Risk Aversion and Credit Access: Solving Financial Exclusion through Contract Innovation

Kate Ambler, M. Mehrab Bakhtiar, Alan DeBrauw and Mohammad Riad Uddin

No 404341, 2026 Annual Meeting, July 26 - 28, 2026, Kansas City, Missouri from Agricultural and Applied Economics Association

Abstract: Credit market failures may reflect voluntary withdrawal by risk-averse borrowers in addition to supply-side constraints. We conduct a randomized trial with 1,517 Bangladeshi households, offering cattle financing through conventional loans or profit-sharing contracts that spread risk between the farmer and the financial partner. Overall, interest in and take-up of the profit-sharing contracts were modestly higher than the conventional loans. However, conventional loan take-up was much lower among risk-averse farmers, and profit-sharing eliminated the take-up gap between risk-averse and non-risk-averse farmers. We find that it is male risk preferences that are associated with these decisions even when contracts explicitly target women. Livestock investment increases under both contracts with no evidence of moral hazard under profit-sharing.

Keywords: Agricultural Finance; Farm Management (search for similar items in EconPapers)
Pages: 43
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea26:404341

DOI: 10.22004/ag.econ.404341

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