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

Roehlano Briones ()

MPRA Paper from University Library of Munich, Germany

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.

Keywords: credit demand; interest elasticity; rural credit; credit policy; Philippines; Asia (search for similar items in EconPapers)
JEL-codes: O16 Q14 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-agr, nep-mfd and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:6044

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