ISLAMIC CREDIT: THE IRANIAN EXPERIENCE

The replacement of the Shah's regime by an Islamic fundamentalist government in Iran resulted in the outlawing of interest-bearing credit and its replacement with a credit system which accords with the teachings of the Koran. Two forms of credit are acceptable: interest-free loans, and profit-and-loss-sharing loans. Although the latter have assumed only a small proportion of lending by the Agricultural Bank, they are potentially attractive to small risk-averse farmers because of their risk-sharing characteristics. In particular, they pass part of the business risk (e.g. due to uncertainty in yields and prices) back to the lender and avoid creating any financial risk for the borrower. A model is developed to explore the impact of Islamic credit on borrower behaviour and a numerical illustration is also provided. Results of a farm survey are reported, and indicate that small risk-averse farmers prefer the Islamic credit system, whilst medium and large-scale farmers prefer interest-based credit. Some of the obstacles to more widespread uptake of the Islamic credit system in Iranian agriculture are identified.     

Can flexible agricultural microfinance loans limit the repayment risk of low diversified farmers?

Using a unique data set from a commercial microfinance institution in Madagascar, this article investigates the credit risk of microfinance loans with flexible repayment schedules for crop farmers. Flexible repayment schedules allow a redistribution of principal payments during periods with low agricultural returns to periods when agricultural returns are high through predefined grace periods. We apply propensity score matching to investigate how different numbers of grace periods reflecting different levels of production diversification affect the credit risk of crop farmers. In this attempt, three delinquency categories reflecting various levels of credit risk are assessed. Moreover, we consider the specifics of the regions where loans were disbursed. Our results reveal that loans with predefined grace periods show significantly higher delinquencies. This effect is significant over all three delinquency categories for loans disbursed to low diversified crop farmers. For the more diversified farmers, this effect is only significant for the lowest delinquency category. Hence, predefined grace periods might bridge periods with low agricultural returns but come at the cost of higher credit risk for the lender. The magnitude of these effects is, however, small.     

USUFRUCT AND USURY: AN ANALYSIS OF LAND LEASING IN EAST JAVA*

On Java, land leasing functions as a credit instrument when the entire rent is paid in advance. The rights obtained by the tenant/lender are the 'price' of the loan made to the land owner/borrower. A model of such transactions shows that the area leased and duration of the lease are substitutes in raising a loan of given size and that the substitution rate is related to the term structure of interest rates.     

Agricultural Financial Analysis Expert Systems: Software Description

The Agricultural Financial Analysis Expert Systems (AFAES) include software to prepare: agricultural financial statements; analysis summaries and graphic presentations of the analysis; and expert systems that present a diagnostic analysis of the financial statement data. In addition, there is a lender data base management system (STANDARDS) to check borrower documentation, to compare borrower data to lender standards and to summarize data from the lender portfolio of borrowers. Using AFAES software helps organize financial data in a format following accounting procedures. The expert system provides a consistent diagnostic analysis of financial data useful to both producers and lender. AFAES is developed to interface with existing accounting and financial statement software or lender data bases. AFAES not only has been developed and verified in Texas but also its development has involved two national task forces, land-grant university professionals, software vendors, accountants, lenders and representatives of regulatory agencies. Experience gained through development and verification efforts indicate that expert systems technology will be a valuable tool to enhance knowledge delivery by agricultural economists. Economics and finance are areas where expertise is often limited, leading to inadequate use of data and analysis tools by producers, lenders and educators. Expert systems offer a significant delivery technology.     

Credit Risk and the Demand for Agricultural Loans

This paper uses the lender–borrower relationship to provide insight into the impirical estimation of loan demand/contract curves for agricultural loans. Loan demand is shown to be determined partly by lenders'willingness to provide debt. The implicit solution to the loan contract curve in the lender–borrower relationship is derived from the cumulative probability distribution function of loan losses, which is the same measure used as the dependent variable in credit scoring models. Consequently, empirical estimation of loan demand can be obtained from credit scoring models. This paper presents the theory and then provides loan demand estimates and elasticities using Farm Credit Corporation cross-sectional and time-series data. Empirical estimates indicate the possibility of a backward-bending loan demand curve, which may indicate some credit ationing in agriculture.     

Measurement errors in agricultural data and their implications on marginal returns to modern agricultural inputs

The low uptake of modern agricultural technologies in sub-Saharan African countries has encouraged researchers to revisit the returns to (or profitability of) these agricultural inputs. A related strand of literature is exploring the allocative efficiency of these factors of production in African agriculture. However, all these studies rely on self-reported agricultural data, which are prone to nonclassical measurement errors, the errors in these data are correlated with the true values of variables of interest. In this article we investigate the implication of measurement errors in self-reported agricultural input and production data on marginal returns to these modern agricultural inputs. We consider a generic two-sided measurement error problem where both production and inputs can be measured with error, and these errors can be correlated. We employ both self-reported and objective measures of production and plot size to compute output elasticities under these alternative measurement scenarios. We find that using self-reported production and plot size overestimates output elasticities and hence marginal returns to modern agricultural inputs (including chemical fertilizer and improved seed). These results are noteworthy in terms of informing conventional technology diffusion strategies as well as in view of revisiting existing presumptions about the profitability of modern agricultural inputs.     

