Beginning farmer and rancher credit usage by socially disadvantaged status

PurposeThe purpose of this paper is to examine credit usage by beginning farmers and ranchers (BFR). BFR credit usage is stratified by location (state) and by socially disadvantaged farmer and rancher (SDFR, also known as historically underserved) status. SDFR groups are defined to include women; individuals with Hispanic, Latino or Spanish Origin; individuals who identify as American Indian or Alaskan Native, Black or African American, Asian, Native Hawaiian or other Pacific Islander. Non-SDFR is defined as individuals who identify as non-Hispanic, White men.Design/methodology/approachThe US Department of Agriculture’s Census of Agriculture, Agricultural Resource Management Survey (ARMS) is linked with Farm Service Agency (FSA) loan program administrative data to estimate shares of BFR operations using FSA credit. Census data provided information on population changes in total farms and BFR operations from 2012 to 2017 which are compared by SDFR status.FindingsResults reveal differences among BFR operations active in agricultural credit markets by SDFR status and state. BFR were more common among SDFR groups as well as in regions where farms tend to be smaller, such as the Northeast, compared to a more highly agricultural upper Midwest. Among BFR, non-SDFR are more likely to utilize credit than SDFR, however, FSA appeared to be crucial in enabling BFR and especially beginning SDFR groups to access loans.Originality/valueThe results are timely and of keen interest to researchers, industry and policymakers and are expected to assist in developing and adjusting policies to effectively promote and improve BFR success in general and for beginning SDFR groups.

State of Agricultural Finance in India

Agricultural finance has come a long way in the past 15 years. After the concerted efforts of GOI, supported by RBI and NABARD, towards doubling of agricultural credit flow in 2004¬¬¬¬--2005, the growth in credit flow to the sector has been robust with an impressive CAGR of 18% between 2004--2005 and 2019--2020. While outreach increased, the Terms of Trade (Farmers and Non-farmers) has largely been on a declining trend, reflecting the underlying stressed conditions in farming. There is a challenge of inclusion, where small and marginal farmers continue to struggle for suitable and affordable credit products and access. This book summarizes the current state of agricultural finance in India, highlighting policy blind spots and grey areas. It documents the important advancements made in the agri-finance space in the last few years. The book covers various aspects of Agri-Finance Policy; institutional appetite and architecture for agriculture credit; formal financial services for enterprises in agriculture; agri-business, including FPOs; and innovations in credit, insurance, delivery mechanisms for agri-sector.

Credit-linked insurance bundles in Zambia: evidence from the aftermath of a shock

PurposeThis research seeks to assess the impact of a credit-linked insurance bundle in Zambia, in terms of the inputs used and the amount of maize subsequently produced and sold.Design/methodology/approachTo estimate the impact of a credit-linked insurance bundle, this research relies on a natural field experiment. A cross-sectional survey, conducted among 409 households that enrolled in a credit-linked insurance program prior to a drought and adverse market conditions, revealed that 252 households dropped out of the program. Of these, 113 households left for an exogenous, involuntary reason (i.e. group loan was not repaid on time).FindingsA comparison of households that used the program and those that dropped out reveals that smallholders who lost the credit-linked insurance bundle purchased less fertilizer (−36%), and this input restriction resulted in diminished harvests (−27%) and less quantity sold (−31%).Research limitations/implicationsRisk-exposed smallholders tend to be severely credit constrained, so they cannot invest in sufficient inputs to increase their yields. A credit-linked insurance scheme provides such risk-exposed smallholders, who lack or have only limited collateral, with commercial agricultural credit services and greater access to input. The current analysis cannot specifically attribute the impact of individual components of the bundle (i.e. credit, insurance and input supply), but the overall impact is substantial. The implication of this research is that policy initiatives which support a credit-linked insurance system should not only encourage upscaling but also resilience of the scheme.Practical implicationsAligning government and public support programs with private initiatives suggests opportunities for greater benefits.Social implicationsAfrican farmers are mainly smallholders, so they face inherent production risks. They also tend to be severely credit constrained, with few means to mitigate these risks, so they suffer from a limited capacity to invest in improved farm technology systems that might increase their productivity. Insured input bundles could help farmers to cope better with adverse risks and facilitate increase productivity.Originality/valueThis research design exploits the peculiarity of the data, including group liability and a strict time window for loan repayments to remain eligible in a forthcoming growing season. This impact assessment approach is rigorous in controlling for self-selection bias and thus offers opportunities to establish how households in each sub-sample (eligible or not) are (un)able to ride out a lean season, following a drought and adverse market conditions.

