IDEAS home Printed from https://ideas.repec.org/p/col/000089/018347.html
   My bibliography  Save this paper

Increasing Access to Agricultural Credit: The Heterogeneous Effects of Collective Action

Author

Listed:
  • Allison Benson
  • Jean-Paul Faguet
  • Maria del pilar López Uribe

Abstract

Collective action allows individuals to overcome market and state failures, something particularly relevant in rural areas and highly imperfect markets such as agricultural credit. We analyze data on over 2.3 million rural producers in Colombia, as well as on an original subnational database with over 15,000 municipality-year observations, to explore the relation between collective action and access to agricultural credit. We focus on collective action in the form of Rural Producer Organizations (RPOs), and find that it increases the likelihood of an individual accessing agricultural credit, as well as access to credit at the aggregate (municipal) level; that is, there is a positive general equilibrium effect, rather than a crowding-out of credit between RPO members and non-members. These effects are heterogeneous according to the type of credit (source and size). For small farmers, the aggregate positive effect operates only via access to public credit. For large farmers the effect is also positive, but this time via private credit only. Medium-scale farmers, by contrast, see no aggregate increases in credit access. Heterogeneity appears driven by structural segmentation in the credit market across farmer type and source, which is replicated rather than counteracted by the collective action effect. Hence the potential impact of collective action on development outcomes is dependent on contextual conditions.

Suggested Citation

  • Allison Benson & Jean-Paul Faguet & Maria del pilar López Uribe, 2020. "Increasing Access to Agricultural Credit: The Heterogeneous Effects of Collective Action," Documentos CEDE 18347, Universidad de los Andes, Facultad de Economía, CEDE.
    • Handle: RePEc:col:000089:018347
    as

