Analyzing the effective role of formal credit and technological development for rice cultivation

Abbas Ali Chandio (), Fayyaz Ahmad (), Ghulam Raza Sargani (), Asad Amin () and Martinson Ankrah Twumasi ()
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Abbas Ali Chandio: Sichuan Agricultural University
Fayyaz Ahmad: Lanzhou University
Ghulam Raza Sargani: Sichuan Agricultural University
Asad Amin: Nanjing University of Aeronautics and Astronautics
Martinson Ankrah Twumasi: Sichuan Agricultural University

Asia-Pacific Journal of Regional Science, 2022, vol. 6, issue 2, No 10, 683-711

Abstract: Abstract We investigated the short-term (ST) and long-term (LT) effects of formal credit, technological development (via improved quality seeds, and use of chemical fertilizers) on rice cultivation in Nepal over the period 1991 to 2019. The ARDL bounds testing co-integration was applied to estimate the long-term association between formal credit, technological development, cultivated area, energy consumption, and rice cultivation. Simultaneously, the VECM method was applied to discover the direction of the causal association between the considered variables. The findings were as follows: (1) the present study verified a long-term co-integration connection between the variables. (2) Formal credit significantly increased rice cultivation in the LT and ST. (3) Technological development factors such as improved quality seeds significantly augmented rice cultivation only in the ST. (4) Correspondingly, chemical fertilizers significantly enhanced rice cultivation in LT and ST. (5) The causality outcomes confirmed a strong LT impact of all variables on rice production. (6) The ST bidirectional causality runs from formal credit and cultivation area to rice cultivation, whereas the causal association of the remaining variables is uni-directional. (7) Additionally, the outcomes of IRF and VDM again confirmed that all factors influence rice cultivation in LT. This study verified that credit played a dynamic role in enhancing rice production and improving food security in Nepal. Consequently, based on our findings, we recommend efforts to increase rice production and improve credit supply in farming communities through financial institutions at flexible interest rates and ensure proper credit utilization.

Keywords: Credit; Technological development; Rice production; Nepal (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s41685-022-00240-z

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