Rural Financial Market Research Articles

Impact of rural capital outflow on sustainable economic growth: evidence from Shaanxi Province of China

The capital constraint and underinvestment faced by rural residents are the pivotal factors limiting economic growth. The rural capital outflow further magnifies the income gap between urban and rural residents, seriously undermining rural areas’ capital accumulation and sustainable development. For this purpose, we perform a theoretical and empirical investigation of the impact of rural capital outflow on economic growth. The results reveal that rural capital outflow occupies investment opportunities for rural economic development that adversely affect economic growth. Secondly, rural economic growth has an inertial effect and generates path dependence on capital outflow. The calculation of rural capital outflow in northern Shaanxi, Guanzhong, and southern Shaanxi regions of China reveals that capital outflow in northern Shaanxi is insignificant and shows signs of capital return, while southern Shaanxi and Guanzhong emerge as key regions for capital outflow.Policymakers must adhere to long-term initiatives to reform and refine multi-level capital markets that support agricultural development in rural areas and build a sound rural financial market order for sustainable economic growth.

Characterization of Existing Rural Finance Markets that can Enhance Participation in Climate Smart Agricultural Technologies in Kenya

Purpose: In Kenya, small holder farmers face climate change related challenges. It is therefore imperative to enhance adaptive capacity through climate smart agricultural (CSA) technologies. Access to finance is a significant enabler for adoption of CSA technologies yet small holder farmers, especially women, have an acute financing gap for agriculture. The purpose of the study was to characterize existing rural finance markets that can enhance adoption of Climate smart agricultural technologies among small holder farmers in Kenya and also improve the participation of other agricultural value chain actors in climate smart agricultural technologies. This was to enhance a better understanding of existing rural financial services available to agricultural value chain actors and the potential of the financial institutions to increase credit access to the value chain actors.
 Methodology: The study used cross sectional data gathered through questionnaires administered on farmers, rural financial institutions and other actors in eight, Kenya Climate Agricultural Project (KCSAP) counties in Kenya. Data was analyzed using Stata statistical package and presented using tables and figures.
 Findings: Rotating and savings credit associations (ROSCAs) were the main credit source for most households. Findings revealed that farmers rarely access insurance for their farming activities. Unlike farmers, other actors for instance, agro processors and agro dealers get loans through mobile phones where short term loans were borrowed from different providers. Majority of financial institutions were serving agricultural sector.
 Unique Contribution to Theory, Practice and Policy: The study had presumed that access to rural financial market services by value chain actors in climate smart technologies for crops and livestock will be enhanced and this will increase adoption in the target Counties. The theory or assumption was validated in a workshop by all stakeholders which was followed up by linking up the value chain actors and the financial institutions through capacity building forums. Financial institutions could leverage on existing models used by ROSCAs to increase access to rural financial services especially by women and youth. A gender-transformative approach should be considered to increase women access to rural financial services.

Complementarity or Substitution: A Study of the Impacts of Internet Finance and Rural Financial Development on Agricultural Economic Growth

Based on the Chinese county-level panel data from 2014–2018, in the study reported in this paper, we empirically tested the “complementarity and substitution” effects of internet finance and rural finance on rural economic development using the feasible generalized least squares (FGLS) estimation method. The research data were obtained from the China County Statistical Yearbook. Similarly, the data of agricultural credit societies were obtained from the unique database of the agricultural credit societies of Shaanxi Rural Finance Research Center, while the internet finance development index was obtained from the Digital Finance Research Center of Peking University. In this research, we found that rural finance and internet finance contribute to rural economic growth. In the context of rural economic growth, internet finance and rural finance development show a substitution effect. The scale and efficiency of rural finance contribute to rural economic growth, while the structure of rural finance has the opposite effect. The development of internet finance reduces the marginal contribution of the rural financial scale and efficiency to rural economic growth. It weakens the negative effect of the rustic financial structure on rural economic growth. Furthermore, the development of internet finance contributes to the rural economic growth of counties of high economic levels but hinders the development of counties of low and medium economic levels. In counties with a high economic status, the development of internet finance and rural finance have a complementary effect on rural economic growth, while in counties of low and medium economic levels, we can observe a substitution effect. These assessments provide guidance, a source for policy recommendations and a reference for researchers and policy makers seeking to optimize the structure and break the monopoly pattern of agricultural credit cooperation in the rural financial market and to strengthen innovation and significantly improve the operational level of rural financial institutions. Moreover, the development of internet financial business and technology is necessary to overcome the demerits of traditional financial institutions.

