Do Small Farmers Borrow Less when the Lending rate Increases? The Case of Rice Farming in the Philippines

Briones, Roehlano (2007): Do Small Farmers Borrow Less when the Lending rate Increases? The Case of Rice Farming in the Philippines.

Abstract

The new generation of credit programs directed at small borrowers emphasizes financial sustainability. Based on anecdotal information (especially from microfinance experiences), proponents of cost recovery claim that raising formal lending rates would have a minimal impact on borrowing. Rigorous evidence for this conjecture is however sparse. This study conducts an econometric test of this conjecture using data from a survey of small rice farmers from the Philippines. Alternative regression techniques tend to reject the conjecture; in particular, a regression that controls for selection effects shows a unitary elastic response of formal borrowing to the lending rate.

• Item Type: MPRA Paper
• Language: English
• Keywords: credit demand, interest elasticity, rural credit, credit policy, Philippines, Asia
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q14 - Agricultural Finance

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