Credit constraints and their impact on farm household welfare

2016 ◽  
Vol 43 (8) ◽  
pp. 782-803 ◽  
Author(s):  
Minh Chau Tran ◽  
Christopher E.C. Gan ◽  
Baiding Hu
Keyword(s):  
Transaction Cost ◽  
Credit Constraints ◽  
Credit Rationing ◽  
Farm Households ◽  
Farm Income ◽  
Farm Household ◽  
Household Welfare ◽  
Switching Regression ◽  
Content Type ◽  
The Impact

Purpose – The purpose of this paper is to identify factors affecting formal credit constraint status of rural farm households in Vietnam’s North Central Coast (NCC) region. Design/methodology/approach – Using the direct elicitation method (DEM), the authors consider both internal and external credit rationing. Findings – Empirical evidences confirm the importance of household head’s age, gender and education to household’s likelihood of being credit constrained. In addition, households who have advantages in farm land size, labour resources and non-farm income are less likely to be credit constrained. Poor households are observed to remain restricted by formal credit institutions. Results from the endogenous switching regression model suggest that credit constraints negatively impact household’s consumption per capita and informal credit can act as a substitute to mitigate the negative influence of formal credit constraints. Research limitations/implications – One limitation arises from the usage of the DEM to identify credit constrained households. The method cannot detect effective and ineffective constraints. Another limitation is the inability of cross-section data to capture long-term impacts of credit constraints on household welfare. Finally, causes of credit constraints from the lender’s view cannot be observed. Practical implications – The results suggest that it is necessary to enhance the credit allocation regime to reduce the transaction cost and provide target households with sufficient credit. It should be emphasized that high transaction cost and the mismatch between credit demand and supply stemming from information asymmetry. The government can help formal financial institutions to reduce information cost by encouraging the active role of social organizations such as Women Unions, Youth Unions and Veteran Unions in bridging rural farm households with formal lenders. Originality/value – There are limited studies focusing on determinants of credit constraints and their impacts on rural farm households. To the best of the knowledge, there is no study evaluating the impact of credit constraints on rural farm household welfare particularly in Vietnam. In addition, the studies related to credit constraints only considered full quantity rationing (households applied for the loan but were rejected), omitting the case of partly quantity rationing (loan obtained by the borrowers is less than their demand) and self-rationing.

Capital and credit constraints in the engagement of youth in Ghanaian agriculture

2019 ◽  
Vol 80 (1) ◽  
pp. 22-37 ◽  
Author(s):  
Martinson Ankrah Twumasi ◽  
Yuansheng Jiang ◽  
Monica Owusu Acheampong
Keyword(s):  
Positive Impact ◽  
Credit Constraints ◽  
Rural Youth ◽  
Unique Contribution ◽  
Switching Regression ◽  
Credit Constraint ◽  
Data Set ◽  
Content Type ◽  
Application Procedure ◽  
The Impact

Purpose The purpose of this paper is to determine the factors influencing rural youth farmers’ credit constraints status and the effect of credit constraint on the intensity of participation of these farmers in Ghana. Design/methodology/approach The econometric estimation is based on cross-sectional data collected in 2018 from the Brong Ahafo region in Ghana. The sample data set consists of 450 rural youth farmers. The collected data were analyzed through different econometric techniques, using the endogenous switching regression model (ERSM). Findings The direct elicitation approach employed in this study revealed that out of the 450 farmers, 211 (47 percent) of the respondents were credit constrained compared to 239 (53 percent) of their counterparts who were unconstrained. The ERSM indicated that youth farmers education, age, savings, parents occupation reduced the probability of the rural youth farmer to be credit constrained but cumbersome loan application procedure and loan disbursement time positively affect credit constraint. Moreover, farmers that are credit constrained have lower intensity of participation in agriculture activities than a random farmer from the sample. This suggests that access to credit has a positive impact on the intensity of participation in agriculture activities. Research limitations/implications In this study, only rural youth farmers in a particular region were considered. However, there are youths all over the nation. Therefore, future researchers could consider other youth’s farmers elsewhere in the country. Originality/value Although existing studies have examined rural youth farmers’ participation in agriculture and credit constraint separately, the unique contribution of this paper is the analysis of credit constraint of rural youth farmers as well as the impact of credit constraint on the intensity of participation in agriculture activities.

