Liquidity or Capital?: The Impacts of Easing Credit Constraints in Rural Mexico

Gabriela Aparicio, Vida Bobicì, Fernando De Olloqui, Maria Carmen Fernandez Diez, María Paula Gerardino, Oscar Mitnik and Sebastián Vargas

No 11332, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: This paper evaluates the effectiveness of easing credit constraints for rural producers in Mexico through loans provided by a national public development finance institution. In contrast to most of the existing literature, the study focuses on the effect of medium-sized loans over a two- to four-year time horizon. This paper looks at the effects of such loans on production and investment decisions, input use, and yields. Using a multiple treatment methodology, it explores the differential impacts of providing liquidity for working capital versus providing credit for investments in fixed assets. It finds that loans increased the likelihood that producers grow and sell certain key annual crops, in particular among recipients of working capital loans. It also finds significant effects on production value and sales (per hectare), with similar impacts for recipients of both types of loans, with gains in yields driven by changes in labor quality and more intensive use of key inputs. There is no evidence of significant effects on the purchase of large machinery, but there are impacts on the acquisition of cattle. Overall, the results reported in this paper suggest that lack of liquidity is at least as important as lack of funding for new investment in capital for rural producers in Mexico. Producers benefit from easing their credit constraints, regardless of the type of loan used for that purpose.

Keywords: agricultural finance; credit constraints; development finance institutions; investmentcapital; working capital (search for similar items in EconPapers)
JEL-codes: G21 O13 O16 Q14 (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-agr, nep-cfn and nep-dev
References: Add references at CitEc
Citations:

Downloads: (external link)
https://publications.iadb.org/publications/english ... -in-Rural-Mexico.pdf (application/pdf)

Related works:
Working Paper: Liquidity or Capital? The Impacts of Easing Credit Constraints in Rural Mexico (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:11332

DOI: 10.18235/0003336

Access Statistics for this paper

More papers in IDB Publications (Working Papers) from Inter-American Development Bank Contact information at EDIRC.
Bibliographic data for series maintained by Felipe Herrera Library ().