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September 12th, 2017

Access to finance from different finance provider types: Farmer knowledge of the requirements

Published by PLOS ONE,

This article (PDF) in the journal PLOS ONE compares farmer knowledge of the requirements to obtain finance with the actual requirements set by different finance provider types. This can provide valuable insights to policy makers about ways to improve farmers’ access to finance. Data for the study were collected in Indonesia, from 43 finance providers and 434 horticultural farmers. In Indonesia banks and MFI provide credit, whereas farmers’ associations and traders provide in-kind finance, and agricultural input kiosks provide flexible payment for inputs. It is found that the most important requirements to acquire finance vary among the finance provider types. Banks perceive character in terms of the history of loan repayments, the capacity of farmers to pay back the loan, and farmer ability to manage their farms as important requirements. MFI focus on character and spouse knowledge of the finance application. Furthermore,  farmers’ associations require farmers to have membership, whereas traders perceive farmer ability and presence of a sales contract as the most important requirements. Agricultural input kiosks perceive the character of the farmer to be the most important requirement. Results also show that farmers generally have little knowledge of the requirements of each type of finance provider. Farmer knowledge is positively associated with finance experience, especially for finance from farmers’ associations. Awareness campaigns, with farmers involved who have experienced with different sources of finance, could improve farmer access to finance by increasing farmer knowledge of the diversity of requirements among the finance provider types.

Curated from journals.plos.org