Role and Trend of Agricultural Finance Institutions in the Inclusive Growth of Farmers in Rural India

Purpose: The study is to evaluate the development of agricultural credit in India, exploration of the agricultural development and also to examine the various policies implemented by the Government of India. The paper emphasizes on the development in agriculture finances, new methods, techniques and technologies with a focus on how they lead to improved agricultural growth and greater financial inclusion. Design/Methodology/Approach: The study is grounded on secondary data compiled from different journals, web sites and related information from newspapers, annual reports of NABARD and RBI. Findings: The study has discovered that, informal credit has decreased as a percentage of total debt, while institutional credit to agriculture has exaggerated over time as a result of institutional agencies volunteering into rural areas, nationalization of foremost commercial banks and the establishment of regional rural banks through Reserve Bank of India initiatives. Originality/Value: This study is unusual in that it attempts to trace the agricultural financial institution in India, as well as the numerous agricultural policies that have been enacted as a result of agricultural finance. Paper Type: Case Study

Is Group Lending a Collateral for Informal Credit?

This article explores how participation in microfinance programs affects informal credit conditions. Using data on the rural credit market of Andhra Pradesh, I provide evidence that group lending participants obtain lower interest rates from the informal credit market. This result can be explained by two main factors. On the one hand, due to joint liability, group lending clients have high incentives to monitor each other, which implies a reduction in the agency costs for moneylenders. On the other hand, as microfinance borrowers are required to invest the credit in income generating activities, they face a lower default risk. Taken together, these two mechanisms may explain why microcredit borrowers are perceived as less risky by informal lenders. Overall, the findings suggest that moneylenders benefit from the duality in the market, thus providing empirical support to recent theoretical research hypothesizing that there is a complementarity relationship between formal and informal credit suppliers.

THE EFFECT OF SAVING ACCOUNT OWNERSHIP AND ACCESS TO FINANCIAL INSTITUTIONS ON HOUSEHOLD LOANS IN INDONESIA

This study investigates whether saving account ownership and access to financial institutions influence household credit in Indonesia. Using a multinomial logit regression model and a sample of 294,426 households from the 2018 national socioeconomic survey and the village potential data, we find that account ownership is essential in encouraging formal credit and reducing informal credit. Access to commercial banks, rural banks, and cooperatives can then improve formal credit without significantly reducing informal credit. Hence, the government needs to encourage bank account ownership and facilitate access to financial institutions in order to promote formal credit and reduce informal credit.

ROSCA: An alternative informal credit source for wholesale and retail traders in Khyber Pakhtunkhwa, Pakistan

This paper attempts to explore the major informal source of fundraising for the wholesale and retail traders in the Khyber Pakhtunkhwa Province of Pakistan. Furthermore it examine a cost benefit analysis of joining ROSCA (Rotating Saving and Credit Association) from the society point of view. Primary data is collected by filling closed ended personally administered questionnaires from 250 respondents, garnered through the snowball method and selected through purposive sampling. Descriptive statistics, percentage method, is used for data analysis. An empirical example is also used to show cost benefit analysis of the participants of the ROSCA. The study find that 68 percent of respondents in the study area asserted that ROSCA is the only source of fundraising for them. Cost benefit analysis shows that the first 8 participants, out of a total of 12 participants, are better off in joining ROSCA and the last 4 participants are worse off. The study concluded that in the milieu where formal markets reluctant to cater to the needs of the small scale businesses, ROSCA plays an important role in fundraising for wholesale and retailers in the target area; and that society as a whole better off in joining ROSCA; rather than without it.

Credit Behaviors of Rural Households in the Perspective of Complex Social Networks

With the increasing number of social networks emerging and evolving, the influence of social networks on human behavior is now again a subject of discussion in academe. Dynamics in social networks, such as opinion formation and information sharing, are restricting or proliferating members’ behavior on social networks, while new social network dynamics are created by interpersonal contacts and interactions. Based on this and against the backdrop of unfavourable rural credit development, this article uses CHFS data to discuss the whole and heterogeneous impact of social networks on rural household credit behavior. The results show that (1) social networks can effectively promote rural household credit behavior; (2) social networks have a significant positive impact on both formal credit and informal credit, but the influence of the latter is stronger; (3) both emotional networks and instrumental networks have a positive impact on formal credit and informal credit, and their influences are stronger on informal credit; (4) the influence of emotional network is stronger than instrumental networks on either formal credit or informal credit.

Analisis Persepsi dan Biaya Transaksi Terhadap Sumber Kredit Usaha Pengolahan Ikan Asin

The growth and development of MSMEs are hampered due to capital constraints, so that MSMEs need other sources of capital to meet their business needs, one of which is with credit. In Muara Angke Traditional Fisheries Processing (PHPT) there are formal and informal credit institutions. The decision-making process of which credit institution will be chosen is determined by the processor's perception of the two institutions, where each institution will incur different transaction costs incurred by salted fish processors. The purpose of this study was to analyze the perceptions of salted fish processors on credit institutions and the amount of credit transaction costs incurred. The perceptual analysis uses the importance-performance analysis method and transaction costs are calculated using the transaction cost analysis method. The total sample of 72 salted fish processing business units in PHPT Muara Angke. The results showed that based on the criteria of processing perceptions of formal institutions better. This is indicated by the measurement of the average value of formal interests 4,48, the average value of the performance of formal institutions is 4,04 while the average value of the interests of non-formal institutions is 4,16 and the average value of the performance of non-formal institutions is 3,99. However, the transaction costs per loan period that must be issued by processors with formal credit (Rp 126.750) are greater than the transaction costs incurred by processors with non-formal credit (Rp 15.434). The largest transaction cost component informal credit is implementation costs (62,60 per cent), while informal credit is information costs (36,37 per cent).

The interrelationships among the formal, semiformal and informal credit demands of farm households in Vietnam

Purpose This study simultaneously explores the nexus among formal, semiformal and informal credit markets and farm households' credit demand determinants in Vietnam. Design/methodology/approach This study uses a multistage stratified random sampling process for a survey of 648 smallholder farmers in the Red River Delta (RRD), Vietnam. The trivariate probit model (TVPM) is used to address the interdependence of farm households' credit demands in different credit markets. Findings The results reveal complementary relationships among two pairs of credit markets (formal versus informal and semiformal versus informal). There are dissimilarities among the determinants (household characteristics, household head's characteristics, credit history and geographic factors) of farm households' credit demands in different markets, reflecting segmentation of Vietnam credit markets. Practical implications The study's empirical findings are important for policymakers and credit providers to enhance farm households' access to credit for agriculture and to improve the operations of the three credit markets. Originality/value This is the first empirical study in Vietnam and one of few in other developing countries simultaneously exploring the determinants of credit demand in and interrelationships among all three credit markets to provide more comprehensive and accurate results.