Financial performance of small farm business households: the role of internet

2016 ◽  
Vol 8 (4) ◽  
pp. 553-571 ◽  
Author(s):  
Aditya R. Khanal ◽  
Ashok K. Mishra
Keyword(s):  
Household Income ◽  
Internet Usage ◽  
Farm Households ◽  
Farm Income ◽  
The Internet ◽  
Small Farm ◽  
Content Type ◽  
Total Household Income ◽  
Farm Business ◽  
The Impact

Purpose The purpose of this paper is to investigate the impact of internet usage on financial performance of small farm business households in the USA. In particular, the authors want to assess the impact of internet usage on small farm businesses, where the owner’s main occupation is farming. Using a nationwide farm-level data in the USA and a non-parametric matching estimator, the study finds a significant positive impact of internet usage on gross cash income, total household income, off-farm income. The study further suggests that small farm businesses receive benefits from internet usage as it facilitates reduction in income risk through off-farm income sources, as well as a reduction in marketing and storage costs; households’ non-farm transportation and vehicle leasing expenses. Design/methodology/approach In this study, the authors use the “nearest neighbors” matching method in treatment evaluation, developed by Abadie and Imbens (2002). In this method, a weighting index is applied to all observations and “nearest neighbors” are identified (Abadie et al., 2004). Although matching estimation through the nearest neighbor method does not require probit or logit model estimation per se, the authors have estimated a probit model because it allows the authors to check the balancing property and to analyze the association of included variables with the likelihood of internet use. Findings The study suggests that small farm business households using the internet are better off in terms of total household income and off-farm income. As compared to the control group (which is counterfactual, representation of small farm businesses not using the internet), small farm businesses using the internet earn about $24,000-$26,000 more in total household income and about $27,000-$28,000 more in off-farm income. Also, small farm businesses using the internet earn about $4,100-$4,900 more in gross cash farm income compared to their counterpart. The estimate of ATT for NFI is not different from zero. However, gross cash farm revenue increased significantly. Practical implications To this end internet can provide an important role in information gathering. Internet is one of the convenient means to access and exchange information. Information and communication facilitation through internet have opened up new areas of commerce, social networking, information gathering, and recreational activities beyond a geographical bound. Producers and consumers can take advantages of internet in both collaborative and competitive aspects in economic activities as it can reduce the information asymmetries among economic agents. Social implications Farmers will seek assistance in interpreting data and applying information to their farming operations, via the internet. Therefore, it is essential that land grant universities continue to improve the delivery of electronic extension and provide information in a clear and concise manner. Originality/value Studies in farm households have mainly investigated factors influencing internet adoption, purchasing patterns through internet, internet use, and applications. In most cases, impact analyses of communication and information technologies such as internet in agricultural businesses are discussed with references to large scale farm businesses. Thus, the authors know very little about access to the internet when it comes to small farm businesses and small farm households and about how it impacts well-being of small farm households.

Does agro-processing adoption affect farm income and farm diversification? Empirical evidence from Taiwan

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Lin Lin ◽  
Hung-Hao Chang
Keyword(s):  
Large Scale ◽  
Farm Households ◽  
Farm Income ◽  
Processing Methods ◽  
Content Type ◽  
Farm Diversification ◽  
Effect Model ◽  
Agricultural Census ◽  
On Farm ◽  
The Impact

