Factors Affecting Farmers’ Access to Formal and Informal Credit: Evidence from Rural Afghanistan
2.2. Analytical Methods
2.2.1. Participation and Amount of Credit
2.2.2. Credit Constraints
2.3. Description of the Variables Used in the Models
3. Results and Discussion
3.1. Socio-Economic Characteristics of the Households
3.2. Credit Constrained and Unconstrained Households
3.3. Factors Affecting Participation in Formal and Informal Credit and the Amount of Credit
3.4. The Factors Affecting Credit Constraints
4. Conclusions and Policy Implications
5. Weaknesses and Future Research
- The number of households who obtained both formal and informal credit in the specified period was only seven, not eligible for being a separate group in the models. Therefore, we included these households in the other credit user groups based on the amount of credit.
- One US dollar was equal to 69.30 Afghanis on 2018/08/20.
- Studies considered age as a proxy for experience. However, due to the migration of people from the rural areas of Afghanistan during the conflicts between 1980 and 2001, age may not be the proxy of experience in Afghanistan, so it is wise to control for farming experience rather that age.
- Religious education includes the interpretation of the Quran and Hadith (the sayings of the Prophet Mohammad PBUH) and Islamic law. Religious education is mostly obtained in Madrassas, which are the religious seminaries, and Mosques in Afghanistan.
- Jerib is the unit of land measurement in Afghanistan. One jerib is equal to 0.2 hectares.
- We have used the Herfindahl Hirschman Index (HHI) to assess the magnitude of crop diversity. This index is the sum of squares of all (n) proportions (in our study, the sum of squares of all proportions of crops grown in a year). The value of “HHI” approaches one when there is complete specialization and zero when the number of crops is more revealing the highest diversity. In this study, the crop diversity index is (1-HHI), in which zero shows monocropping, and one stands for the highest diversity. (CDI=1-HHI = 1 − ). See Biswas .
Conflicts of Interest
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|Education||Years of formal education|
|Farm size||Size of cultivable land in Jeribs5|
|Dependency ratio||Dependency ratio of a household|
|No. of adults||Number of adults in a household who are able to work|
|Crop diversity||Crop diversity index (1-HHI)6|
|Distance||Distance from the nearest city in km|
|Experience||Farming experience of the household head (years)|
|Farm size squared||Squared term of farm size|
|Education squared||Squared term of education|
|Extension||1 = Have access to agricultural extension services|
0 = Do not have access
|Non-agricultural income||1 = Household receive non-agricultural income|
0 = Do not receive
|Membership in association||1 = Have membership in any farmers’ association|
0 = Do not have
|Registered land documents||1 = Have registered land documents which can work as collateral for obtaining credit|
0 = Do not have
|Livestock||1 = Household raises animals beside crop production|
0 = Do not raise
|Income shock||1 = Household has had faced crop failure, market failure, or any other unexpected loss in the last two years|
0 = Have not faced
|Religious education||1 = Household head has religious education|
0 = Does not have
|Farm size (Jeribs)||5.61|
|Number of adults (Persons)||5.37|
|Distance from the city (km)||12.41|
|Crop diversity index (1-HHI)||0.33|
|Farming experience (years)||23.87|
|Access to extension (% access)||69.70||59.60||78.80|
|Non-agricultural income (% yes)||43.43||35.02||26.20|
|Membership in farmers’ association (%yes)||4.04||8.08||12.12|
|Registered land documents (% yes)||43.43||36.36||47.40|
|Livestock (% yes)||84.85||67.68||71.70|
|Income shock (% yes)||15.84||18.72||18.94|
|Religious education (% yes)||30.69||22.02||22.16|
|Categories||No. of Households||Percentage (%) of Total Households|
