Increasing access to formal agricultural credit: the role of rural producer organisations

Benson, Allison L. and Faguet, Jean-Paul ORCID: 0000-0002-7188-0098 (2023) Increasing access to formal agricultural credit: the role of rural producer organisations. The Journal of Development Studies, 59 (1). 21 - 38. ISSN 0022-0388

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Abstract

Access to agricultural credit contributes to rural development by allowing farmers to carry out profit-maximising investments that increase productivity and income, underlining the importance of exploring ways to increase access to this resource. This paper analyses the role of Rural Producer Organisations (RPOs) in easing access to formal agricultural credit. We build an original dataset comprising 15,000 municipality-year observations of RPO creation and credit allocation in Colombia to estimate a fixed effects model. We show that when the number of RPOs increases in a municipality, aggregate access to credit increases. This positive relation also holds at the individual level, with RPO membership increasing both the likelihood of a farmer requesting credit and of receiving the requested credit. We discuss demand and supply-side mechanisms that plausibly explain these results, and we further show that the relation between RPOs and access to credit is heterogeneous according to the source of credit (public vs. private bank) and the type of farmer to whom it is allocated (low-wealth, mid-wealth or high-wealth farmers). Our results point to the potential of RPOs to improve access not only to input and output markets but also to financial markets.

Item Type:	Article
Official URL:	https://www.tandfonline.com/journals/fjds20
Additional Information:	© 2022 Informa UK Limited, trading as Taylor & Francis Group
Divisions:	International Development
Subjects:	H Social Sciences > HD Industries. Land use. Labor S Agriculture > S Agriculture (General)
Date Deposited:	13 Jul 2022 09:24
Last Modified:	18 Nov 2024 08:42
URI:	http://eprints.lse.ac.uk/id/eprint/115546

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