less efficient. The yield level of recorded tenant households is also distinctly higher than unrecorded tenant households. Recorded tenants are enjoying lower rental rate than unrecorded tenants. The possibility of interlinked transactions has been remote among tenant households.

Interlinked Transactions in Cash Cropping Economies: The Determinants of Farmer Participation and Performance in the Zambezi River Valley of Mozambique

This paper investigates the determinants of participation and performance of tobacco contract farmers, and the effects of participation on overall crop and household incomes in the Zambezi Valley of Mozambique. We test the existence of threshold effects in land holdings and educational attainment to identify the types of farmers that benefit. Several results stand out. First, participation in the schemes is driven by factor endowments, asset ownership and alternative income opportunities, and very little by demographic factors. Second, we find no returns to education in tobacco; this result is consistent with previous research in Mozambique but surprising in an agronomically demanding crop like tobacco. Third, there appear to be economies of scale in tobacco production, perhaps through more efficient use of hired labor. If true, tobacco could drive greater economic differentiation through the growth of “emergent” or commercial smallholder households – something that has been conspicuously lacking in Mozambique to date. Fourth, farmers without wage income are more likely to grow tobacco; since other research shows that wage labor has driven most income growth in Mozambique over the past six years, tobacco could be inequality reducing. Tobacco growers also hire much more labor than non-growers, contributing to second-round inequality reducing effects. Further analysis, preferably in a general equilibrium framework, is needed to understand how the simultaneous forces of economic differentiation and spreading of economic benefits will affect income distribution. Potential adverse environmental impacts also deserve far more attention than they have received to date.

Agricultural Tenancy in India: Growth Promoting or Growth Retarding

Tenancy is gaining significance in Indian agriculture in recent times. It takes the form of fixed rent in the areas of assured irrigation and sharecropping in the areas of uncertain irrigation and low cropping intensity. With high use df purchased inputs like chemical fertilizers and pesticides, the importance of tenancy declined in rain-fed agriculture. There is no evidence of inter-linked transactions of land, labour and credit in the areas studied in Andhro Pradesh. On the other hand, tenancy leads to increase in labour use, cultivation of high valued crops, high participation of family labour and development of non-farm activities like dairying. Though tenancy agreements are oral and for short period, there is no frequent change of tenants. However, legalizing tenancy confers certain benefits to the tenants like access to the credit and insurance markets and removes imperfections in the land markets like choosing the tenant on the basis of caste.

COMPETITION AND POWER IN RURAL MARKETS: A CASE STUDY FROM ANDHRA PRADESH

Summary In a study of two villages in Andhra Pradesh, done in 1986/87, there were clear linkages between credit transactions and sales of crops. Producers from powerful classes were able to control the timing of sales of their crop, and hence obtain better prices; by contrast, petty commodity producers sold their groundnut crop soon after harvest, often to their moneylender. The latter obtained relatively low prices for their output. In one village, personal clientelization of borrowers ‘tied’ them to a particular merchant in a long‐term relationship involving interlinked transactions. In a more developed village nearby, with more competition, personalized clientage was less common. In both villages, small producers were forced, through a process of subtle manipulation, to sell groundnut at disadvantageous prices. Meanwhile, paddy (rice) was grown on a small scale by farmers, but they were not forced to sell that crop; instead they used it for home consumption. The article suggests ways of improving future research on power within such markets.

Share contracts and their rationale: Lessons from marine fishing

Most of the existing literature on share contracts is based explicitly or implicitly on agriculture, a sector in which share contracts are seldom dominant and apparently on the decline. Moreover, since agricultural activities have some rather special characteristics, the purpose of the present article is to analyse contractual choice and especially the choice of share contracts in a sector in which share contracts are dominant, namely fishing. In the process of explaining the dominance of share contracts in fishing, the article also explains (a) some heretofore neglected features of these share contracts, such as the way in which shares are calculated and the treatment of repair and maintenance expenditures, (b) the nature and extent of interlinked transactions, (c) the exceptional cases where share contracts are not used, and (d) the relevance of varying environmental conditions and especially those of poor developing countries to the nature of contracts in fishing, and to the differences therein between...