Rural Financial Market Research Articles

The Research on the Path of Rural Bank’s Transformation Based on Bourdieu*’s Practice Theory: A Case Study of Wuwei Rural Bank in China

More than 1000 Chinese rural banks’ asset size exceeded trillion in 2015, but they have problems in low operating efficiency, information asymmetry between rural banks and villagers, poor public trust, insufficient absorption capacity and low social awareness. Should rural banks still stick to the rural areas? What’s the way to develop the rural financial market at present? With Bourdieu’s practice theory, this paper analyses the transformation practice of “the Bank-Government miaxture” model of the Wuwei Rural Bank in China. The Wuwei Rural Bank plants habitus, field and capital (mainly symbolic capital and social capital) into the transformation practice. This paper benefits from a particular ethnography enriched by the oral reviews and engaged observations in two years of fieldwork. Thirty-four depth interviews were conducted, involving the Wuwei Rural Bank’s staffs, the mayors of 21 towns, convenience stores staffs, school principals, clinic employees and many villagers. Analysing the capital and changing the habitus of the villagers makes the transformation successful. It gives a new perspective for the path of rural bank’s transformation.

Microfinance as an Instrument in Financing the Rural Sector with an Impact on Poverty Reduction and Economic Development: Albanian Case

An efficient rural financial market plays an important role in the development and growth of productivity in agriculture and livestock. This means setting up a financial system to meet the typical functions of a market economy and above all the mobilization and allocation of financial resources to this sector and coordination with sources of donors and of the state budget. In this context, perhaps it is useful to set up a bank profiled in agriculture and rural development, ending anarchy of today and by establishing opportunities for better coverage to the growing needs of this sector. This would help for the displacement of available funds to the agrarian sector, either through a specialized bank without curb or deter the existing commercial banks, and the combination with other efforts in the form of investment funds, would constitute a good opportunity for to finance agricultural development with nonpublic resources. DOI: 10.5901/ajis.2015.v4n3s1p611

Savings Groups and Rural Financial Markets: Japanese and Thai Experiences

Savings groups/credit unions serve as a financial intermediary within a village by mobilizing savings from rural households and extending loans to them. This system often encounters an issue of excess funds when total savings exceed loan demands within a credit union. In Thailand rural financial markets created by savings groups are segregated not only from those created by other savings groups but also from formal financial markets. Excess funds become a critical issue for some savings groups and hinder their development. On the other hand, in Japan, the market integration with respect to excess funds was pursued by organizing segregated rural credit markets (horizontal integration) and aligning rural credit markets with formal financial markets (vertical integration). This paper discusses the contrasting evolutionary paths of Japanese credit unions and Thai savings groups to offer practical insights for Lao savings group movement.

Microfinance in Fisheries in China

Because of lack of collateral and formal financial information, family aquacultures and small boat owners find it difficult to get loans from formal financial institutions. Fishery microfinance can partly solve the information asymmetry and incomplete contract problems in rural financial market, and it is an effective complement to formal fishery finance. The service object of fishery microfinance is mainly micro-enterprises in fisheries, including family aquacultures and small fishing boats. Fishery microfinance providers include formal financial institutions and many kinds of micro-financial institutions, among which China Fishery Mutual Insurance Association (FMIA) is the most famous one. Although micro-finance has a 20-year-history in China, there are still some problems that block its advance. The market is huge, but the existing providers are not providing good services and most are not sustainable. There is still a long way towards commercial operation and financial sustainability.

Improvement of Financial Efficiency and Cost Effectiveness of Financial Institution for ‘Financial Inclusion’ in India

Finance has become an integral part of an economy. Banking institutions play a vital role in facilitating the development of financial system as well as to achieve ‘financial inclusion’ which is the prime objective of policy makers in our economy. The term ‘financial inclusion’ has gained popularity in all emerging economies especially in Indian economy after financial sector reforms. Financial inclusion has become an essential pre-requisite for achieving ‘Inclusive Growth’ in Indian economy and for accelerating economic and social life of all people. The basic financial services at affordable prices to the weaker section of the society are an essential task for policy makers in recent era. Without changing it’s main regular functions, how a financial institution can grow through applying different environmental friendly policies throughout the India is a big question? Due to the various constraints like lack of infrastructural problem, environmental problem, geographical problem, basic education and local political problem, financial institution are not able to reach the needy people in rural areas. Therefore the development of rural financial market with minimum cost and maximum benefit to the people is the prime concern of central authority to reach the mass. Keeping the alarming situation in mind it is time for India to improve the financial efficiency and cost effectiveness of financial institution through minimization of wastage and maximization of sales & profit. On the basis of this background this paper attempts to make a comprehensive study of financial institutional parameters to minimize the cost of operation and maximized profit by using Multi-objective Fuzzy Nonlinear Goal Programming. On the basis of secondary data collected from the annual report and RBI data regarding six financial institutions parameters which can use as a decision making variables for performance measurement of an institution. Regression Analysis method is used to identify the main indicator of financial performance, using SPSS (20) software and LINGO software used to study the Multi-objective Fuzzy Non-linear Goal Programming. The study found that both Internal and external parameters are responsible for doing financial institutions performance and to achieve “Inclusive Growth”. Indian financial backbone can be improved and reach global platform by using an alternative policy like reducing nonperforming assets and increase in managerial performance for customer satisfaction in all levels.

