Credit Constraints, Agricultural Productivity, and Rural Nonfarm Participation : Evidence from Rwanda
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World Bank, Washington, DC
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Although the potentially negative
impacts of credit constraints on economic development have
long been discussed conceptually, empirical evidence for
Africa remains limited. This study uses a direct elicitation
approach for a national sample of Rwandan rural households
to assess empirically the extent and nature of credit
rationing in the semi-formal sector and its impact using an
endogenous sample separation between credit-constrained and
unconstrained households. Being credit constrained reduces
the likelihood of participating in off-farm self-employment
activities by about 6.3 percent while making participation
in low-return farm wage labor more likely. Even within
agriculture, elimination of all types of credit constraints
in the semi-formal sector could increase output by some 17
percent. Two suggestions for policy emerge from the
findings. First, the estimates suggest that access to
information (education, listening to the radio, and
membership in a farm cooperative) has a major impact on
reducing the incidence of credit constraints in the
semi-formal credit sector. Expanding access to information
in rural areas thus seems to be one of the most promising
strategies to improve credit access in the short term.
Second, making it easy to identify land owners and transfer
land could also significantly reduce transaction costs
associated with credit access.
Palabras clave
ACCESS TO CAPITAL, ACCESS TO CREDIT, ACCESS TO INFORMATION, ADVERSE SELECTION, AGRICULTURAL COMMODITIES, AGRICULTURAL FINANCE, AGRICULTURAL PRACTICES, AGRICULTURE, AMOUNT OF LOAN, ASSET OWNERSHIP, ASSETS, BANK ACCOUNT, BANK LOAN, BANK POLICY, BORROWING CONSTRAINTS, CAPITAL MARKET, COLLATERAL FOR LOANS, COLLATERAL REQUIREMENTS, COLLATERAL RISK, COMPARATIVE ADVANTAGES, CONSUMER DURABLES, CREDIT ACCESS, CREDIT CONSTRAINT, CREDIT CONSTRAINTS, CREDIT MARKET, CREDIT MARKETS, CREDIT RATIONING, CREDIT UNIONS, DEMAND FOR CREDIT, DEMAND-SIDE FACTORS, DEPENDENT, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DISEQUILIBRIUM, DURABLE, DURABLE ASSETS, ECONOMETRIC ANALYSIS, ECONOMETRIC EVIDENCE, ECONOMIC DEVELOPMENT, ECONOMIC OUTCOMES, ECONOMIC RESEARCH, ECONOMICS, EMPLOYMENT, ENTRY BARRIERS, EQUILIBRIUM CREDIT RATIONING, EXCESS DEMAND, EXPENDITURE, EXPORTS, FINANCIAL DEEPENING, FINANCIAL MARKETS, FORMAL LOANS, FORMS OF CREDIT, GDP, HOLDING, HOLDINGS, HOUSEHOLD INCOME, HOUSING, INCENTIVE EFFECTS, INCOME, INCOME INEQUALITY, INCOME SHOCKS, INDEBTED, INFORMAL BORROWING, INFORMAL CREDIT, INSTRUMENT, INSURANCE, INSURANCE MARKET, INTEREST RATE, INTEREST RATE RESTRICTIONS, INTEREST RATES, INTERNATIONAL BANK, INTERNATIONAL DEVELOPMENT, INVESTMENT PURPOSES, LABOR MARKET, LABOR MARKETS, LACK OF COLLATERAL, LAND AS COLLATERAL, LAND OWNERSHIP, LAND PARCELS, LAND TENURE, LAND TITLING, LAND USE, LENDERS, LIQUIDITY, LOAN, LOAN AMOUNT, LOAN AMOUNTS, LOAN APPLICATION, LOAN APPLICATIONS, LOAN MARKET, LOAN TERMS, LOANABLE FUNDS, LOANS FROM FAMILY, LOSS OF COLLATERAL, LOW INTEREST RATES, MARKET ACCESS, MAXIMUM LIKELIHOOD ESTIMATION, MAXIMUM LIKELIHOOD METHOD, MICRO-FINANCE, MICRO-FINANCE INSTITUTIONS, MICROFINANCE, MICROFINANCE INSTITUTIONS, MISSING MARKETS, MOBILE PHONE, MONEY LENDER, MONEYLENDERS, OPPORTUNITY COST, PAYOFFS, PERMANENT INCOME, PORTFOLIO, PORTFOLIOS, POTENTIAL BORROWERS, PRODUCTIVITY, PROFITABILITY, PROPERTY RIGHTS, REGRESSION MODELS, REMITTANCES, REPAYMENT, RESOURCE ALLOCATION, RETURN, RETURNS, RISK AVERSION, RURAL CREDIT, RURAL CREDIT MARKETS, RURAL FINANCIAL MARKETS, SAVINGS, SMALLHOLDER AGRICULTURE, SOCIAL CAPITAL, SOCIAL NETWORKS, SOURCE OF CREDIT, SUPPLY OF CREDIT, TITLES, TRANSACTION, TRANSACTION COST, TRANSACTION COSTS, TRANSITORY INCOME, VALUE OF OUTPUT, WAGES, WEALTH, WEALTH EFFECTS