Nontraditional lenders and access to local agricultural credit markets by beginning and female farmers

PurposeThe purpose of this study is to evaluate if access to local branch infrastructure of the farm credit system institutions (FCS), banks and credit unions (BCU), and alternative financial services (AFS) providers is related to the use of credit from non-traditional lenders (NTLs). The focus is on beginning and women operators who are typically credit constrained and thus more likely to suffer from closures of bank branches and consolidation of traditional agricultural lenders.Design/methodology/approachInformed by Detragiache et al. (2000), the authors specify farmers’ use of loans as a function of their access to credit (measured by the branch density of each lender type) along with operator’s and operation’s controls. The measures of loans by NTLs (number, use, share and lender type) require the use of Poisson, Probit, Tobit and Multinomial Logit techniques. This study utilizes individual producer data from the 2018 Agricultural Resource Management Survey and 2018 county-level branch density data for FCS, BCU and AFS providers.FindingsAccess to credit from FCS is helpful to BFRs only, while access to AFS is associated with the use of loans from NTLs by women but not by BFRs. As expected, access to BCU credit matters for the use of loans from NTLs, with a complementary effect for BFRs but a substitution effect for women’s use of such loans.Originality/valueThere are no studies on local agricultural credit markets in the US that evaluate the implications from changes in access to credit on credit-constrained borrowers and their use of NTLs’ credit.

Strategic behavior of nontraditional lenders in agricultural credit markets

PurposeThis paper examines credit products, operational performance and business models employed by nontraditional lenders (NTLs) in agricultural credit markets.Design/methodology/approachTwo research methods were employed in this study: (1) an executive interview to collect primary data and (2) a case study approach to analyze the findings and develop insights.FindingsThe findings indicate the presence of significant differences among lenders across and within three categories of NTLs (large volume, vendor financing and collateral-based NTLs). For example, collateral-based NTLs employ different strategies focusing on types of loans, funding sources, commodities they support and geographic coverage to further segment the market. NTLs in this study were able to capture market by successfully identifying gaps in the supply side of agricultural credit and developing products that meet the needs of that niche (e.g. heavy renters, large operations, producers seeking fixed interest rates for term loans, financially fragile producers). Most of the interviewed NTLs had credit standards comparable to those of traditional lenders and consider them both competitors and partners since many NTLs partner with traditional lenders on participation loans, loan servicing and/or sourcing funds.Originality/valueThe supply side of a nontraditional lending has not been studied extensively due to the proprietary nature of data. The executive interviews conducted in this study allowed for accumulation of industry data, which is not available otherwise.

Déterminants de l’accès aux crédits agricole par les producteurs d’anacarde au nord-Bénin