PurposeThe purpose of this paper is to identify the factors associated with the adoption of agro-processing methods and to estimate their impact on farm income and farm diversification.Design/methodology/approachUsing a large-scale sample of 12,122 special crop farm households drawn from the 2015 Agricultural Census Survey in Taiwan, the semiparametric multivalued treatment effect model was estimated.FindingsThe authors found that agro-processing farm households obtain higher farm incomes than non-agro-processing farm households. Among the agro-processing methods, self-processing generates higher farm income than outsourced-processing. Moreover, farm households that adopt either agro-processing method are more likely to diversify into agritourism and other agribusinesses than non-agro-processing farms.Research limitations/implicationsThe authors could only access data on farm income and not on agro-processing costs. Future studies may address the impact of agro-processing on farm profitability if relevant data are available.Originality/valueVery few studies have examined the relationship between agro-processing, farm income and farm diversification. To the best of the authors’ knowledge, this is one of the first papers to examine the impact of different agro-processing practices on farm income and farm diversification.

Multidimensional impact of food security on household welfare: evidences from a household survey in three Indian states

2020 ◽  
Vol 47 (7) ◽  
pp. 913-932
Author(s):  
Jyotirmayee Satapathy ◽  
Narayan Chandra Nayak ◽  
Jitendra Mahakud
Keyword(s):  
Food Security ◽  
Food Consumption ◽  
Security Policy ◽  
Household Survey ◽  
Household Welfare ◽  
Switching Regression ◽  
Indian States ◽  
Content Type ◽  
Food Subsidy ◽  
The Impact

PurposeThe welfare impacts of the food security on the beneficiaries can be understood from multiple dimensions. This paper, thus, examines the impact of the India's National Food Security Act (NFSA) on the welfare of the beneficiary households from a multidimensional perspective.Design/methodology/approachThe study is based on a sample household survey covering three different states of India. The stratified random sampling technique was used to select the states, districts and blocks. Sample villages and households were selected purposively. A total of 1,523 households comprising 1,069 beneficiary and 454 non-beneficiary households constituted the sample. In order to find out the impact of the programme on different dimensions of welfare, the endogenous switching regression model is employed as it helps control for any absence of randomization and the unobserved heterogeneity bias. Propensity score matching is also employed to supplement the results.FindingsThe substitution effect and income effect of the food subsidy policy combined improve the overall welfare of the households presented through the subjective measures of food consumption behaviour, income transfer and educational achievements. The bargaining effect of the food subsidy programme is reflected in the enhanced social status and women's empowerment. The food security programme seems to augment the food consumption of the beneficiaries as observed from the food consumption score.Research limitations/implicationsThe food security policy has improved the overall welfare of the households and can play a major role in enhancing household welfare even further. The non-beneficiaries' welfare could have increased if they would have been included in the food security programme. The subjective assessment may, however, be subjected to personal biases, and there is also absence of a common reference point. Hence, the implications of the findings may be generalized with caution.Originality/valueThis study provides evidences of the impacts of food subsidy from a multidimensional standpoint considering both subjective and objective dimensions of household welfare.

scholarly journals The Impact of Internet Use on Income: The Case of Rural Ghana

2020 ◽  
Vol 12 (8) ◽  
pp. 3255 ◽  
Author(s):  
Anthony Siaw ◽  
Yuansheng Jiang ◽  
Martinson Ankrah Twumasi ◽  
Wonder Agbenyo
Keyword(s):  
Household Income ◽  
Internet Use ◽  
Farm Households ◽  
Farm Income ◽  
Switching Regression ◽  
Information Communication ◽  
Education Access ◽  
Access To Credit ◽  
Employment Education ◽  
The Impact

This study analyzed the effects of internet use on farm income and household income using survey data from 478 rural farmers from two regions in Ghana. An endogenous switching regression (ESR) model and probit models were employed to achieve the aims of the study. The results revealed that internet use was influenced by off-farm employment, education, access to credit, non-fixed asset (NFA), age, and perception variables. We found that internet use increased farm income and household income by 20.1% and 15.47%, respectively. Regarding heterogeneous impacts, the estimates showed that internet use reduced farm income by 18.12% for farm households that participated in off-farm activities but increased farm income by 14.66% for households that had access to NFA. The estimates also indicated that internet use increased household income by 31.77% for farm households that engaged in off-farm employment and by 15.33% for those that had access to NFA. Furthermore, internet use increased the household income for households that did not engage in off-farm activities by 24.85%. The findings of this study will contribute significantly to the existing literature on information communication technology (ICT) in developing countries by providing a new reference for improving rural development and solving the problem of poverty.