    Download full text from publisher

    File URL: https://repositorio.uniandes.edu.co/bitstream/handle/1992/45865/dcede2020-30.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Shoji, Masahiro & Aoyagi, Keitaro & Kasahara, Ryuji & Sawada, Yasuyuki & Ueyama, Mika, 2012. "Social Capital Formation and Credit Access: Evidence from Sri Lanka," World Development, Elsevier, vol. 40(12), pages 2522-2536.
    2. Robert M. Townsend, 2016. "Village and Larger Economies: The Theory and Measurement of the Townsend Thai Project," Journal of Economic Perspectives, American Economic Association, vol. 30(4), pages 199-220, Fall.
    3. David Mushinski, 1999. "An analysis of offer functions of banks and credit unions in Guatemala," Journal of Development Studies, Taylor & Francis Journals, vol. 36(2), pages 88-112.
    4. Deininger, Klaus, 1995. "Collective agricultural production: A solution for transition economies?," World Development, Elsevier, vol. 23(8), pages 1317-1334, August.
    5. Okten, Cagla & Osili, Una Okonkwo, 2004. "Social Networks and Credit Access in Indonesia," World Development, Elsevier, vol. 32(7), pages 1225-1246, July.
    6. Cynthia Kinnan & Robert Townsend, 2012. "Kinship and Financial Networks, Formal Financial Access, and Risk Reduction," American Economic Review, American Economic Association, vol. 102(3), pages 289-293, May.
    7. Conning, Jonathan & Udry, Christopher, 2007. "Rural Financial Markets in Developing Countries," Handbook of Agricultural Economics, in: Robert Evenson & Prabhu Pingali (ed.), Handbook of Agricultural Economics, edition 1, volume 3, chapter 56, pages 2857-2908, Elsevier.
    8. repec:pri:rpdevs:gamespaper.pdf is not listed on IDEAS
    9. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "The Role of Social Capital in Financial Development," American Economic Review, American Economic Association, vol. 94(3), pages 526-556, June.
    10. Tanguy Bernard & Alemayehu Seyoum Taffesse & Eleni Gabre‐Madhin, 2008. "Impact of cooperatives on smallholders' commercialization behavior: evidence from Ethiopia," Agricultural Economics, International Association of Agricultural Economists, vol. 39(2), pages 147-161, September.
    11. Michael R. Carter & Pedro Olinto, 2003. "Getting Institutions “Right” for Whom? Credit Constraints and the Impact of Property Rights on the Quantity and Composition of Investment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(1), pages 173-186.
    12. Stephen R. Boucher & Michael R. Carter & Catherine Guirkinger, 2008. "Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agricultural Development," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(2), pages 409-423.
    13. DeanS. Karlan, 2007. "Social connections and group banking," Economic Journal, Royal Economic Society, vol. 117(517), pages 52-84, February.
    14. Fischer, Elisabeth & Qaim, Matin, 2012. "Linking Smallholders to Markets: Determinants and Impacts of Farmer Collective Action in Kenya," World Development, Elsevier, vol. 40(6), pages 1255-1268.
    15. Lyne, Michael C. & Collins, Ray, 2008. "South Africa’s new Cooperatives Act: A missed opportunity for small farmers and land reform beneficiaries," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 47(2), pages 1-18, June.
    16. Daniel Ayalew Ali & Klaus Deininger & Marguerite Duponchel, 2014. "Credit Constraints and Agricultural Productivity: Evidence from rural Rwanda," Journal of Development Studies, Taylor & Francis Journals, vol. 50(5), pages 649-665, May.
    17. Dean S. Karlan, 2005. "Using Experimental Economics to Measure Social Capital and Predict Financial Decisions," American Economic Review, American Economic Association, vol. 95(5), pages 1688-1699, December.
    18. Juan José Echavarría & Mauricio Villamizar-Villegas & Daniela McAllister, 2017. "Impacto del crédito sobre los productores de café en Colombia," Borradores de Economia 1019, Banco de la Republica de Colombia.
    19. Boucher, Stephen R. & Carter, Michael R. & Guirkinger, Catherine, 2008. "AJAE Appendix: Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agriculture Development," American Journal of Agricultural Economics APPENDICES, Agricultural and Applied Economics Association, vol. 90(2), pages 1-6.
    20. Joseph P. Kaboski & Robert M. Townsend, 2012. "The Impact of Credit on Village Economies," American Economic Journal: Applied Economics, American Economic Association, vol. 4(2), pages 98-133, April.
    21. Markelova, Helen & Meinzen-Dick, Ruth & Hellin, Jon & Dohrn, Stephan, 2009. "Collective action for smallholder market access," Food Policy, Elsevier, vol. 34(1), pages 1-7, February.
