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Reaping the Gains from Trade: Constraints and Opportunities of Agricultural Credit Markets

  • Chloupkova, Jarka
  • Bjornskov, Christian

International trade liberalisation often implies increased potentials for export production. For investing in increasing capacity in agriculture, farmers need to have credit access. However, farmers in many countries are credit constrained, e.g. due to collateral reasons, which is the case in Central Europe and East Africa, among others. A model illustrates the additional producer gains from having access to credit; the gains are composed of a price effect, an investment effect, and a social capital externality. Improvement of agricultural credit can be achieved by relying on existing social structures, such as farmers' social capital. This approach tackles the collateral issue and can furthermore entail benefits external to the investment decision. The paper concludes that these externalities need to be addressed when designing optimal agricultural credit institutions.

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File URL: http://purl.umn.edu/24189
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Paper provided by Royal Veterinary and Agricultural University, Food and Resource Economic Institute in its series Unit of Economics Working papers with number 24189.

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Date of creation: 2001
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Handle: RePEc:ags:rvaewp:24189
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  1. weijland, Hermine, 1999. "Microenterprise Clusters in Rural Indonesia: Industrial Seedbed and Policy Target," World Development, Elsevier, vol. 27(9), pages 1515-1530, September.
  2. Deininger, Klaus & Olinto, Pedro, 2000. "Why liberalization alone has not improved agricultural productivity in Zambia : the role of asset ownership and working capital constraints," Policy Research Working Paper Series 2302, The World Bank.
  3. Khandker, Shahidur R. & Faruqee, Rashidur R., 2001. "The impact of farm credit in Pakistan," Policy Research Working Paper Series 2653, The World Bank.
  4. Lopez, Ramon, 1998. "The Tragedy of the Commons in Cote d'Ivoire Agriculture: Empirical Evidence and Implications for Evaluating Trade Policies," World Bank Economic Review, World Bank Group, vol. 12(1), pages 105-31, January.
  5. Bhatt, Nitin & Tang, Shui-Yan, 1998. "The problem of transaction costs in group-based microlending: An institutional perspective," World Development, Elsevier, vol. 26(4), pages 623-637, April.
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