Knowledge ecosystem of financial markets: a new perspective on alleviating the supply-demand contradiction of the rural finance in the post-COVID-19 era

PurposeThis paper aims to establish a systematic cognition to alleviate the supply–demand contradiction in rural financial markets from an integrated perspective of knowledge management and proposes the concept of rural financial knowledge ecosystem (RFKE) to encourage multifaceted solutions.Design/methodology/approachThe authors qualitatively describe the process that the knowledge management dilemmas cause the supply–demand contradiction in the rural finance and further summarize a systematic methodology from three dimensions: the knowledge subject, the knowledge environment and the knowledge ecology.FindingsThe authors list four types of knowledge management dilemmas leading to the supply–demand contradiction in the rural finance, i.e. the weak knowledge sharing, the poor knowledge flow, the slow knowledge updating and the imperfect knowledge environment. Meanwhile, the RFKE model consisting of the ecological subject, the ecological environment and the ecological regulation is also presented.Research limitations/implicationsThe role of knowledge management in improving the allocation of financial resources to various rural financial market participants (government, rural financial institutions, farmers, agricultural enterprises, etc.).Originality/valueThe authors creatively give the RFKE model, which complements and enriches the theory of knowledge management. Meanwhile, relevant management practices are urgently needed under the macro circumstance of the COVID-19 pandemic and the rural revitalization in China.

Assessing the effects of the new-type urbanization policy on rural settlement evolution using a multi-agent model

Urbanization is an inevitable trend of modernization. In recent years, the Chinese government has proposed a new urbanization policy to accelerate the citizenization of the migrant agricultural population. The proposal of China's new urbanization strategy will inevitably cause the large-scale migration of China's urban and rural population, thus impacting the evolution patterns of China's rural settlements. To investigate the future evolution trends of rural settlement patterns against the background of new-type urbanization, we constructed a rural settlement multi-agent system (RSMAS) that can explicitly simulate the influences of government policies. In the model, we set four types of agents, including urban area, rural area, government, and peasant household. Through top-down control and bottom-up response, the model can reveal the mutual gaming relationships, influencing relationships, and feedback relationships among agents against the background of new-type urbanization. Taking Jizhou District of Tianjin, which is one of the first pilot areas of new-type urbanization, as an example, we first simulated the changes of rural settlement patterns in Jizhou District from 2005 to 2015 using the RSMAS. The accuracy of the model simulation was 60.96%, indicating that the model has good reliability. Second, we predicted the impact of the new-type urbanization policy on the rural settlement patterns in Jizhou District in 2030, using 2015 as the starting year. The household registration system is no longer the key constraint to urbanization. The trend of the expansion of rural settlements has been effectively curbed after the implementation of new urbanization. In addition, government-led urbanization processes would increase the local financial burden. Therefore, we suggest that the government should effectively control these processes, activate the rural financial market, and promote the participation of local state-owned enterprises in financing.

Optimization Analysis of Rural Finance Based on Supply-Side Structural Reform

As the country has been placing greater emphasis on agricultural development, rural finance based on supply-side structural reform has achieved tremendous growth. However, investigations have found that the rural financial market still has problems in its service modes, organizational systems, product innovation, and risk evaluation, thus requiring urgent attention. Therefore, this study analyzes and expounds on these problems from the aforementioned four aspects and proposes the following solutions: encourage the creation of agricultural service institutions, establish and improve the rural financial organization system, vigorously develop new rustic financial products, and strengthen the risk supervision and management of financial markets. Only in this way can the agricultural supply-side structural reform and the innovative development of rural finance be realized.

