IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Causes and implications of credit rationing in rural Ethiopia : the importance of spatial variation

  • Ayalew Ali, Daniel
  • Deininger, Klaus

This paper uses Ethiopian data to explore credit rationing in semi-formal credit markets and its effects on farmers'resource allocation and crop productivity. Credit rationing -- both voluntarily and involuntarily -- is found to be widespread in the sampled rural villages, largely because of risk-related factors. Political and social networks emerge as key determinants of access to credit among smallholder, peasant farmers. Significant regional variation emerges as well. In high-potential, surplus producing areas where credit is largely used for agricultural production, eliminating credit constraints is estimated to increase productivity by roughly 11 percentage points. By contrast, in low-productivity, drought prone areas where loans were rarely used to acquire inputs for crop production, the authors find no relationship between credit rationing and agricultural productivity. To be effective, efforts to improve agricultural productivity not only need to increase credit supply, but also explore the reasons for credit rationing and the availability of productive opportunities.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2012/06/18/000158349_20120618134415/Rendered/PDF/WPS6096.pdf
Download Restriction: no

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6096.

as
in new window

Length:
Date of creation: 01 Jun 2012
Date of revision:
Handle: RePEc:wbk:wbrwps:6096
Contact details of provider: Postal: 1818 H Street, N.W., Washington, DC 20433
Phone: (202) 477-1234
Web page: http://www.worldbank.org/Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. de Janvry, Alain & Fafchamps, Marcel & Sadoulet, Elisabeth, 1991. "Peasant Household Behaviour with Missing Markets: Some Paradoxes Explained," Economic Journal, Royal Economic Society, vol. 101(409), pages 1400-417, November.
  2. Foltz, Jeremy D., 2004. "Credit market access and profitability in Tunisian agriculture," Agricultural Economics, Blackwell, vol. 30(3), pages 229-240, May.
  3. Michael Lokshin & Zurab Sajaia, 2004. "Maximum likelihood estimation of endogenous switching regression models," Stata Journal, StataCorp LP, vol. 4(3), pages 282-289, September.
  4. Stephen R. Boucher & Michael R. Carter & Catherine Guirkinger, 2008. "Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agricultural Development," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(2), pages 409-423.
  5. Jonathan Conning & Christopher Udry, 2005. "Rural Financial Markets in Developing Countries," Working Papers 914, Economic Growth Center, Yale University.
  6. Freeman, H. A. & Ehui, Simeon K. & A. Jabbar, Mohammad, 1998. "Credit constraints and smallholder dairy production in the East African highlands: application of a switching regression model," Agricultural Economics, Blackwell, vol. 19(1-2), pages 33-44, September.
  7. Bell, Clive, 1988. "Credit markets and interlinked transactions," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 16, pages 763-830 Elsevier.
  8. Andre Croppenstedt & Mulat Demeke & Meloria M. Meschi, 2003. "Technology Adoption in the Presence of Constraints: the Case of Fertilizer Demand in Ethiopia," Review of Development Economics, Wiley Blackwell, vol. 7(1), pages 58-70, February.
  9. Jappelli, Tullio, 1990. "Who Is Credit Constrained in the U.S. Economy?," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 219-34, February.
  10. Stefan Dercon & Luc Christiaensen, 2007. "Consumption risk, technology adoption and poverty traps: evidence from Ethiopia," CSAE Working Paper Series 2007-06, Centre for the Study of African Economies, University of Oxford.
  11. Carter, Michael R., 1988. "Equilibrium credit rationing of small farm agriculture," Journal of Development Economics, Elsevier, vol. 28(1), pages 83-103, February.
  12. Guirkinger, Catherine & Boucher, Stephen R., 2007. "Credit Constraints and Productivity in Peruvian Agriculture," Working Papers 6882, University of California, Davis, Department of Agricultural and Resource Economics.
  13. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  14. Martin Petrick, 2005. "Empirical measurement of credit rationing in agriculture: a methodological survey," Agricultural Economics, International Association of Agricultural Economists, vol. 33(2), pages 191-203, 09.
  15. Feder, Gershon & Lau, Lawrence J. & Lin, Justin Y. & Xiaopeng Luo, 1991. "Credit's effect on productivity in Chinese agriculture : a microeconomic model of disequilibrium," Policy Research Working Paper Series 571, The World Bank.
  16. Eswaran, Mukesh & Kotwal, Ashok, 1986. "Access to Capital and Agrarian Production Organisation," Economic Journal, Royal Economic Society, vol. 96(382), pages 482-98, June.
  17. Kochar, Anjini, 1997. "An empirical investigation of rationing constraints in rural credit markets in India," Journal of Development Economics, Elsevier, vol. 53(2), pages 339-371, August.
  18. Gamal Ibrahim & Abbi Kedir & Sebastian Torres, 2007. "Household-level Credit Constraints in Urban Ethiopia," Discussion Papers in Economics 07/03, Department of Economics, University of Leicester.
  19. Klaus Deininger & Daniel Ayalew Ali & Tekie Alemu, 2008. "Assessing the Functioning of Land Rental Markets in Ethiopia," Economic Development and Cultural Change, University of Chicago Press, vol. 57(1), pages 67-100, October.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:6096. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.