Micro-lending for small farmers in Bangladesh

Shahidur Rashid, Manohar P. Sharma () and Manfred Zeller

No 45, MTID discussion papers from International Food Policy Research Institute (IFPRI)

Abstract: It has been long hypothesized that lack of access to credit is the main reason why, despite higher profitability of High Yielding Varieties (HYVs), farmers in developing countries continue to allocate a portion of their land to traditional crop varieties. The empirical testing of this hypothesis has generated a large body of literature with differing conclusions. This paper re-examines the issue in the context of a specially designed group-based lending program for small farmers in Bangladesh, who neither have access to formal sources of credit nor do they qualify to become members of other micro-credit organizations. Two measures of access to credit, credit limit and amount borrowed at a given point in time, are used to analyze the determinants of farm households' land allocation decision. Under a variety of model specifications, formulated within Heckman's two-step method, the results show that credit limits from the lending programs and informal sources are significant determinants of small farmers' decision to cultivate HYV. Authors' abstract.

Keywords: Microfinance.; Micro-credit programs; South Asia.; Credit Bangladesh.; Small farmers.; Land use Economic aspects.; Households Bangladesh.; Micro-credit programs.; Selection bias.; Access to credit.; Credit limit.; Land allocation decision. (search for similar items in EconPapers)
Date: 2002
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Working Paper: Micro-lending for small farmers in Bangladesh (2002)
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