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 Impact of Financial Development on Agricultural Enterprises in Central China Based on Vector Autoregressive Model

China is a large developing country, and there is no doubt that it is a large developing agricultural country. Agriculture has played a vital role in the development of the national economy since ancient times, and it serves as the foundation of China’s national economy. As agricultural modernization is the fundamental way of agricultural development, its source of funds must come from rural finance. The financial support of rural finance for agricultural modernization is the material basis and prerequisite for ensuring the healthy and rapid development of agricultural modernization. If there is no financial support from rural finance, the process of agricultural modernization will be hindered, and it will not benefit our country’s socialist modernization. Although our country’s rural financial system has been constantly changing and improving, our country’s current financial system still has many shortcomings and defects. In the process of supporting agriculture, rural finance has insufficient capital supply, which has become a “bottleneck” in the development of agricultural modernization, and to a certain extent has severely restricted the development of agricultural modernization. On the basis of existing literature research, this article systematically studies the influence of rural financial market structure on the development of agricultural enterprises in central China. The content includes agricultural total factor productivity and agricultural emission reduction. When analyzing the impact of rural financial market structure on agricultural development, this article also pays attention to its specific impact on agricultural development under the conditions of different types of enterprises.

A Study on the Performance Evaluation System of Microfinance Companies Under Dual Objectives

Microfinance companies are the result of China’s rural financial reform. Since their creation, they have been undertaking the responsibility of effectively allocating financial resources and guiding the flow of funds to rural areas and underdeveloped areas through the introduction of private capital. The emergence of microfinance companies has intensified the competition in rural financial market and built a new pattern of rural financial service systems. As a result driven by multiple objectives, these microfinance companies must face the issue of how to integrate microfinance services for the “three rurals” (rural economy, rural community, and rural residents) as well as small, medium, and micro enterprises with their own finances in a sustainable and effective manner. On the basis of dual objectives and with full consideration of the characteristics of China’s microfinance companies, this study has constructed a performance evaluation system exclusively for commercial microfinance companies in China by drawing on the performance evaluation system of foreign micro-credit institutions through analytic hierarchy process and Delphi method.

Research on the Trust Mechanism of Individual Consumers in Rural Financial Markets Based on the Dynamic CGE Model

In order to obtain the complete equilibrium state of rural financial market and ensure the stable development of rural financial consumer market, this paper introduces CGE model and analyzes the dynamic trust mechanism of individual consumers in rural financial market. In this paper, the single variable evolutionary fuzzy clustering algorithm is used to analyze the orthogonal eigenvector solutions of individual consumers; the big data of individual consumers under the mode of perceived trust is automatically clustered, so as to obtain the fuzzy analogy function of individual consumers in the rural financial market; and finally the prediction value of consumer trust is obtained. The results show that trust, customer satisfaction, and service quality are positively correlated. Under the same sample expectation constraints, the dynamic CGE model is more robust, and the individual consumer trust mechanism of rural financial market in the study area has higher advantages.

Access to credit and farmland abandonment nexus: The case of rural Ghana

AbstractCredit has been identified as an essential tool to improve poor households' livelihood. Therefore, for rural farm households to improve their welfare and invest in productive agriculture activity, access to credit must be promoted. This paper examines how credit accessibility influences rural farm households' farmland abandonment reduction in Ghana. Using survey data collected from four regions in Ghana, the endogenous switching regression (ESR) model, and the problem confronting index (PCI) model were employed in the estimation. The findings revealed that households with access to credit are more likely to not abandon their farmland than a random farmer from the sample. Also, different household groups showed a heterogeneous impact of credit on farmland abandonment. Our findings provide policy implications to reduce farmland abandonment. For example, the negative credit accessibility impact on farmland abandonment implies that government and policymakers should target policies (e.g., improving the rural financial market) that will motivate farmers to reduce farmland abandonment.

Transfer Of Rural Funds Through Branches Of Commercial Banks

The major thrust of the present paper is to find relevance in Banglades11 of the thesis developed by ~~rdal' with regard to the flow of transfer of funds from less developed areas to the more developed ones. This process is termed by him as "backwash effects." The logic of such fund transfer, as shown by him, lies in the possibility of getting relatively higher return from investing funds in the more developed areas. It may be noted here that the present study is limited to the rural operations of commercial banks in Bangladesh. Comnlercial Banks are szlected for this purpose mainly because the same appears to be relatively more prominent2 in terms of the volume of transactions compared to other agencies operating in the rural financial market of Bangladesh.

The Construction Practice of National Rural Financial System Based on Computer Intensive Technology

“Credit capital” is a key factor in eliminating adverse selection and moral hazard in the country’s rural financial market. “Internet finance mode” is an important way for small and micro enterprises to reduce financing costs. Based on computer intensive technology, this article integrates elements on the Internet platform to build a national rural financial “three-element” credit system under the background of big data, which can effectively solve the financing difficulties, high financing costs, and high financing risks of rural small and micro enterprises Paradox, to achieve a win-win situation of a “virtuous circle” of rural small and micro enterprises, Internet financial enterprises, insurance companies and government departments.