scholarly journals The Impact of Cooperative Membership on Fish Farm Households’ Income: The Case of Ghana

2021 ◽  
Vol 13 (3) ◽  
pp. 1059
Author(s):  
Martinson Ankrah Twumasi ◽  
Yuansheng Jiang ◽  
Bismark Addai ◽  
Zhao Ding ◽  
Abbas Ali Chandio ◽  
...  
Keyword(s):  
Peer Influence ◽  
Household Income ◽  
Sample Selection ◽  
Institutional Arrangement ◽  
Fish Farm ◽  
Farm Income ◽  
Switching Regression ◽  
Farm Work ◽  
Household Heads ◽  
The Impact

The emergence of agricultural cooperatives is extensively viewed as a necessary institutional arrangement that can help farmers in developing countries overcome the constraints that impede them from improving sustainable agricultural production and acquiring new marketing opportunities. Therefore, this study examines the determinants of cooperative membership and its impact on fish farm household income, using data collected from two regions in Ghana. An endogenous switching regression (ESR) model is utilized to address the potential sample selection bias issue. The results show that household heads’ decisions to join cooperatives are affected by their access to credit, off-farm work, education level, and peer influence. Cooperative membership can increase both household and farm income by 28.54% and 34.75%, respectively. Moreover, we show that different groups of households’ cooperative impacts on farm and household income are heterogeneous. Our findings highlight the importance of cooperative patronization and provide implications that can improve households’ welfare.

Credit constraints and labour allocation decisions in rural Burkina Faso

2017 ◽  
Vol 77 (2) ◽  
pp. 257-274 ◽  
Author(s):  
Mohamed Porgo ◽  
John K.M. Kuwornu ◽  
Pam Zahonogo ◽  
John Baptist D. Jatoe ◽  
Irene S. Egyir
Keyword(s):  
Burkina Faso ◽  
Agricultural Production ◽  
Credit Constraints ◽  
Probit Model ◽  
Multinomial Logit Model ◽  
Farm Households ◽  
Content Type ◽  
Labour Market Participation ◽  
On Farm ◽  
Allocation Decisions

Purpose Credit is central in labour allocation decisions in smallholder agriculture in developing countries. The purpose of this paper is to analyse the effect of credit constraints on farm households’ labour allocation decisions in rural Burkina Faso. Design/methodology/approach The study used a direct elicitation approach of credit constraints and applied a farm household model to categorize households into four labour market participation regimes. A joint estimation of both the multinomial logit model and probit model was applied on survey data from Burkina Faso to assess the effect of credit constraint on the probability of choosing one of the four alternatives. Findings The results of the probit model showed that households’ endowment of livestock, access to news, and membership to an farmer-based organization were factors lowering the probability of being credit constrained in rural Burkina Faso. The multinomial logit model results showed that credit constraints negatively influenced the likelihood of a farm household to use hired labour in agricultural production and perhaps more importantly it induces farm households to hire out labour off farm. The results also showed that the other components of household characteristics and farm attributes are important factors determining the relative probability of selecting a particular labour market participation regime. Social implications Facilitating access to credit in rural Burkina Faso can encourage farm households to use hired labour in agricultural production and thereby positively impacting farm productivity and relieving unemployment pressures. Originality/value In order to identify the effect of credit constraints on farm households’ labour decisions, this study examined farm households’ decisions of hiring on-farm labour, supplying labour off-farm or simultaneously hiring on-farm labour and supplying family labour off-farm under credit constraints using the direct elicitation approach of credit constraints. To the best of the authors’ knowledge, this study is the first to examine this problem in Burkina Faso.

