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Factors Influencing Internal And External Credit Rationing Among Small-Scale Farm Households In Kwazulu-Natal

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  • Fenwick, L.J.
  • Lyne, Michael C.

Abstract

The Heckman two-stage procedure is used to identify and rank the determinants of internal and external credit rationing in rural households using data sourced from two districts in the former KwaZulu homeland. The results confirm international findings that high transaction costs faced by rural households limit their access to formal credit markets. Income and savings levels are significant determinants of the level of credit obtained, with savings acting as a substitute for credit. Better access to financial markets will require public investment in rural infrastructure, literacy and vocational training, and legal reform in order to lower transaction costs, improve income levels, and facilitate the efficient use of collateral. Savings lose their value as a source of information when lending institutions are distinct from savings institutions, and moveable assets carry high collateral-specific risk in the absence of an efficient judicial system.

Suggested Citation

  • Fenwick, L.J. & Lyne, Michael C., 1998. "Factors Influencing Internal And External Credit Rationing Among Small-Scale Farm Households In Kwazulu-Natal," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 37(4), pages 1-11, December.
    • Handle: RePEc:ags:agreko:54892
    DOI: 10.22004/ag.econ.54892
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    References listed on IDEAS

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    1. Bruce, Judith, 1989. "Homes divided," World Development, Elsevier, vol. 17(7), pages 979-991, July.
    2. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    3. Adams, Dale W & Chen, H. Y. & Lamberte, M. B., 1993. "Differences in uses of rural financial markets in Taiwan and the Philippines," World Development, Elsevier, vol. 21(4), pages 555-563, April.
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    Cited by:

    1. Khoi, Phan Dinh & Gan, Christopher & Nartea, Gilbert V. & Cohen, David A., 2013. "Formal and informal rural credit in the Mekong River Delta of Vietnam: Interaction and accessibility," Journal of Asian Economics, Elsevier, vol. 26(C), pages 1-13.
    2. Tran, Minh Chau & Gan, Christopher & Hu, Baiding, 2014. "Credit Constraints and Impact on Farm Household Welfare: Evidence from Vietnam’s North Central Coast region," 2014 Conference, August 28-29, 2014, Nelson, New Zealand 187495, New Zealand Agricultural and Resource Economics Society.

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