Microfinance for Agricultural Firms- Credit Access and Loan Repayment in Tanzania
AbstractOn the example of a commercial microfinance institution (MFI) in Tanzania this paper investigates first whether agricultural firms have a different probability to get a loan and whether their loans are differently volume rationed than loans to non-agricultural firms. Second, we analyze whether agricultural firms repay their loans with different delinquencies than non-agricultural firms. Our results reveal that agricultural firms face higher obstacles to get credit but as soon as they have access to credit, their loans are not differently volume rationed than those of non-agricultural firms. Furthermore, agricultural firms are less often delinquent when paying back their loans than non-agricultural firms. Our findings suggest that a higher risk exposition of agricultural firms does not necessarily lead to higher credit risk. They also show that the investigated MFI overestimates the credit risk of agricultural clients and, hence, should reconsider its risk assessment practice to be able to increase lending to the agricultural sector. In addition, our results might indicate that farmers qualify less often for a loan as they do not fit into the standard micro credit product.
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Bibliographic InfoPaper provided by European Association of Agricultural Economists in its series 123rd Seminar, February 23-24, 2012, Dublin, Ireland with number 122552.
Date of creation: 23 Feb 2012
Date of revision:
Agricultural Finance; Access to Credit; Loan Repayment; Microfinance Institutions; Financial Economics; International Development; Risk and Uncertainty; G21; G32; Q14;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
This paper has been announced in the following NEP Reports:
- NEP-AFR-2012-05-15 (Africa)
- NEP-ALL-2012-05-15 (All new papers)
- NEP-BAN-2012-05-15 (Banking)
- NEP-MFD-2012-05-15 (Microfinance)
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