Determinants of Smallholder Farmers’ Access to Agricultural Finance in Zambia

Smallholder farmers in Zambia face many challenges in accessing financial services including limited access to financial markets. Despite the numerous reforms undertaken by the Government and the donor community, including financial sector reforms, many rural farmers have remained in poverty with limited capacity to access safety nets like loans to militate against hunger and disease. This paper set out to find out factors that affect smallholders’ decision to access rural finance and the intensity of their participation in the financial markets. A household survey was conducted in five provinces from which thirteen districts were purposively selected. Employing both purposive and random sampling techniques, a pre-tested questionnaire was administered on 1,326 households. Data was analysed using a double huddle model. Results indicated that education level of household head, size of household and number of daily meals served significantly influenced decision to access finance while loan payback period, having a phone and personal savings influenced the intensity of participation in the rural financial market.

Reviewing the Development of Rural Finance in Vietnam

The objective of this article is to review the development of the rural financial system in Vietnam in recent years, especially, after Doi moi. There are two opposite schools of thought in the literature on rural credit policies in developing countries. One is the conventional supply-side (government-led) approach while the other is called “a new paradigm” that emphasizes the importance of the viability of financial providers and the well functioning of rural credit markets. Conventional theories of rural finance contend that rural finance in low-income countries is generally accompanied by many failures. Contrary to these theories, rural finance in Vietnam does not encounter the above-mentioned failures so far. Up to the present time, it is progressing well. Using a supply-side approach, methodologically, this study reviews the development of the rural financial system in Vietnam. The significance of this study is to challenge the extreme view of dichotomizing between the old and the new credit paradigms. Analysis in this study contends that a rural financial market that, (1) is initiated and spurred by government; (2) operates principally under market mechanisms; and (3) is strongly supported by rural organizations (semi-formal/informal institutions) can progress stably and well. Therefore, the extremely dichotomizing approach must be avoided.

Credit NGOs' sustainability in rural financial market: a SWOT analysis on DAYBANG

PurposeThe purpose of this paper is to analyze the sustainability of Credit Non‐Governmental Organizations (CNGOs) such as DAYBANG.Design/methodology/approachThis paper investigates and describes the operating details, through the web, of DAYBANG using SWOT analysis.FindingsBy the means of SWOT analysis it is found that clarified information, credit scoring system and the law of large numbers set up by DAYBANG will decrease the asymmetric information influence, which will result in adverse selection and lowering of the transaction cost; while operational risk and moral hazard are the weaknesses to be overcome. SO, ST, WO, WT strategies deserve consideration.Originality/valueResearches on informal finance have focused on loans between relatives, friends and usurers. Few literatures, however, have studied the Credit NGOs (CNGOs). DAYBANG is a newly‐emerging CNGO which has resulted in immense public interest because of its Web operating platform. This paper discloses its operational characteristics, using SWOT analysis, which expands the research on informal finance.

Microenterprise financing preference

PurposeThe purpose of this paper is to investigate the determinants of financing preference of micro and small enterprises (MSEs) whilst distinguishing a broader range of financing sources beyond what is typically the case within the corporate finance literature.Design/methodology/approachUnder the framework of ordinal logistic regression, the paper also tests whether there is evidence of hierarchical preference ordering as predicted by pecking order theory (POH) using field survey data for 2009.FindingsThe authors relate that new enterprises are more likely to prefer low cost and less risky or less formal financing such as internal or bootstrap finances. However, as the enterprise gets established or matures, its capacity to seek formal financing increases, thereby becoming more likely to prefer or being in a higher category of formal financing. While the paper affirms the POH, it is argued that this order is a consequence of severe persistent constraints other than sheer preference. The findings further reveal that, microentrepreneur's and MSE's‐specific level socio‐economic characteristics such as owner's education or financial literacy status, households tangible assets, ownership structure, enterprise size, as well as sensitivity to high interest rates in the credit market, to be important determinants of either past (start‐up), present or future financing preference.Originality/valueThe main value of this paper is to analyse the determinants of financing preference of MSEs within the context of rural financial market (RFM) from a developing country perspective.

