Governing Of Finance Supply In Bulgarian Farms
AbstractAttempt has been made to identify dominant forms and factors for finance supply in Bulgarian farms. New Institutional and Transaction Costs Economics framework is used to estimate comparative efficiency of various modes for financing of short-term and long-term activities of farms of different type and size. Study is based on a large-scale microeconomic data collected through interviews with managers of 0.5% of commercial farms in the country. Big transitional institutional, economic and behavioral uncertainty combined with high asset specificity and low recurrence of transactions, have blocked use of market debt financing of farms. Great variety of specific private modes have emerged to overcome funding difficulties and to govern dependant transactions (internal investment, personal contacts, share investment, interlinked organization). However, vast development and maintenance costs (“free riding”) have prevented formation of effective collective credit supply forms. Large third-party (Government, international assistance, NGO) intervention has also taken place to finance (directly or indirectly) farms or to assist market and private modes of funding of farm activities. Nevertheless, for majority of Bulgarian farms external funding is still either too expensive (high interest rate, unaffordable collateral requirements, immense paper work and bureaucratic procedures, big “side payments”) or not accessible at all. High transaction costs for “credit supply”, and “marketing”, and “contract enforcement” are the major factors limiting farm enlargement at present stage of transition. Along with further credit support, public involvement should be directed to enhancement of efficiency of State lending programs and improvement of general institutional environment (legislative framework, contract enforcement system, market infrastructure etc.).
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Bibliographic InfoPaper provided by EconWPA in its series Finance with number 0511003.
Date of creation: 06 Nov 2005
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governing of finance in farms; transaction cost economics; transitional farm organization;
Find related papers by JEL classification:
- G - Financial Economics
This paper has been announced in the following NEP Reports:
- NEP-AGR-2005-11-12 (Agricultural Economics)
- NEP-ALL-2005-11-12 (All new papers)
- NEP-EEC-2005-11-12 (European Economics)
- NEP-TRA-2005-11-12 (Transition Economics)
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- Bachev, Hrabrin, 2010. "Study on Agrarian Contracts in Bulgaria," MPRA Paper 22946, University Library of Munich, Germany.
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- Bachev, Hrabrin, 2010. "Competitiveness of Bulgarian farms," MPRA Paper 25626, University Library of Munich, Germany.
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