Causes and Implications of Credit Rationing in Rural Ethiopia : The Importance of Spatial Variation
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World Bank, Washington, DC
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This paper uses Ethiopian data to
explore credit rationing in semi-formal credit markets and
its effects on farmers' resource allocation and crop
productivity. Credit rationing -- both voluntarily and
involuntarily -- is found to be widespread in the sampled
rural villages, largely because of risk-related factors.
Political and social networks emerge as key determinants of
access to credit among smallholder, peasant farmers.
Significant regional variation emerges as well. In
high-potential, surplus producing areas where credit is
largely used for agricultural production, eliminating credit
constraints is estimated to increase productivity by roughly
11 percentage points. By contrast, in low-productivity,
drought prone areas where loans were rarely used to acquire
inputs for crop production, the authors find no relationship
between credit rationing and agricultural productivity. To
be effective, efforts to improve agricultural productivity
not only need to increase credit supply, but also explore
the reasons for credit rationing and the availability of
productive opportunities.
Palabras clave
ACCESS TO CAPITAL, ACCESS TO CREDIT, ACCESS TO FORMAL CREDIT, ACCESS TO LOANS, ADVERSE SELECTION, AGRICULTURAL ACTIVITIES, AGRICULTURAL ECONOMICS, AGRICULTURE, ALLOCATION OF CREDIT, AMOUNT OF CREDIT, ASSETS, BORROWER, BORROWING, BORROWING CONSTRAINTS, CAPITAL CONSTRAINTS, CAPITAL MARKET, CAPITAL MARKETS, COLLATERAL, COLLATERAL REQUIREMENT, COLLATERAL REQUIREMENTS, COMPETITIVE MARKETS, CONSUMER DURABLES, CONSUMPTION SMOOTHING, COOP, COOPERATIVES, CREDIT ACCESS, CREDIT ASSOCIATIONS, CREDIT AVAILABILITY, CREDIT CONSTRAINT, CREDIT CONSTRAINTS, CREDIT MARKET, CREDIT MARKET ACCESS, CREDIT MARKETS, CREDIT RATIONING, CREDIT UNIONS, CREDITS, DEMAND FOR CREDIT, DEPENDENT, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DEVELOPMENT STRATEGY, DISEQUILIBRIUM, ECONOMETRIC ANALYSIS, ECONOMIC CRITERIA, ECONOMIC DEVELOPMENT, ECONOMIC OPPORTUNITIES, EMPLOYMENT OPPORTUNITIES, ENDOWMENTS, EQUALITY, EQUILIBRIUM CREDIT, EQUILIBRIUM CREDIT RATIONING, EXCESS DEMAND, EXCHANGE RATE, EXCLUSION, FARMER, FARMERS, FINANCIAL MARKETS, FORMAL CREDIT, FORMAL FINANCE, FORMAL FINANCIAL INSTITUTIONS, FORMAL LOAN, HOLDING, HOUSEHOLD WELFARE, HOUSEHOLDS, INCENTIVE EFFECTS, INCOME, INDEBTED, INEFFICIENCY, INFORMAL CREDIT, INFORMAL LOANS, INFORMATIONAL ASYMMETRIES, INSTRUMENT, INSURANCE, INTEREST RATE, INTEREST RATES, INTERNATIONAL BANK, INVESTMENT OPPORTUNITIES, LABOR MARKETS, LACK OF ACCESS, LACK OF COLLATERAL, LAND ADMINISTRATION, LAND OWNERSHIP, LENDERS, LIQUIDITY, LOAN, LOAN AMOUNT, LOAN APPLICANTS, LOAN APPLICATION, LOAN APPLICATIONS, LOAN REQUEST, LOAN SIZE, LOAN SIZES, LOAN TERMS, LOANABLE FUNDS, MAXIMUM LIKELIHOOD ESTIMATION, MAXIMUM LIKELIHOOD METHOD, MICRO-FINANCE, MICRO-FINANCE INSTITUTIONS, MICROFINANCE, MICROFINANCE INSTITUTIONS, MISSING MARKETS, MONEYLENDERS, MORAL HAZARD, OUTREACH, PERMANENT INCOME, PORTFOLIO, POSITIVE COEFFICIENT, POSSESSION, POTENTIAL BORROWERS, PRODUCTIVITY, PROFITABILITY, PROVISION OF CREDIT, REGRESSION MODELS, REPAYMENT, RETURNS, RURAL CREDIT, RURAL CREDIT MARKETS, RURAL FINANCIAL MARKETS, SAVINGS, SMALL FARM, SMALL LOANS, SMALLHOLDER, SMALLHOLDER FARMERS, SMALLHOLDERS, SOCIAL NETWORKS, SOURCE OF CREDIT, STOCKS, TERMS OF LOAN, TRANSACTION, TRANSACTION COST, TRANSACTION COSTS, TRANSITION COUNTRIES, UNIONS, USE OF COLLATERAL, VALUE OF OUTPUT, VARIABLE INPUTS, VILLAGE, VILLAGES, WARRANTS, WEALTH, WEALTH EFFECTS, WORKING CAPITAL