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Impact of Supermarket Procurement System on Farmers' Credit Access

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  • Marcoul, Philippe
  • Veyssiere, Luc

Abstract

In developing countries, modern production contracts offered by supermarkets or agro-export firms entail a loan component under the form of input advances. Like traditional moneylenders, supermarkets want to make sure that this investment is not diverted. However, unlike moneylenders, supermarkets do care about the attributes of the product (form, quality, food safety, etc.). Whether such attributes are present in the harvested product is largely influenced by the advice and the extension services received by the farmer. We built a financial contracting model where we show that supermarkets, choosing to forgo specialization, optimally delegate to a multi-tasking agent both the monitoring and the advisory missions. This contract is shown to potentially enhance credit access for small farmers and sometimes to involve excessive monitoring.

Suggested Citation

  • Marcoul, Philippe & Veyssiere, Luc, 2008. "Impact of Supermarket Procurement System on Farmers' Credit Access," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43862, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae08:43862
    DOI: 10.22004/ag.econ.43862
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    References listed on IDEAS

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