Limited Access To Credit Research Articles

Does improved credit access promote pollution reduction? The role of bank proximity

The impact of the spatial proximity between banks and enterprises on industrial pollution reduction remains underexplored, particularly in areas with limited credit access. Previous studies have focused on the influence of environmental regulations and green credit initiatives; however, the significance of the financial sector's spatial distribution remains uninvestigated. Our research develops a model illustrating that improved credit access facilitates greater investment in emission reduction, leading to more effective pollution control as financing becomes more accessible. Using data from China's bank branch expansion, we empirically show that closer proximity between banks and enterprises significantly enhances pollution mitigation efforts. Our findings reveal that a more accessible banking network eases credit constraints and promotes eco-friendly practices without impeding economic growth, particularly by aiding less efficient and more polluting enterprises. This study sheds light on the crucial role of financial accessibility in advancing environmental performance and provides valuable insights for policymakers and financial strategists.

How Do Cash Windfalls Affect Entrepreneurship? Evidence from the Spanish Christmas Lottery

Abstract We show cash windfalls affect the real economy by spurring entrepreneurship. We identify these effects using the Spanish Christmas Lottery, which provides a unique setting as prizes are geographically concentrated and distributed among thousands of households. We find higher start-up entry, job creation, and self-employment in winning regions. Consistent with a financial constraints channel, results are strongest in sectors relying on external finance and regions with limited credit access. Newly created firms are larger, more profitable, and survive longer. For existing firms, however, growth and profitability do not respond to lottery awards, but wages increase due to tighter labor markets.

Improving dairy farmers’ welfare in Indonesia: Does cooperative membership matter?

AbstractDairy farmers in developing countries face numerous challenges, including price instability, limited credit access, outdated technology adoption, market barriers, and poverty. Cooperatives offer promising solutions to farmers’ problems and help them enhance their agricultural sustainability. Although the impact of cooperative membership has been widely investigated, little evidence is found in dairy farming households. This study estimates the impact of cooperative membership on dairy farmers’ household incomes, net returns, and profits from dairy products (processed and fresh milk). The cross‐sectional data were collected from 300 dairy farmers in East Java, Indonesia. Inverse probability weighting with regression adjustment (IPWRA) and two‐stage predictor substitution (2SPS) were used in the analysis to address the selection bias in the estimation. The findings are corroborated by a robustness check using propensity score matching. The results show that dairy farmers’ decisions to join a cooperative are positively and significantly influenced by farming experience, transportation ownership, number of cattle owned, and involvement in social activities and are negatively influenced by age. Cooperative membership significantly improves farmers’ welfare by increasing their household incomes, net returns, and profits from fresh milk products. However, the membership reduces profits from processed milk products. These findings suggest that the government should encourage farmers to participate actively in cooperatives.

Enduring lending relationships and european firms default

This paper investigates the link between close banking relationships and European manufacturing firms’ defaults. Based on binary outcomes (i.e., Logit, Probit, Complementary log-log) and discrete-time models, the empirical analysis reveals that enduring lending relationships present benefits in reducing firms’ temporary and permanent defaults. This evidence suggests that, in a framework of limited credit access that may compromise firms’ survival, relationship lending might represent an effective tool for overcoming asymmetric information problems, helping firms relax credit constraints, encouraging greater discipline in their managers, and preventing failure.

Farmers’ preference for digital credit: Does the delivery channel matter?

AbstractPrevious studies highlight the limited credit access for farmers compared to non-agricultural firms in sub-Saharan Africa. A new innovation that has the potential to serve the financing needs of farmers in sub-Saharan Africa is digital credit. However, empirical studies on farmers’ preferences for digital credit are limited. Formal financial institutions and mobile network operators are two different delivery channels for digital credit with different loan characteristics. We apply a discrete choice experiment to investigate smallholder farmers’ preferences for digital credit in Madagascar. Our results show that digital credit is more attractive for farmers if it offers a lower interest rate per month, longer loan duration, and flexible repayment conditions adapted to farmers’ production needs. Our results highlight the potential of digital credit for rural farmers if mobile network operators could provide digital credit with longer loan maturities, and formal financial institutions could offer digital credit with more flexible repayment conditions.

Analysis of Credit Access, U.S. Agricultural Productivity, and Residual Returns to Resources

AbstractWe examine the relationship credit access has had with the U.S. agricultural productivity and residual returns to resources. Our theoretical analysis suggests that limited credit access can be sufficient to prevent a representative farmer from maximizing both short- and long-run profits. Empirical results show that increased credit access is positively associated with both productivity and residual returns to resources. Our findings imply that one way to stimulate the U.S. agricultural productivity growth is to increase credit access. They also provide strong empirical support for the productivity-stimulating value of programs such as the Farm Service Agency’s Farm Loan Program.

Credit Market Conditions and Agricultural Performance in Sub-Saharan Africa

Agriculture is important for Sub-Saharan African development being a major source of poverty reduction, job and wealth creation. However, limited access to credit due to weak financial systems has over the years remained a major constraint for the sector. Extant studies show mixed and inconclusive results, suggesting that the effect of credit market on agriculture is influenced by other intervening variables. Accordingly, this paper examines the extent to which credit market conditions affect agricultural productivity. The study adopts a model that draws inspiration from a standard agriculture household framework that integrates both consumption and production decisions of farm households. In terms of methodology, the paper departs from existing literature because it gives due consideration to technological heterogeneity across countries. The model is estimated using pooled ordinary least square and fixed effect panel data estimator that accounts for omitted variable bias. The study uses yearly panel data for the period 1990-2015 for West Africa (13), Southern Africa (11), Central Africa (6) and East Africa (5); resulting in 35 Sub-Saharan African countries. The findings reveal that credit market conditions in terms of low lending rates and credit to the private sector are important for agricultural development within the sub-regions considered and this result is consistent after controlling for other important agricultural inputs. The empirical analysis further shows that limited credit access particularly in the East and Central African sub-regions compared to West and Southern Africa inhibits productivity. More so, availability of critical factor inputs such as agriculture equipment, fertilizer, infrastructure and precipitation exert a positive and significant impact on agriculture output. The results unexpectedly reveal that the effect of labor on agriculture output is negative and this outcome is traced to the low productivity of agriculture workers. The results are robust using an alternative estimator (fixed effect) and measure of the dependent variable (cereal yield). The results have important policy implications. First, lowering lending rate is a viable option for improving credit to the sector in addition to enhancing agriculture sector programs. Second, intensification of efforts particularly towards rural infrastructure development and indeed the provision of agriculture support systems that promote all-year farming may be considered.