Determinants of Soybean Farmers' Adoption of Green Revolution Technologies in Oyo State, Nigeria

Soybean is a non-indigenous crop in Nigeria, but has become an important food security crop due to its nutritive, economic and agronomic benefits. In recognition of these benefits, numerous efforts have been made to boost soybean output and productivity in Nigeria through the 'green revolution' pathway. However, despite the impressive widespread adoption of high yielding varieties of soybean in Nigeria, observed yields are still below regional and global averages, prompting research into the disparity between actual yields observed and obtainable potential yield. One of the reasons suggested in literature is that farmers do not fully adopt the 'green revolution' technology package that includes fertilizers, herbicides and pesticides, leading to sub-optimal yields. This study therefore assessed the adoption rate and determinants of adopting the complementary components of high yielding varieties of soybean (fertilizer, pesticides and herbicides) among its farmers in Oyo State, Nigeria. The study made use of primary data collected from 108 soybean farmers in a cross-sectional survey with the aid of a questionnaire. Data were analyzed using descriptive statistics and Multivariate Probit regression model. The results show that most of the soybean farmers are male, married and middle aged (average of 50 years), with a mean household size and years of formal education of 9 persons and 4 years respectively. However, while herbicides (93.5%) and pesticides (92.6%) are widely adopted, the adoption rate of fertilizer is low (38.9%) among the soybean farmers. The adoption of these technologies is significantly influenced by gender, education, age, household size, extension contact and credit access, albeit heterogeneously. Soybean farmers that had contact with extension service are more likely to adopt fertilizers, while education and credit access positively influence the adoption of herbicides and pesticides. Female farmers have a higher likelihood of adopting herbicides, but are less likely to adopt fertilizers relative to male farmers. Based on these findings, it is recommended that efforts to expand the rural financial market to improve farmers' access to credit should be made. Similarly, extension activities designed to inform, train and monitor farmers about fertilizer use in soybean production should be intensified in order to encourage the adoption of these complementary components for improved yield, nutrition and welfare of soybean farmers.

Land transfer and food crop planting decisions in China

ABSTRACT This paper proposes a theoretical model to illustrate the relationship between the scale of land transfer-in and farmers’ crop selection behaviour. We use a semiparametric instrumental variable regression model to test this relationship. Data come from a face-to-face interview survey of 2,677 farmers located in nine provinces of China collected in 2014–2015. Results show that the size of land transfer-in has a U-shaped impact on the probability of planting food crops. To guarantee food crop self-sufficiency, the Chinese government should encourage land transfer, foster the mobility of agricultural labourers, and enhance the capacity of the rural financial market.

Farmer innovations in financing smallholder maize production in Northern Ghana

PurposeThe purpose of this paper is to explore smallholder agricultural financing in Ghana’s Northern region by identifying farmers’ preferred traditional and innovative financing methods and estimating the determinants of use of innovative financing methods.Design/methodology/approachThis paper presented a list of documented traditional financing methods to farmers during in-depth interviews and employed descriptive statistics to summarize choice and amounts sourced from traditional methods. Two questions from the survey revealed a felt need for extra financing sources for credit-rationed farmers. Farmers with positive responses to either or both questions were classified as “users of innovative financing”. The authors then used a probit model to examine factors that influence decisions to use innovative financing method.FindingsFarmers’ own savings, reinvesting past season’s profits and financing maize production with income from other commercial crops were the most popular traditional methods. The authors found complementary relations between formal and informal lending systems in the rural financial market. Smallholders also took farm and non-farm “by-day” jobs to raise income for farm investment and/or joined Village Savings and Loans Associations (VSLAs) specifically to take advantage of possible credit opportunities. These two latter methods were operationalized in this study as innovative agricultural financing. The results show that access to credit, social capital and market participation increased the likelihood of using innovative financing methods. Alternatively, farmer group membership, diversity in crop production and being a household head diminished the likelihood of innovative financing use.Practical implicationsThe activities of VSLAs can be regulated and expanded to spread its benefits to more farmers. Also, creating avenues for dry season labour market participation in the region could enable farmers raise capital for farm investment.Originality/valueThis study explores existing practices and farmer innovations to agricultural financing and, by so doing, deviates from the vast literature focussing mainly on microcredit provisioning as the main model of smallholder agricultural financing in Africa.

