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Climate Risk and Access to Credit: Evidence from Colombian Potato Growers

Author

Listed:
  • Camilo Bohorquez-Penuela
  • Margarita Gáfaro
  • Karelys Guzmán-Finol
  • Alex Perez

Abstract

We study both the ex post and ex ante effects of climate risk on credit access for small producers of potato in Colombia. First, we explore the ex post effects that come after a drought, a climate shock that affects the production value of the crop. Second, we investigate the ex ante effects through the uncertainty surrounding future climate conditions, using rainfall variability as a proxy for that uncertainty. Finally, we analyze how these two effects interact to influence farmers’ use of credit as a coping mechanism for climate risk. We show that credit access (amount disbursed and number of borrowers) increases after adverse weather shocks. However, this is only true under conditions of low rainfall variability and for credits backed by a public-funded guarantee system. Moreover, we find that rainfall variability decreases disbursements of loans with private guarantees. These results suggest that risk exposure is a relevant constraint to credit access and highlight the potential effectiveness of public guarantees in mitigating these risks. RESUMEN: Evaluamos los efectos ex post y ex ante del riesgo climático sobre el acceso al crédito para los pequeños productores de papa en Colombia. En primer lugar, exploramos los efectos ex post que se producen después de una sequía, un choque climático que afecta el valor de la producción de este cultivo. En segundo lugar, analizamos los efectos ex ante a través de la incertidumbre en torno a las condiciones climáticas futuras, utilizando la variabilidad de en la precipitación como indicador. Por último, analizamos cómo estos dos efectos interactúan para influir en el acceso al crédito por parte de los agricultores como mecanismo de enfrentamiento al riesgo climático. Mostramos que el acceso al crédito (i.e., montos desembolsados y número de prestatarios) aumenta con la duración de los periodos de sequía. Sin embargo, esto solo es cierto en condiciones de baja variabilidad de las precipitaciones y para créditos respaldados bajo un sistema de garantías públicas (Fondo Nacional de Garantías). Además, encontramos que la variabilidad de las precipitaciones está asociada a menores desembolsos de préstamos que no están cubiertos por el Fondo. Estos resultados sugieren que la exposición al riesgo climático es una restricción relevante para el acceso al crédito y resaltan la posible efectividad de las garantías públicas para mitigarlos.

Suggested Citation

  • Camilo Bohorquez-Penuela & Margarita Gáfaro & Karelys Guzmán-Finol & Alex Perez, 2025. "Climate Risk and Access to Credit: Evidence from Colombian Potato Growers," Borradores de Economia 1307, Banco de la Republica de Colombia.
    • Handle: RePEc:bdr:borrec:1307
    DOI: 10.32468/be.1307
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    More about this item

    Keywords

    Agriculture; credit; climate shocks; developing countries; Colombia; Agricultura; crédito; clima; choques climáticos; países en desarrollo;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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