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Famers’ access to credit: Does collateral matter or cash flow matter?—Evidence from Sindh, Pakistan

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  • Abbas Ali Chandio
  • Yuansheng Jiang
  • Feng Wei
  • Abdul Rehman
  • Dan Liu

Abstract

Credit is highly demanded in different parts of the world, mainly for capital requirement to improve land, purchase of main agricultural inputs including fertilizers, seeds, pesticides, and purchase of farm machinery. The purpose of this study was to examine the farmers’ access to credit: does collateral matter or cash flow matter?—evidence from Sindh province of Pakistan. The random sampling technique was used to collected data from 300 rural households through a face-to-face interview. To find the important factors affecting access to credit in Sindh province of Pakistan, we performed descriptive statistics and probit regression model. The results of probit regression model showed that gender, household size, educational level, farming experience, farm size, income, and availability of collateral have positive effect on farmers’ access to credit, while age has a negative and statistically insignificant effect on the farmers’ access to credit. Therefore, this study recommended that institutional sources of credit (such as the ZTBL and other Commercial Banks) should improve their loaning schemes to better suit the diversified needs of small farmers.

Suggested Citation

  • Abbas Ali Chandio & Yuansheng Jiang & Feng Wei & Abdul Rehman & Dan Liu, 2017. "Famers’ access to credit: Does collateral matter or cash flow matter?—Evidence from Sindh, Pakistan," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1369383-136, January.
    • Handle: RePEc:taf:oaefxx:v:5:y:2017:i:1:p:1369383
    DOI: 10.1080/23322039.2017.1369383
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    2. Martinson Ankrah Twumasi & Yuansheng Jiang & Evans B. Ntiamoah & Selorm Akaba & Kwabena N. Darfor & Linda K. Boateng, 2022. "Access to credit and farmland abandonment nexus: The case of rural Ghana," Natural Resources Forum, Blackwell Publishing, vol. 46(1), pages 3-20, February.
    3. Ayat Ullah & Nasir Mahmood & Alam Zeb & Harald Kächele, 2020. "Factors Determining Farmers’ Access to and Sources of Credit: Evidence from the Rain-Fed Zone of Pakistan," Agriculture, MDPI, vol. 10(12), pages 1-13, November.
    4. Hamdiyah Alhassan & Benjamin Musah Abu & Paul Kwame Nkegbe, 2020. "Access to Credit, Farm Productivity and Market Participation in Ghana: A Conditional Mixed Process Approach," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 14(2), pages 226-246, May.
    5. Abera Alemu & Zerhun Ganewo, 2023. "Impact Analysis of Formal Microcredit on Income of Borrowers in Rural Areas of Sidama Region, Ethiopia: A Propensity Score Matching Approach," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(1), pages 65-85, March.
    6. Abbas Ali Chandio & Yuansheng Jiang & Abdul Rehman & Waqar Akram, 2021. "Does Formal Credit Enhance Sugarcane Productivity? A Farm-Level Study of Sindh, Pakistan," SAGE Open, , vol. 11(1), pages 21582440209, January.
    7. David Mhlanga & Steven Henry Dunga, 2020. "Measuring Financial Inclusion and its Determinants among the Smallholder Farmers in Zimbabwe: An Empirical Study," Eurasian Journal of Business and Management, Eurasian Publications, vol. 8(3), pages 266-281.
    8. Anh, Nguyen Tuan & Gan, Christopher & Anh, Dao Le Trang, 2022. "Multi-market credit rationing: The determinants of and impacts on farm performance in Vietnam," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 159-173.

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