Access to Rural Credit Markets in Developing Countries, the Case of Vietnam: A Literature Review

Agricultural sectors play an important role in the process of economic development of a country, especially in developing ones. Vietnam is known as an emerging market, which depends directly on agriculture-related activities for their livelihood, in which the issue of rural credit access still remains a confounding problem. The paper focuses on the characteristics of rural credit markets, the determinants of farmer access to the markets, the socio-economic impacts of credit access in Vietnam and briefly comparing with those of some developing countries. This question is addressed by reviewing existing literature and empirical evidence, followed by a comprehensive case study in Vietnam. Comprehensive literature review with secondary data collection and key informant interviews are methods that are applied in this research. The results of this analysis indicate the features of Vietnam markets as participated constraints, government intervention, and segmentation. Other results reveal the significant determinants of credit accessibility. Impacts of credit access on output production, household income, and poverty reduction are highlighted in this paper. Some managerial implications are recommended for households through participation in lending networks; for financial institutions relating to expand target clients as well as capital allocation; and, for policy-makers via ensuring market competitiveness and sustainable development in the long run.

Agriculture Credit in Developing Economies: A Review of Relevant Literature

<p>This paper aims to present a comprehensive review of 110 studies on agriculture credit in developing countries during 1995 to 2015. The literature has been classified and presented on the basis of time period, country of study, methodology used, issues covered, and sources of study. Agriculture credit has gained interest of policy makers and researchers in developing economies in recent years with raising concerns of issues like food security and rising population. However, the situation of small and marginal farmers is still vulnerable and they lack timely and adequate access to institutional sources of finance. Non-institutional sources of credit are still dominant in rural credit markets; while the role of micro-finance appears dubious. This study will prove helpful for policy makers and future researchers who wish to study diverse issues in rural finance in general and agriculture credit in particular.</p>

Risk rationing and the demand for agricultural credit: a comparative investigation of Mexico and China

Purpose – The purpose of this paper is to determine the extent of risk rationing among potential rural borrowers in Mexico and China. Design/methodology/approach – Using primary survey data from 730 farm households in the Shaanxi province of China and from 372 farmers in northeastern Mexico, the authors investigate factors associated with risk rationed, price rationed and quantity rationed farmers. The survey was instrumented to self-identify borrower typologies. In addition the authors created within the survey a discrete-choice credit demand build to determine borrower credit demand elasticities. The analysis applies a linear probability which the authors found to be consistent with multinomial and binary logit models. Findings – The authors find in China the incidence of risk rationing in farmers to be 6.5, 14 percent for quantity rationed and 80 percent for price rationed. In Mexico, 35 percent of the sample is risk rationed, 10 percent quantity rationed and 55 percent price rationed. The results from China support the hypothesis that the financially poor are more likely to be quantity rationed; in Mexico, however, the level of education is found to be important in determining quantity rationed. In both countries, asset wealthy farmers are less likely to be risk rationed; however, income does not appear to have an impact. The paper provides evidence that the elasticity of demand for credit is different among the three credit rationed groups: risk rationed, price rationed and quantity rationed. Risk aversion and prudence are significantly correlated with risk rationing in China, while only risk aversion is significant in Mexico. The results suggest that efforts to enhance credit access must also deal with risk and risk perceptions. Practical implications – Risk rationing is an important concept in the understanding of rural credit markets. The findings that only 6.5 and 35 percent of Chinese and Mexican farmers are in stark contrast to each other. For agricultural economies such as Mexico with a significant number of farmers being risk rationing, more effort should be put into financial education and financial practices, including perhaps the use of risk-contingent credit to remove collateral risk. As property rights in China evolve, and new laws are promulgated to permit borrowing against land use rights, the collateralization issue will become much more important in rural credit markets. Originality/value – This paper is the first to investigate risk rationing in China and Mexico and one of the few research studies empirically investigating risk rationing. A comparative analysis of Mexico and China is enlightening because of the structural differences in the respective agricultural economies. The use of a credit demand build and the enumeration of individual credit demand elasticities is an original contribution to this literature.

Informal rural credit markets and interlinked transactions in the district of late Ottoman Haifa, 1890–1915

By examining the acts of the Public Notary of Haifa (1890–1915), this article shows that it was the traditional informal market of credit, run by local notables, which financially supported the development of the small-landholding-based agricultural sector of the Haifa district in late Ottoman Palestine. In seeking to ascertain what led to the success of the informal rural credit market as compared with the formal credit market, the article finds that the local notables, who acted as financial intermediaries for small landholders, enjoyed an information advantage over the banks stemming from the establishment of interlinked credit market transactions connected to the stipulation of bay' wafā, salam and muzara‘ah contracts. In a context of land privatisation and growing commercialisation of agriculture, these contracts became the instruments used by notables to invest in peasants' landholdings and to manage a sales network for agricultural products on a local and international scale, hence representing an efficient financial institution to support the ‘agricultural export-led growth’ of late Ottoman Palestine.