Self-Help Groups and the Rural Financial Market in South India:

Self-Help Groups and the Rural Financial Market in South India:

Financial services consumption constraints: Empirical evidence from Rwandan rural households

The concentration of banking and financial institutions in the city and/or urban in any developing countries in general, Rwanda in particular creates various constraints in availing and consuming different financial products and services by the rural households. The article examines the forms and determinants of credit constraint status of rural households of Rwanda and the impact of constraints variables on availing and using the range of financial products and services. The study concludes that 42.5 per cent of the Rwandan rural households surveyed face triple forms of credit constraints including self-imposed constraints, quantity rationing and risk rationing by formal financial institutions. However, quantity rationing is perhaps not as pervasive as self-imposed rationing and risk rationing by the lenders. The results from the empirically tested model revealed that in addition to demographic and socioeconomic characteristics of households, the variables constraining demand and/or supply of financial services with reference to accessibility were significant predictors of households' credit constraints. The study informs on the needs for innovative systems, products and services that would increase access relax credit constraints and improve rural consumers' welfare. The authors conclude that establishing an enabling legal and regulatory environment, providing adequate public goods and physical infrastructure, designing capacity building and technical assistance programs and maintaining political and macroeconomic stability are perhaps major public and policy issues needed for a robust rural financial market.

Vietnam rural financial market- Fact dianostics and the policy implications for rural development of Vietnam

The development of Vietnam rural sector has been given attention by different orientations and policy frameworks, of which rural finance is the key tool, notably the Decree 41 on cred- it for rural sector. The Vietnam rural financial sector has been growing and making significant contribution to its rural development by a rapid expansion of outreach and available fund sources. However, there have been remaining problems that are very likely to hinder the sector from its further development. Such problems are: (1) there is a lack of responsive and adequate financial services in rural areas; (2) a significant number of the poor households still do not have access to any microfinance services, to name a few. Thus, this paper is intented to focus on two main issues. The first is to analyze the causes of such problems, and the second is to pro- vide recommendations that are strongly expected to overcome such problems to enhance Vietnam rural development in the new decade with the Development Millenium Goal.

Socio‐economic constraints to demand for borrowing among rural females of Pakistan

PurposeThe purpose of this paper is to investigate how many rural women have access to finance. It also explores the additional constraint faced by them in accessing the credit.Design/methodology/approachFor the estimation purpose, multivariate logit regression is used, taking borrowing any credit as dependent variable.FindingsResults indicate that women lack easier access to formal credit and the socio‐economic, cultural background of the family significantly impact probability of borrowing. More specifically, result indicates that female own age, marital status and employment bring self‐confidence and reliability that encourage female borrowing.Research limitations/implicationsIn the absence of any recent nation‐wide data about micro‐credit, cross‐section survey, theRural Financial Market Surveyis used to examine the factors affecting the demand for borrowing.Practical implicationsThis paper proposes that government should implement education programmes in order to create awareness towards role of women in economic development. Moreover, to overcome the cultural constraints, information should also be disseminated through influential media.Originality/valueWhile it is widely recognized that, demand for credit is severely affected by socio‐economic, cultural and personal characteristics, this has rarely been confirmed earlier. There are numbers of studies documented on borrowing all focus on the issue of formal and informal sources ignoring the above determinants. This paper attempts to do so.

Risk, Migration, and Rural Financial Markets: Evidence from Earthquakes in El Salvador

This study examines the circumstances under which rural households can use outmigration to cope with negative shocks. In theory, when financial markets are imperfect and when migration involves a fixed cost, the impact of economic shocks on migration can depend on the extent to which shocks are common across households. When shocks are idiosyncratic, shocks are likely to raise migration. But aggregate shocks may make it more difficult to pay fixed migration costs, and so can actually lead to less migration. In a rural household panel from El Salvador, idiosyncratic and aggregate shocks do have opposite effects on migration. Households become differentially more likely to have a migrant relative in the year following an idiosyncratic shock (a death in the family). By contrast, aggregate shocksCproximity to the massive 2001 earthquakesClead to large differential declines in migration. Increased difficulty in financing migration=s fixed cost is likely to help explain declines in migration in areas closest to the quakes: households in quake-affected areas also experience differential declines in granted credit. Empirical evidence does not support alternative explanations for the quake-induced migration decline, such as a desire for family unity, increases in outside aid, a need for family labor in reconstruction, or improved local income opportunities.