Restructuring rural financial market for agricultural growth in Nigeria

Abstract. All developing economies require a sophisticated financial system, which incorporates both the financial institutions and financial market. These institutions and market exist to mediate between those who wish to save or lend and those who wish to borrow or invest. This basic rationale seems complex, since offering new types of financial instruments which can reduce transaction cost in the face of highly risky and challenging agricultural business coupled with the urgent quest for revitalization of agricultural sector for meaningful growth and development is needed. This paper searches the missing link between financial sector and agricultural growth in Nigeria between 1996Q1 and 2017Q4. The study adopts Autoregressive Distributed Lag (ARDL) Bounds testing approach developed by Pesaran, Shin and Smith (2001) in estimating the relevant relationship. The results of the long run estimates show that agricultural credit, money markets, capital markets, exchange rate have positive relationship with agricultural growth in Nigeria, while expected inflation has negative impact on agricultural growth in the long run. The results of the short run dynamics of (one lagged) of variables shows negative impacts on agricultural growth, whereas the lagged two of the variables shows positive impacts on agricultural growth in the short run. The study recommends that the policy makers need to restructure the financial sector to influence agricultural credit as mandate to rescue the agricultural sector from this unimpressive growth. Keywords. Financing, Agriculture, Exchange rate, Growth. JEL. L00, L16, F31.

Heterogeneous effects of rural land property mortgage loan program on income

PurposeThe innovative rural land property right mortgage loan program (RLPRMLP) provides a new channel for farmers to secure borrowing from microfinance institutions. Farmers’ land property right could be used as collateral to deal with moral hazard and adverse selection issues. The purpose of this paper is to document the effects of the RLPRMLP on households’ income using a unique data set from 1,279 households’ survey in Western China during 2012–2014.Design/methodology/approachAt the first stage, the authors evaluate the impacts of RLPRMLP on households’ income to get the benchmark results when the authors control household’s observed and unobserved characteristics. To address the potential endogeneity issue resulting from the self-selection of farmers into the rural financial market, the authors apply the treatment effect model to identify the csusal effects of the innovative loan approach on a household’s income.FindingsThe empirical results favor the belief that participating in the RLPRMLP helps the households improve their total income (at least by 20.2 percent) and income per capita. This income-improving channel is only through agricultural sector, rather than through non-agricultural sector which potentially helps to deal with the inequality issue within poor regions. The results are robust when the authors control households’ characteristics, including observed and unobserved, and solve the endogeneity issue. Participating in the RLPRMLP could encourage farmers to invest more in the agricultural sector and increase agricultural productivity, which is the main mechanism of the income-improving effect of the RLPRMLP.Originality/valueThe innovative mortgage loan program provides a new channel for farmers to get loan. Land property right reform is being currently applied in rural China. Testing the effectiveness of combining land property right and microfinance loan method is necessary for the government policy making and development of rural areas. The findings are striking. The income improvement mechanism mainly works through agricultural sector, potentially because of the reform of land property, contributing to the increase of marginal product of land, i.e., the increase of agricultural productivity. These could help the development of microfinance theory, and the innovative loan method could be applied to other developing countries.

Credit Market Structure and Collateral in Rural Thailand

This paper empirically examines reliance on collateral in different credit market segments—formal, semiformal and informal lending—of a developing rural financial market. Determinants of collateralization indicate that all three types of lenders price risk conventionally. Controlled for standard risk factors, however, formal lenders rely on collateral about 40 per cent more often than informal lenders. The difference is explained by informal lenders’ better information on borrowers. This is shown by informal lenders’ behaviour: a longer lending relationship does not improve information about the borrower but shorter distance to the borrower does—the opposite applies to formal lenders, as predicted by theory.

Comparison between China and India’s Financial Services RCA Indices and Its Enlightenment on China

China and India are two of the most important developing countries. In this paper we first state the current situations of financial services trade in China and in India. Next, we compare China’s financial services RCA index with India’s and find that India has the greater values of RCA indices than China. Thereafter, this paper tries to give the enlightenments of India’s financial services trade on China’s financial reform, which includes speeding up the financial reform, improving the relevant legal system and improving the rural financial market.