Pour sécuriser les revenus agricoles des producteurs béninois, des mécanismes de financement sont mis en place dans la production d’anacarde. La présente étude identifie les déterminants de l’accès au financement par les producteurs d’anacarde. A cet elffet, des données socioéconomiques ont été collectées par enquête auprès de 160 producteurs de noix de cajou choisis aléatoirement dans deux communes du Nord-Bénin. La statistique descriptive a été utilisée pour caractériser les types de financement. Un modèle de régression Logit binaire a été estimé pour déterminer les variables influençant l’accès aux crédits par les producteurs d’anacarde. Les principaux résultats de cette étude indiquent trois types de financement sont obtenus par les producteurs d’anacarde et financés par divers acteurs. Le sexe, l'âge, l'appartenance à une organisation, les contacts avec les services de vulgarisation et la formation à la production d’anacarde déterminent l'accès au crédit agricole au nord du Bénin. Enfin, a promotion du financement agricole dans la zone d’étude permettra de réguler la capacité à introduire l’agroforesterie dans l’exploitation agricole dans le contexte d’amélioration des conditions de vie et la protection des sols. English title: Determinants of access to agricultural credits by casnacard growers in north Benin In order to secure the agricultural income of producers in Benin, agricultural financing mechanisms have been put in place in cashew production. This study aimed at identifying the determinants of access to finance by cashew producers. To this end, socioeconomic data was collected through a survey of 160 cashew producers chosen at random from two municipalities in North Benin. Descriptive statistics were used to characterize the types of funding. A binary logit regression model was estimated to determine the variables influencing access to credit by cashew producers. The main results of this study indicate three types of financing obtained by cashew producers, which are financed by various actors. In addition, gender, age, membership of an organization, contacts with extension services and training in cashew production determine access to agricultural credit in northern Benin. Finally, the promotion of this financing in the study area will make it possible to regulate the capacity to introduce agroforestry on the farm, all of which contributes to the improvement of living conditions and soil protection.

Pengaruh Kredit Usaha Tani Terhadap Kesejahteraan Petani di Desa Kedung Lengkong, Kecamatan Dlangu, Kabupaten Mojokerto

Suppose the agricultural sector is supported by a comprehensive and sustainable planning system and balanced with an adequate budget (such as capital). In that case, the role of the agricultural sector will be optimal. Farmers face the problem of funding; although many farmers can increase their yields, they cannot develop their own farming business if they do not have sufficient funds. Therefore, farmers will apply for loans from formal and informal financial institutions to overcome the lack of funds. However, credit growth has increased, especially in the agricultural sector, which is the agricultural sector where the government plans to improve the rural economy. Agricultural credit plays a crucial role in developing agriculture to obtain higher yields. If output increases, farmers' income will also increase, which will benefit farmers. The research method used was quantitative, with a sample of 100 people. This study used a population of 187 farmers in Kedung Lengkong Village, Dlangu District, Mojokerto Regency. The analysis used in this study was simple regression to understand the impact of credit availability on farmers' welfare. The hypothesis test results were that credit has a positive effect on welfare, with a regression coefficient value of 0.291. Credit helped farmers purchase fertilizers, seeds, and other things related to the need for farming so that the agricultural production process could run according to planning so that production results were in line with farmers' expectations to increase profits. These profits, in the end, became a source to meet the costs of meeting basic needs. The ability to meet these needs raised the standard of living and the community's welfare so that people could have a better quality of life.

Synchronized Agricultural Credit and Diversification Adoption to Catastrophic Risk Manage for Wheat Production in Punjab, Pakistan

Catastrophic risks caused severe affects on agricultural production particularly in developing countries due to consecutive occurrence of unfavorable climate events. Farmers adopt risk management strategies to minimize marketing, production and financial risks in agriculture. The purpose of this study is to investigate the potential association and implementing synchronized agricultural credit and diversification adoption to catastrophic risk manage for wheat production in Punjab, Pakistan. This study used stratified random sampling technique for collecting data of 480 wheat farmers’ respondents from production based categorized six districts of Punjab Pakistan. Multinomial and bivariate probit regression models were used in the study to examine the effects of farm and social feathers, disastrous risks farmers view and their attitude to sources of risk moreover potential relationship in agricultural credit and diversification as risk management strategy. Estimates of the study indicated the association in risk management strategies adoption while adopting single risk management strategy motivates farmers to adopt another strategy at same time. Furthermore, findings also indicated as farmer schooling, age, family return, ownership of land, farm size and farmer risk oppose character were highlighted the most influenced features for adopting various risk management strategies. Policy makers and state based authorities can be assisted by the accumulated information of multinomial and bivariate probit regression models in evaluating plans of risk management and willingness of farmer in accept government supported risk managing strategies in incidence of traditional practices for managing farmhouse risk.