Technical Efficiency in the Rural Financial Sector: Evidence from Mexico

The void in the rural financial market in Mexico is more pronounced than ever given the retreat of many state programs. In response, small, heterogeneous semi-formal institutions have begun to fill the gap with financial services to rural Mexicans. This study sheds light on this largely undocumented sector by examining the technical efficiency of various institutional types. Data Envelopment Analysis is used to create a nonparametric frontier of technically efficient firms based on a sample of 350 semi-formal financial institutions. Using this framework, the heterogeneity of the sector is highlighted and most institutions are found to be highly inefficient. In a second stage of analysis, the primary determinants of efficiency are found to be institutional factors rather than client profiles.

Fragmentation and Embeddedness: An Alternative Approach to the Analysis of Rural Financial Markets

Political economy approaches to analysing the efficiency of rural financial markets have focused on the role of power and social relations. Neo-classical institutional economics, on the other hand, has used information and transaction costs to explain performance. Recognizing the limitations of both approaches, this paper presents an alternative that focuses on the institutional form of financial intermediaries, that is, the governance structure of rules, monitoring and enforcement mechanisms that enable them to operate. This structure is supported by both formal and informal rules, norms and sanctions. As a result, the ways in which transaction costs are affected by governance structures can be identified and the embeddedness of financial intermediaries in social relations can be theorized. The application of this approach in Central Kenya demonstrates the insights that it offers into explaining borrower preferences in the financial market.

Rural Financial Markets in Asia: Policies, Paradigms, and Performance

Rural Financial Markets in Asia: Policies, Paradigms, and Performance

Participatory Product Design by Using Conjoint Analysis in the Rural Financial Market of Northern Vietnam

Analyzing secondary and primary data (collected in 2001–2002), this paper suggests a shift in national development policies from solely promoting rural credit to supporting local savings activities. The household data (N = 260) are econometrically analyzed applying conjoint analysis (CA) methodology. The CA gave valuable insights into how to improve outreach of formal financial institutes (FFIs) by adapting the credit products to client preferences and revealed an un‐attended demand for savings instruments. Due to the enormous credit outreach of the FFIs in Vietnam, it would be more efficient to launch a credit consolidation policy and to implement a reliable and sustainable deposit collection system at the village level. However, within national policymaking, a paradigm change must take place and the capability of rural households to save needs to be recognized by policy‐makers.

Book reviews

Book reviewed in this article: Management of Shared Groundwater Resources: The Israeli‐Palestinian Case with an International Perspective Eran Feitelson and Marwan Haddad (Eds.) Rural planning and management Joe Morris, Alison Bailey, R. Kerry Turner and Ian J. Bateman (Eds.) Rural Financial Markets in Asia: Policies, Paradigms, and Performance (Study of Rural Asia, Vol. 3) Richard Meyer and Geetha Nagarajan (Authors) The Biotechnology Revolution in Global Agriculture: Invention, Innovation and Investments in the Canola Sector Peter W.B. Phillips, George G. Khachatourian (Eds.) Agricultural Use of Groundwater: Towards Integration Between Agricultural Policy and Water Resources Management Cesare Dosi (Ed.)

The impact of farm credit in Pakistan

AbstractBoth informal and formal loans matter in agriculture. However, formal lenders provide many more production loans than informal lenders, often at a cost (mostly loan default cost) higher than what they can recover. For example, the Agricultural Development Bank of Pakistan (ADBP), providing about 90% of formal loans in rural areas, incurs high loan default costs. Yet, like other governments, the Government of Pakistan supports the formal scheme on the grounds that lending to agriculture is a high risk activity because of covariate risk. Hence, such policies are often based on a market failure argument. As farm credit schemes are subsidised, policy makers must know if these schemes are worth supporting. Using a recent large household survey data from rural Pakistan (Rural Financial Market Studies or RFMS), we have attempted to estimate the effectiveness of the ADBP as a credit delivery institution. A two‐stage method that takes the endogeneity of borrowing into account is used to estimate credit impact. Results reveal that ADBP contributes to household welfare and that its impact is higher for smallholders than for large holders. Nevertheless, large holders receive the bulk of ADBP finance. The ADBP is, thus, not a cost‐effective institution in delivering rural finance. Its cost‐effectiveness can be improved by reducing its loan default cost and partially by targeting smallholders in agriculture where credit yields better results.