Distributional role of monetary policy under limited credit access

The paper explores the redistributive effects of a monetary policy shock in a limited participation framework with limited credit access. Expansionary monetary policy redistributes consumption from traders to non-traders. This redistribution is the largest when only financial market participants have a choice between multiple means of payments while non-participants do not. Welfare analysis reveals that the effectiveness of monetary policy on the economy is the greatest when all agents (financial market participants and nonparticipants) can choose from alternative means of payment in a financially segmented model. The model is calibrated to the US economy for quantitative analysis.

Distributional Role of Monetary Policy under Limited Credit Access

The paper explores the redistributive effects of a monetary policy shock in a limited participation framework with limited credit access. Expansionary monetary policy redistributes consumption from traders to non-traders. This redistribution is the largest when only financial market participants have a choice between multiple means of payments while non-participants do not. Welfare analysis reveals that the effectiveness of monetary policy on the economy is the greatest when all agents (financial market participants and nonparticipants) can choose from alternative means of payment in a financially segmented model. The model is calibrated to the US economy for quantitative analysis.

GOOD AGRICULTURAL PRACTICE - A STRICT DIRECTION IN FUTURE FOR SUSTAINABLE VEGETABLE CULTIVATION SYSTEMS IN RED RIVER DELTA, VIETNAM

Urbanization and industrialization in many parts of the world leads to rapidly changing environmental conditions along urban-rural interfaces. This has a direct impact on the people who are involved in urban and peri-urban horticulture, in particular on vegetable production. Because of increasing concerns about the risk of contamination of water, soil and agricultural products, the introduction of Good Agricultural Practice is being actively encouraged. This research was carried out in selected urban, peri-urban and rural regions in the Red River Delta, the largest vegetable cultivation area in Vietnam. The results show that there are many problems affecting vegetable production. Small-scale vegetable and mixed vegetable-rice farms, many of which are fragmented and threatened by urbanization, are currently using high amounts of soil amendments and pesticides. The use of organic fertilizer has declined, while the use of chemical fertilizer has increased. In addition, the high use of pesticides is not sustainable. Other problems include the farmer’s concerns about the declining income from their farm, limited access to credit and limited access to agricultural extension services. To investigate the sustainability of farms, a multi-criteria evaluation was done by pair-wise comparison using different weight factors based on five environmental sustainability indicators, four social sustainability indicators, and three economic sustainability indicators. The aggregate value for the overall sustainability index of vegetable cultivation systems in the urban area was 0.36, in the peri-urban area 0.52, and in the rural area 0.62, respectively. To achieve sustainable horticulture in the Red River Delta in Vietnam, the farmers need improved internal controls and traceability systems, as well as strict social control to implement good agricultural practice guidelines.

International business spillovers in South Eastern Europe: members of the stability pact

This study aims to investigate the effect of international business to productivity levels of members of the Investment Compact (IC) programme – an initiative under the umbrella of stability pact for South Eastern Europe (SEE). Although the findings are mixed, they indicate clearly the limited effect that the domestic direct investment associated with international business has on labour productivity, compared with the technology spillovers of Foreign Direct Investment (FDI). The limited access to credit within the region of SEE for the generation of investment funds promotes FDI to a vital ingredient for economic growth. In view of the intense competition to attract FDI, SEE is not only on the verge of having a competitiveness issue, but also in danger of dealing with a contraction in investment expenditure, labour productivity and economic growth.

Forgive and Forget: Who Gets Credit after Bankruptcy and Why?

Conventional wisdom holds that individuals who have gone bankrupt face difculties getting credit for at least some time. However, there is very little non-survey based empirical evidence on the availabil- ity of credit post-bankruptcy and its dependence on the credit cycle. Using data from one of the largest credit bureaus in the US, this paper makes three contributions. First, we show that individuals whole for bankruptcy are indeed penalized with limited credit access post-bankruptcy, but wend that this con- sequence is very short lived. Ninety percent of individuals have access to some sort of credit within the 18 months afterling for bankruptcy, and 75% are given unsecured credit. Second, we show that those individuals who have the easiest access to credit after bankruptcy tend to be the ones who have shown previously the least ability and least propensity to repay their debt. In fact, a signicant fraction of indi- viduals at the bottom of the credit quality spectrum seem to receive more credit afterling. We interpret the widespread post-bankruptcy credit access and the differential credit provision across borrower types as evidence that lenders target riskier borrowers. Employing a simple theoretical framework we show that this interpretation is consistent with a prot maximizing lender whose optimal strategy involves seg- menting borrowers by observable credit quality and bankruptcy status. This interpretation is also in line with survey evidence that shows lenders repeatedly solicit debtors to borrow after bankruptcy, especially with offers of revolving credit. Finally, we show that ourndings depend heavily on the aggregate credit environment: the ease of credit and limited bankruptcy credit cost observed in the initial period of our data (2003-2004) become much less signicant when we repeat the analyses in 2007, as the recent credit downturn began.