Nonfarm diversification and the well-being of rural farm households in developing countries: Evidence from Ghana using new dataset

2018 ◽  
Vol 69 (3) ◽  
pp. 207-229
Author(s):  
Bernardin Senadza ◽  
Edward Nketiah-Amponsah ◽  
Samuel Ampaw
Keyword(s):  
Well Being ◽  
Household Consumption ◽  
Empirical Method ◽  
Farm Households ◽  
Consumption Expenditure ◽  
Switching Regression ◽  
Rural Ghana ◽  
Per Capita ◽  
Nationally Representative ◽  
The Impact

Abstract This paper examines the impact of participation in both farm and nonfarm activities on both household consumption expenditure per adult equivalent and household per capita income, in rural Ghana. The objective is to ascertain whether the results are sensitive to the choice of well-being measure. We use a nationally representative dataset on 8,059 rural farm households collected in 2012/13. In order to account for potential selectivity and endogeneity biases, which previous studies failed to correct for, we adopt the endogenous switching regression (ESR) estimation technique. We find diversified households to be systematically different from their undiversified counterparts in terms of socioeconomic and demographic centeracteristics, thus justifying the empirical method used. Our results indicate a higher observed mean consumption for the diversified sub-sample compared to its counterfactual, implying that households participating in nonfarm enterprise activities in addition to farming have greater mean consumption compared to households engaged solely in farming. Similar conclusions are reached when income instead is used as the well-being indicator. Our findings, thus, indicate that the well-being implication of farm-nonfarm diversification is insensitive to the choice of well-being measure.

scholarly journals Impacts of Oil Discovery on Households in Uganda: A CGE Analysis

2019 ◽  
Vol 5 (1) ◽  
pp. 41
Author(s):  
Koire Twaha ◽  
Arshad Ali Bhatti ◽  
Husain Abbas Naqvi
Keyword(s):  
Private Consumption ◽  
Farm Households ◽  
Household Welfare ◽  
Cge Model ◽  
Absolute Poverty ◽  
Poverty And Inequality ◽  
Urban Farm ◽  
Oil Exports ◽  
The Impact ◽  
Positive Effect

This study analyses the impact of oil discovery on household poverty and inequality by employing a CGE model using 2007 SAM for Uganda. The oil production and export simulations show a decline in absolute poverty, poverty gaps and severity. Further, our findings showcase a positive effect of production and exports on household welfare, except for urban farm households. This study recommends for the managers of the economy to pay special attention towards injection of a reasonable portion of oil rent in sectors which positively contribute to the economy, diversify non-oil exports and above all, boost private consumption.

scholarly journals Is change worth it? The effects of adopting modern agricultural inputs on household welfare in Rwanda

2021 ◽  
Vol 16 (3) ◽  
pp. 216-236
Author(s):  
Aimable Nsabimana ◽  
Keyword(s):  
Market Access ◽  
Driving Forces ◽  
Farm Income ◽  
Household Welfare ◽  
Switching Regression ◽  
Adoption Decision ◽  
Advisory Services ◽  
Effective Dissemination ◽  
Farm Credit ◽  
Household Farm

This study investigates the driving factors that influence farmers’ decisions to adopt modern agricultural inputs (MAI) and how this affects farm household welfare in rural Rwanda. To account for heterogeneity in the MAI adoption decision and unobservable farm and household attributes, we estimate an endogenous switching regression (ESR) model. The findings reveal that size of land endowment, access to farm credit and awareness of farm advisory services are the main driving forces behind MAI adoption. The analysis further shows that MAI adoption increases household farm income, farm yield and equivalised consumption per capita. This implies that adopting MAI is the most consistent and potentially best pathway to reduce poverty among rural farmers. The study hence suggests that policymakers should align the effective dissemination of MAI information and farm advisory services, strengthen farm credit systems and improve market access – most crucially at affordable prices – among small-farmers throughout Rwanda.

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