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Do Small Farmers Borrow Less When the Lending Rate Increases? Interest Rate Elasticity of Rice Farmers in the Philippines

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  • Roehlano M. Briones

Abstract

The new generation of credit programs directed at small borrowers emphasizes financial sustainability. Based on anecdotal information, proponents of cost recovery claim that raising formal lending rates would have a minimal impact on borrowing. However, rigorous evidence for this conjecture is sparse. The present study conducts an econometric test of this conjecture using data from a survey of small rice farmers from the Philippines. Alternative regression techniques tend to reject the conjecture; in particular, a regression that controls for selection effects shows a unitary elastic response of formal borrowing to the lending rate. Copyright 2009 The Author. Journal compilation 2009 East Asian Economic Association and Blackwell Publishing Ltd..

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  • Roehlano M. Briones, 2009. "Do Small Farmers Borrow Less When the Lending Rate Increases? Interest Rate Elasticity of Rice Farmers in the Philippines ," Asian Economic Journal, East Asian Economic Association, vol. 23(4), pages 439-455, December.
  • Handle: RePEc:bla:asiaec:v:23:y:2009:i:4:p:439-455
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    Cited by:

    1. Myyrä, Sami, & Pietola, Kyosti & Heikkilä, Anna-Maija, 2011. "Farm Level Capital: Capital positions, structures, the dynamics of farm level investments, capital accumulation and leverage positions," Factor Markets Working Papers 105, Centre for European Policy Studies.
    2. Twine, Edgar & Rao, Elizaphan & Baltenweck, Isabelle & Omore, Amos, 2015. "Credit, Technology Adoption and Collective Action in Tanzania’s Smallholder Dairy Sector," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 204198, Agricultural and Applied Economics Association;Western Agricultural Economics Association.

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