    22. Uphoff, Norman & Wijayaratna, C. M., 2000. "Demonstrated Benefits from Social Capital: The Productivity of Farmer Organizations in Gal Oya, Sri Lanka," World Development, Elsevier, vol. 28(11), pages 1875-1890, November.
    23. Roberto Junguito & Juan José Perfetti & Alejandro Becerra, 2014. "Desarrollo de la agricultura colombiana," Cuadernos de Fedesarrollo 11565, Fedesarrollo.
    24. Timothy G. Conley & Christopher R. Udry, 2010. "Learning about a New Technology: Pineapple in Ghana," American Economic Review, American Economic Association, vol. 100(1), pages 35-69, March.
    25. Abebaw, Degnet & Haile, Mekbib G., 2013. "The impact of cooperatives on agricultural technology adoption: Empirical evidence from Ethiopia," Food Policy, Elsevier, vol. 38(C), pages 82-91.
    26. Alessandra Cassar & Luke Crowley & Bruce Wydick, 2007. "The effect of social capital on group loan repayment: evidence from field experiments," Economic Journal, Royal Economic Society, vol. 117(517), pages 85-106, February.
    27. Raj M. Desai & Shareen Joshi, 2014. "Can Producer Associations Improve Rural Livelihoods? Evidence from Farmer Centres in India," Journal of Development Studies, Taylor & Francis Journals, vol. 50(1), pages 64-80, January.
    28. Faguet, Jean-Paul, 2014. "Decentralization and Governance," World Development, Elsevier, vol. 53(C), pages 2-13.
    29. Nilsson, Jerker, 2001. "Organisational principles for co-operative firms," Scandinavian Journal of Management, Elsevier, vol. 17(3), pages 329-356, September.
    30. Robin Burgess & Rohini Pande & Grace Wong, 2005. "Banking for the Poor: Evidence From India," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 268-278, 04/05.
    31. Markussen, Thomas & Tarp, Finn, 2014. "Political connections and land-related investment in rural Vietnam," Journal of Development Economics, Elsevier, vol. 110(C), pages 291-302.
    32. Robin Burgess & Rohini Pande, 2005. "Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment," American Economic Review, American Economic Association, vol. 95(3), pages 780-795, June.
    33. Narrod, Clare & Roy, Devesh & Okello, Julius & Avendaño, Belem & Rich, Karl & Thorat, Amit, 2009. "Public-private partnerships and collective action in high value fruit and vegetable supply chains," Food Policy, Elsevier, vol. 34(1), pages 8-15, February.
    34. Bernard, Tanguy & Gabre-Madhin, Eleni Z. & Taffesse, Alemayehu Seyoum, 2008. "Heterogeneous Impacts Of Cooperatives On Smallholders’ Commercialization Behavior: Evidence From Ethiopia," 2007 Second International Conference, August 20-22, 2007, Accra, Ghana 52161, African Association of Agricultural Economists (AAAE).
    35. Dean S. Karlan, 2005. "Social Capital and Group Banking," Working Papers 181, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
    36. Carter, Michael R. & Barham, Bradford L., 1996. "Level playing fields and laissez faire: Postliberal development strategy in inegalitarian agrarian economies," World Development, Elsevier, vol. 24(7), pages 1133-1149, July.
    37. Ximena Cadena & Claudia Quintero Salleg, 2015. "Evolución de los servicios financieros en Colombia, 2010 - 2013," Libros en Línea 14165, Universidad de los Andes, Facultad de Economía, CEDE.
    38. Hellin, Jon & Lundy, Mark & Meijer, Madelon, 2009. "Farmer organization, collective action and market access in Meso-America," Food Policy, Elsevier, vol. 34(1), pages 16-22, February.
    39. Anneleen Vandeplas & Bart Minten & Johan Swinnen, 2013. "Multinationals vs. Cooperatives: The Income and Efficiency Effects of Supply Chain Governance in India," Journal of Agricultural Economics, Wiley Blackwell, vol. 64(1), pages 217-244, February.
    40. Coleman, Brett E., 2006. "Microfinance in Northeast Thailand: Who benefits and how much?," World Development, Elsevier, vol. 34(9), pages 1612-1638, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Verhofstadt, Ellen & Maertens, Miet, 2013. "Cooperative membership and agricultural performance: Evidence from Rwanda," Working Papers 157389, Katholieke Universiteit Leuven, Centre for Agricultural and Food Economics.
    3. Jan Falkowski & Pavel Ciaian, 2016. "Factors Supporting the Development of Producer Organizations and their Impacts in the Light of Ongoing Changes in Food Supply Chains: A Literature Review," JRC Research Reports JRC101617, Joint Research Centre.
    4. Ellen Verhofstadt & Miet Maertens, 2014. "Smallholder cooperatives and agricultural performance in Rwanda: do organizational differences matter?," Agricultural Economics, International Association of Agricultural Economists, vol. 45(S1), pages 39-52, November.