新疆农业资金投入与农民收入效应关系的实证研究

[目的]为清晰识别农业资金投入对新疆农民收入的影响程度,并给予地方政府进一步优化调整农业资金使用效能提供参考依据。[方法]文章选取1978~2013年新疆统计数据,采用协整分析、误差修正模型等方法对财政支农、农业贷款、农民自主投资与新疆农民人均纯收入进行了实证探究。[结果]新疆地区财政支农、农业信贷、农民自主投资与农民人均纯收入之间存在长期均衡关系;而短期内财政支农、农业信贷以及农户自主投资的促进效应不如长期明显,其中农业贷款的收入效应远低于财政支农和农民自主投资;财政支农、农民自主投资与农民人均纯收入在短期内具有格兰杰因果关系,长期则格兰杰因果关系解释力逐渐减弱,而农业贷款在短期内不是新疆农民人均纯收入增长的格兰杰原因,长期则互为格兰杰因果关系。[结论]该文提出加大财政支农投入力度,提高财政资金配置效率;推动农村金融改革,提高农村金融效率;提振农民自主积累资金投资的积极性等政策含义,以期为新疆"三农问题"有效解决提供坚实可靠的资本基础。     

Secure property right as a determinant of SME’s access to formal credit in Ghana: dynamics between Micro-finance Institutions and Universal Banks

Does registered land title help to improve tenure security and enhance one’s chances of securing a loan from formal financial institutions? This question continues to sharply divide opinions among academics, policy-makers and international development partners. The long running debate on the subject of ‘Property in the Commons’, which serves as the ideological origin of what has become known as ‘Washington Consensus’ in contemporary times claims that there is positive correlation between the possession of registered land title and access to credit. However, this has often received considerable rebuttals. Even if the ‘Washington Consensus’ is accepted, the argument is still laced with some fundamental difficulty because it inherently assumes and treats financial institutions as a homogenous class of business. Yet financial institutions exhibit greater diversity in their operations and decision-making process. This paper attempts to contribute towards developing improved understanding between the ‘secure land title and access to credit relationship’ by disaggregating financial institutions into Micro-finance and Universal Banks (UBs) and examining what role secure land title play in granting credit from the perspectives of these two categories of financial institutions. To achieve this, field level investigations were conducted amongst officials of both Micro-finance Institutions (MFIs) and UBs in Ghana using structured questionnaires. A total of 200 questionnaires – 100 each to MFI and Universal Banks were administered of which a response rate of 51 and 57 was, respectively, achieved. The data were analysed using various non-parametric statistics. The study amongst other things established that UBs and MFIs differ in their opinions on how important secure titles are in the lending process and the nature of the influence they can exert on the final lending decision. It was established that both categories of lenders do regard secure titles as important but whether or not it will influence their decision to accept a given landed property as collateral varies across lender types.     

绩效与不足:民国时期现代农业金融与农村社会之关系

民国时期，现代农业金融从无到有，初步形成了一个垂直的贷款网络体系。它与农村社会的关系具有和谐与紧张的两重性，它是中国乡村借贷关系转型与现代化的重要标志，对于改变高利贷一统天下的格局，促进乡村金融流通，救济贫苦农民，刺激生产经营都起到了一定程度的作用。但也不能不承认，它还远未形成一个有效的借贷系统，距离农民借贷的需求还很遥远，传统借贷向现代金融的转轨之路还很长。     

Contractual Relations in Agricultural Credit Markets: A Hedonic Pricing Approach with Application to Poland

We present a micro‐econometric analysis of agricultural credit market outcomes in Poland that investigates the relationship between contractual arrangements and interest rates. An innovative theoretical framework based on a hedonic market model is developed. We interpret the factors that influence interest rates as ‘quality’ components of the credit contract. Using unique data allows us to consider both nominal interest rates and additional bank fees. The results show that banks have preferences for particularly liquid types of collateral, whereas they care little about the purpose for which the loan is used. Furthermore, the analysis allows quantification of the effects of socioeconomic attributes of farmers, different lending sources and government subsidies on interest rates. The latter effect is small compared with the officially declared reduction of the nominal interest rate. A simulation shows that enabling more borrowers to use liquid forms of collateral implies lower rates than those obtained by participating in the subsidy programme.