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Access to Formal Credit and Gender Income Gap: The Case of Farmers in Cambodia

SAM, Vichet (2019): Access to Formal Credit and Gender Income Gap: The Case of Farmers in Cambodia.

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Abstract

This article analyzes the factors that drive the gender income difference among farmers in Cambodia with a focus on the access to formal credit, using the FinScope survey data. First, an Ordinary Least Square regression (OLS) is used to investigate the main determinants of farmers’ income, while an instrumental variable approach (IV) is estimated to check the causal effect of the access to formal credit on earnings. Next, the Blinder-Oaxaca technique is employed to decompose the gender earnings gap. Results from OLS regression show that individual education and health, farm size and other inputs, irrigation system and weather conditions, access to market and formal credit are strongly associated with farmers’ earnings, while the positive impact of access to formal credit is also confirmed by the IV regression at 5% significant level. These results suggest that improving infrastructure and formal credit access in the rural areas play a critical role in increasing farmers’ income. Then, based on the Blinder-Oaxaca decomposition technique, most of gender earnings difference is due to the endowment effect in favor of male farmers such as education, farm size and volume of work hours. Access to formal credit also contributes to the gender earnings gap, yet not in terms of endowment but coefficient effect, as a higher return to credit access for male farmers is observed. This could be due to the levels of education and financial literacy that are higher for men, allowing them to use the formal credit better. Closing the gap in education and financial literacy would therefore reduce their earnings gap. Discrimination against female farmers, not in terms of credit access, but in loan amount should be worth to consider as well, as the median of loan amounts of male farmers is higher than those of female. If such discrimination exists, it could also limit the women’s capacity to manage and invest in their farms effectively, and thus, the return to credit access must be lower for female farmers.

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