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Micro-lending for small farmers in Bangladesh: does it affect farm households' land allocation decision?

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  • Rashid, Shahidur
  • Sharma, Manohar
  • Zeller, Manfred

Abstract

It has been long hypothesized that lack of access to credit is the main reason why, despite higher profitability of High Yielding Varieties (HYVs), farmers in developing countries continue to allocate a portion of their land to traditional crop varieties. The empirical testing of this hypothesis has generated a large body of literature with differing conclusions. This paper re-examines the issue in the context of a specially designed group-based lending program for small farmers in Bangladesh, who neither have access to formal sources of credit nor do they qualify to become members of other micro-credit organizations. Two measures of access to credit, credit limit and amount borrowed at a given point in time, are used to analyze the determinants of farm households' land allocation decision. Under a variety of model specifications, formulated within Heckman's two-step method, the results show that credit limits from the lending programs and informal sources are significant determinants of small farmers' decision to cultivate HYV. Authors' abstract.

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  • Rashid, Shahidur & Sharma, Manohar & Zeller, Manfred, 2002. "Micro-lending for small farmers in Bangladesh: does it affect farm households' land allocation decision?," MSSD discussion papers 45, International Food Policy Research Institute (IFPRI).
    • Handle: RePEc:fpr:mssddp:45
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    3. Porgo, Mohamed & Kuwornu, John K.M. & Zahonogo, Pam & Jatoe, John Baptist D. & Egyir, Irene S., 2018. "Credit constraints and cropland allocation decisions in rural Burkina Faso," Land Use Policy, Elsevier, vol. 70(C), pages 666-674.
    4. Timothy N. Njeru & Yukichi Mano & Keijiro Otsuka, 2016. "Role of Access to Credit in Rice Production in Sub-Saharan Africa: The Case of Mwea Irrigation Scheme in Kenya," Journal of African Economies, Centre for the Study of African Economies, vol. 25(2), pages 300-321.
    5. Dorosh, Paul A. & Shahabuddin, Quazi, 2002. "Rice price stabilization in Bangladesh: an analysis of policy options," MSSD discussion papers 46, International Food Policy Research Institute (IFPRI).
    6. Shah Johir Rayhan & Md. Sadique Rahman & Kaiyu Lyu, 2024. "Increasing Boro rice productivity through credit: Evidence from Bangladesh," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 70(2), pages 49-59.
    7. Shah Johir Rayhan & Md. Sadique Rahman & Kaiyu Lyu, 2023. "The Role of Rural Credit in Agricultural Technology Adoption: The Case of Boro Rice Farming in Bangladesh," Agriculture, MDPI, vol. 13(12), pages 1-17, November.
    8. Shahabuddin, Quazi & Dorosh, Paul A., 2002. "Comparative advantage in Bangladesh crop production," MSSD discussion papers 47, International Food Policy Research Institute (IFPRI).
    9. Bidisha, Sayema Haque & Hossain, Md. Amzad & Alam, Rubaiyat & Hasan, Md. Mehedi, 2018. "Credit, tenancy choice and agricultural efficiency: Evidence from the northern region of Bangladesh," Economic Analysis and Policy, Elsevier, vol. 57(C), pages 22-32.
    10. Nicholas Minot & Lisa Daniels, 2005. "Impact of global cotton markets on rural poverty in Benin," Agricultural Economics, International Association of Agricultural Economists, vol. 33(s3), pages 453-466, November.
    11. Jiang Du & Miao Zeng & Zhengjuan Xie & Shikun Wang, 2019. "Power of Agricultural Credit in Farmland Abandonment: Evidence from Rural China," Land, MDPI, vol. 8(12), pages 1-14, December.
    12. Delgado, Christopher L. & Rosegrant, Mark W. & Wada, Nikolas & Meijer, Siet & Ahmed, Mahfuzuddin, 2002. "Fish as food: projections to 2020 under different scenarios," MTID discussion papers 52, International Food Policy Research Institute (IFPRI).
    13. Bidisha, Sayema Haque & Khan, Akib & Imran, Khalid & Khondker, Bazlul H. & Suhrawardy, Gazi Mohammad, 2017. "Role of credit in food security and dietary diversity in Bangladesh," Economic Analysis and Policy, Elsevier, vol. 53(C), pages 33-45.
    14. Sayema Haque Bidisha & Akib Khan & Bazlul Haque Khondker & Khalid Imran, 2015. "Returns to Agricultural Microcredit: Quasi-experimental Evidence from Bangladesh," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 38(4), pages 31-46.

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    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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