|Total number of households||292||100|
|Households who did not want to borrow|
|Sufficient capital, no need credit (a)||13||4.45|
|Need credit, but did not apply (b)||74||25.34|
|Households that needed capital (and applied)|
|Were not lent any money (denied)||15||5.14|
|Were lent an amount which is less than what households wanted||119||40.75|
|Was lent fully||75||25.68|
|Credit Participation in the Past Two Years|
|Formal (e and g)||96||32.88|
|Informal (f and h)||94||32.19|
|Non-borrowers (a, b, c and d)||102||34.93|
|Constrained (b, c, d, e and f)||206||71.23|
|Unconstrained (a, g and h)||86||30.14|
|Independent Variables||Formal Credit (Participation = 1)||Formal Credit Amount (log)||Informal Credit (Participation = 1)||Informal Credit Amount (log)|
|Farm size (Jeribs)||0.038||0.067||0.205 ***||0.064||−0.031||0.109||0.043||0.103|
|Dependency ratio||0.144||0.112||0.063||0.057||0.326 **||0.095||−0.007||0.086|
|Number of adults (Persons)||0.080 *||0.049||−0.054 **||0.023||0.018||0.041||−0.010||0.037|
|Access to Extension (1 if have access, 0 otherwise)||0.650 **||0.283||−0.111||0.183||−0.410 *||0.239||0.152||0.214|
|Non-agricultural income (1 if have, 0 otherwise)||−0.449 *||0.251||−0.133||0.145||−1.126 **||0.234||−0.450 *||0.303|
|Membership in association (1 if have, 0 otherwise)||0.732||0.421||−0.156||0.194||0.920 *||0.483||−0.043||0.416|
|Registered documents of land (1 have, 0 otherwise)||0.337||0.215||−0.084||0.114||0.037||0.221||−0.188||0.205|
|Crop diversity (1-HH)||2.331 ***||0.656||−1.976||0.449||2.432 ***||0.603||0.221||0.591|
|Experience (years)||0.006||0.011||−0.002||0.005||−0.015 *||0.009||0.005||0.009|
|Livestock (1 raising livestock, 0 otherwise)||−0.056||0.260||−0.304 **||0.136||−0.020||0.255||0.364||0.246|
|Farm size squared||−0.002||0.003||−0.013 ***||0.004||−0.004||0.007||−0.001||0.007|
|Income shock||−0.585 *||0.318||0.175||0.210||0.486 **||0.253||−0.130||0.229|
|Distance (km)||−0.097 ***||0.030||−0.031 *||0.018||0.058 *||0.029||−0.038||0.025|
|Religious education (1 have, 0 otherwise)||−0.357||0.273||−0.215||0.163||0246||0.233||0.393 *||0.213|
|Number of observations||198||194|
|Prob > chi2||0.000||0.000|
|Independent Variables||Formal Credit (Constrained = 1)||Informal Credit (Constrained = 1)|
|Education (years)||−0.047 ***||0.017||−0.033 *||0.018|
|Farm size (Jeribs)||−0.063 **||0.028||−0.008||0.018|
|Dependency ratio||−0.040||0.028||−0.060 ***||0.022|
|Access to extension (1 if have access, 0 otherwise)||−0.093||0.072||0.037||0.063|
|Non-agricultural income (1 if have, 0 otherwise)||−0.119 *||0.067||0.010||0.065|
|Membership in associations||0.059||0.100||0.001||0.121|
|Registered documents of land (1 have, 0 otherwise)||−0.035||0.058||0.071||0.058|
|Crop diversity (1-HH)||0.128||0.172||−0.199||0.140|
|Raising livestock (1 raising livestock, 0 otherwise)||0.012||0.073||−0.021||0.063|
|Farm size squared||0.003 *||0.001||0.001||0.001|
|Education squared||0.002 **||0.001||0.002||0.001|
|Income shock (1 faced, 0 otherwise)||−0.030||0.079||−0.126 *||0.073|
|Distance (km)||0.028 ***||0.009||0.008||0.009|
|Religious education (1 have, 0 otherwise)||0.122 *||0.065||0.075||0.061|
|Number of observations||198||194|
|Prob > chi2||0.014||0.008|
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Moahid, M.; Maharjan, K.L. Factors Affecting Farmers’ Access to Formal and Informal Credit: Evidence from Rural Afghanistan. Sustainability 2020, 12, 1268. https://doi.org/10.3390/su12031268
Moahid M, Maharjan KL. Factors Affecting Farmers’ Access to Formal and Informal Credit: Evidence from Rural Afghanistan. Sustainability. 2020; 12(3):1268. https://doi.org/10.3390/su12031268Chicago/Turabian Style
Moahid, Masaood, and Keshav Lall Maharjan. 2020. "Factors Affecting Farmers’ Access to Formal and Informal Credit: Evidence from Rural Afghanistan" Sustainability 12, no. 3: 1268. https://doi.org/10.3390/su12031268