    5. Jerzy Michalek & Pavel Ciaian & Jan Pokrivcak, 2018. "The impact of producer organisations on farm performance: A case study of large farms in Slovakia," JRC Research Reports JRC108059, Joint Research Centre.
    6. Ma, Wanglin & Abdulai, Awudu, 2016. "Does cooperative membership improve household welfare? Evidence from apple farmers in China," Food Policy, Elsevier, vol. 58(C), pages 94-102.
    7. Gezahegn, Tafesse & Van Passel, Steven & Berhanu, Tekeste & D'Haese, Marijke & Maertens, Miet, 2020. "Structural and Institutional Heterogeneity among Agricultural Cooperatives in Ethiopia: Does it Matter for Farmers’ Welfare?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 46(2), August.
    8. Huma Neupane & Krishna P. Paudel & Mandeep Adhikari & Qinying He, 2022. "Impact of cooperative membership on production efficiency of smallholder goat farmers in Nepal," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 93(2), pages 337-356, June.
    9. Federica Di Marcantonio & Enkelejda Havari & Liesbeth Colen & Pavel Ciaian, 2022. "Do producer organizations improve trading practices and negotiation power for dairy farms? Evidence from selected EU countries," Agricultural Economics, International Association of Agricultural Economists, vol. 53(S1), pages 121-137, November.
    10. Balana, Bedru & Oyeyemi, Motunrayo, 2021. "Credit Constraints and Adoption of Agricultural Technologies in Developing Countries? Evidence from Nigeria," 2021 Conference, August 17-31, 2021, Virtual 315347, International Association of Agricultural Economists.
    11. Tray, Bunthan & Garnevska, Elena & Shadbolt, Nicola, 2021. "Linking smallholder producers to high-value markets through vegetable producer cooperatives in Cambodia," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 24(6), February.
    12. Michalek, Jerzy & Ciaian, Pavel & Pokrivcak, Jan, 2018. "The impact of producer organizations on farm performance: The case study of large farms from Slovakia☆," Food Policy, Elsevier, vol. 75(C), pages 80-92.
    13. Kifle T. Sebhatu & Fatemeh Taheri & Tekeste Berhanu & Miet Maertens & Steven Van Passel & Marijke D'Haese, 2021. "Beyond focus: Exploring variability of service provision of agricultural cooperatives," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 92(2), pages 207-231, June.
    14. Aga, B.K. & Tesfay, G.B., 2018. "How Should Rural Financial Cooperatives Be Best Organized? Evidence from Ethiopia," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277735, International Association of Agricultural Economists.
    15. Dang, Le Phuong Xuan & Hoang, Viet-Ngu & Nghiem, Son Hong & Wilson, Clevo, 2023. "Social networks with organisational resource, generalised trust and informal loans: Evidence from rural Vietnam," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 388-402.
    16. Margitta Minah, 2022. "What is the influence of government programs on farmer organizations and their impacts? Evidence from Zambia," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 93(1), pages 29-53, March.
    17. Jasper GRASHUIS & Ye SU, 2019. "A Review Of The Empirical Literature On Farmer Cooperatives: Performance, Ownership And Governance, Finance, And Member Attitude," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 90(1), pages 77-102, March.
    18. Awotide, B.A. & Abdoulaye, Tahirou & Alene, Arega & Manyong, Victor M., 2015. "Impact of Access to Credit on Agricultural Productivity: Evidence from Smallholder Cassava Farmers in Nigeria," 2015 Conference, August 9-14, 2015, Milan, Italy 210969, International Association of Agricultural Economists.
    19. Catherine Guirkinger & Stephen R. Boucher, 2008. "Credit constraints and productivity in Peruvian agriculture," Agricultural Economics, International Association of Agricultural Economists, vol. 39(3), pages 295-308, November.
    20. Kibrom A. ABAY & Bethelhem KORU & Gashaw Tadesse ABATE & Guush BERHANE, 2019. "How Should Rural Financial Cooperatives Be Best Organized? Evidence From Ethiopia," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 90(1), pages 187-215, March.

    More about this item

    Keywords

    rural financial development; agricultural credit; credit constraints; collective action; rural producer organizations; Colombia.;
    All these keywords.

    JEL classification:

    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:col:000089:018347. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Universidad De Los Andes-Cede (email available below). General contact details of provider: https://edirc.repec.org/data/ceandco.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.