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Can cooperatives help commercial farms to access credit in China? Evidence from Jiangsu Province

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  • Yuanyuan Peng
  • H. Holly Wang
  • Yueshu Zhou

Abstract

Chinese agriculture is experiencing a transition from smallholder farming to the emergence of commercial farms that are characterized by intensification and specialization in production, as well as commercialization and cooperation in management. It requires substantial capital to facilitate such a transition, but it is very difficult for farmers in China to access bank credit. One way that commercial farms have to overcome such handicap is by organizing themselves into cooperatives. To assess the effect of cooperatives on the credit accessibility of commercial farms, we have developed a theoretical model as well as an empirical study of commercial farms in Jiangsu Province based on data from a survey of 754 commercial farm owners. Instrumental variable (IV) methods and the Propensity Score Matching (PSM) method that control endogeneity problem are used in the analysis. The empirical results show that cooperatives have a significant positive impact on the credit access of commercial farms. Commercial farms participating in cooperatives may alleviated their credit constraints by about 17.3 percentage points and increase the average credit per capita by nearly 80,000 Yuan. Cooperatives improve the credit access of commercial farms by exerting strong market power and reputation effect based on its organizational advantages. A disaggregated analysis also reveals that small commercial farms tend to benefit more from cooperatives in improving credit access than large commercial farms. L'agriculture chinoise connaît une transition de l'agriculture paysanne à l'émergence d'exploitations commerciales qui se caractérisent par l'intensification et la spécialisation de la production, ainsi que la commercialisation et la coopération dans la gestion. Il faut des capitaux importants pour faciliter une telle transition, mais il est très difficile pour les agriculteurs chinois d'accéder au crédit bancaire. L'une des façons dont les exploitations agricoles commerciales doivent surmonter ce handicap est de s'organiser en coopératives. Pour évaluer l'effet des coopératives sur l'accessibilité au crédit des fermes commerciales, nous avons développé un modèle théorique ainsi qu'une étude empirique des fermes commerciales dans la province du Jiangsu basée sur les données d'une enquête auprès de 754 propriétaires de fermes commerciales. Les méthodes des variables instrumentales et la méthode ACP qui contrôlent le problème d'endogénéité sont utilisées dans l'analyse. Les résultats empiriques montrent que les coopératives ont un impact positif significatif sur l'accès au crédit des exploitations commerciales. Les fermes commerciales participant aux coopératives peuvent alléger leurs contraintes de crédit d'environ 17,3 points de pourcentage et augmenter le crédit moyen par habitant de près de 80 000 yuans. Les coopératives améliorent l'accès au crédit des exploitations agricoles commerciales en exerçant un fort pouvoir de marché et un effet de réputation basé sur ses avantages organisationnels. Une analyse désagrégée révèle également que les petites exploitations commerciales ont tendance à bénéficier davantage des coopératives pour améliorer l'accès au crédit que les grandes exploitations commerciales.

Suggested Citation

  • Yuanyuan Peng & H. Holly Wang & Yueshu Zhou, 2022. "Can cooperatives help commercial farms to access credit in China? Evidence from Jiangsu Province," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 70(4), pages 325-349, December.
    • Handle: RePEc:bla:canjag:v:70:y:2022:i:4:p:325-349
    DOI: 10.1111/cjag.12320
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    3. Liyan Yu & Jerker Nilsson & Feng Zhan & Song Cheng, 2023. "Social Capital in Cooperative Memberships and Farmers’ Access to Bank Credit–Evidence from Fujian, China," Agriculture, MDPI, vol. 13(2), pages 1-18, February.
    4. Qiao Liang & Kangwei Ma & Wenhao Liu, 2023. "The role of farmer cooperatives in promoting environmentally sustainable agricultural development in China: A review," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 94(3), pages 741-759, September.
    5. Yangyang Zheng & Jianhong Lou & Linfeng Mei & Yushuang Lin, 2023. "Research on Digital Credit Behavior of Farmers’ Cooperatives—A Grounded Theory Analysis Based on the “6C” Family Model," Agriculture, MDPI, vol. 13(8), pages 1-19, August.
    6. Guyo Godana Dureti & Martin Paul Jr. Tabe‐Ojong & Enoch Owusu‐Sekyere, 2023. "The new normal? Cluster farming and smallholder commercialization in Ethiopia," Agricultural Economics, International Association of Agricultural Economists, vol. 54(6), pages 900-920, November.

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