[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/idb/brikps/11332.html
   My bibliography  Save this paper

Liquidity or Capital?: The Impacts of Easing Credit Constraints in Rural Mexico

Author

Listed:
  • Aparicio, Gabriela
  • Bobicì, Vida
  • De Olloqui, Fernando
  • Fernández Díez, María Carmen
  • Gerardino, María Paula
  • Mitnik, Oscar A.
  • Vargas, Sebastián
Abstract
This paper evaluates the effectiveness of easing credit constraints for rural producers in Mexico through loans provided by a national public development finance institution. In contrast to most of the existing literature, the study focuses on the effect of medium-sized loans over a two- to four-year time horizon. This paper looks at the effects of such loans on production and investment decisions, input use, and yields. Using a multiple treatment methodology, it explores the differential impacts of providing liquidity for working capital versus providing credit for investments in fixed assets. It finds that loans increased the likelihood that producers grow and sell certain key annual crops, in particular among recipients of working capital loans. It also finds significant effects on production value and sales (per hectare), with similar impacts for recipients of both types of loans, with gains in yields driven by changes in labor quality and more intensive use of key inputs. There is no evidence of significant effects on the purchase of large machinery, but there are impacts on the acquisition of cattle. Overall, the results reported in this paper suggest that lack of liquidity is at least as important as lack of funding for new investment in capital for rural producers in Mexico. Producers benefit from easing their credit constraints, regardless of the type of loan used for that purpose.

Suggested Citation

  • Aparicio, Gabriela & Bobicì, Vida & De Olloqui, Fernando & Fernández Díez, María Carmen & Gerardino, María Paula & Mitnik, Oscar A. & Vargas, Sebastián, 2021. "Liquidity or Capital?: The Impacts of Easing Credit Constraints in Rural Mexico," IDB Publications (Working Papers) 11332, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:11332
    DOI: http://dx.doi.org/10.18235/0003336
    as

    Download full text from publisher

    File URL: https://publications.iadb.org/publications/english/document/Liquidity-or-Capital-The-Impacts-of-Easing-Credit-Constraints-in-Rural-Mexico.pdf
    Download Restriction: no
    File URL: https://libkey.io/http://dx.doi.org/10.18235/0003336?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hans Degryse & Steven Ongena, 2005. "Distance, Lending Relationships, and Competition," Journal of Finance, American Finance Association, vol. 60(1), pages 231-266, February.
    2. João Alberto De Negri & Alessandro Maffioli & Cesar M. Rodriguez & Gonzalo Vázquez, 2011. "The Impact of Public Credit Programs on Brazilian Firms," SPD Working Papers 1103, Inter-American Development Bank, Office of Strategic Planning and Development Effectiveness (SPD).
    3. David McKenzie & Christopher Woodruff, 2008. "Experimental Evidence on Returns to Capital and Access to Finance in Mexico," The World Bank Economic Review, World Bank, vol. 22(3), pages 457-482, November.
    4. Gabriel Jiménez & José-Luis Peydró & Rafael Repullo & Jesús Saurina, 2017. "Burning Money? Government Lending in a Credit Crunch," Working Papers 984, Barcelona School of Economics.
    5. Carlos A. Flores & Oscar A. Mitnik, 2013. "Comparing Treatments across Labor Markets: An Assessment of Nonexperimental Multiple-Treatment Strategies," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1691-1707, December.
    6. Sebastian Calonico & Matias D. Cattaneo & Rocio Titiunik, 2014. "Robust Nonparametric Confidence Intervals for Regression‐Discontinuity Designs," Econometrica, Econometric Society, vol. 82, pages 2295-2326, November.
    7. Dean Karlan & Robert Osei & Isaac Osei-Akoto & Christopher Udry, 2014. "Agricultural Decisions after Relaxing Credit and Risk Constraints," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(2), pages 597-652.
    8. Abhijit Vinayak Banerjee, 2013. "Microcredit Under the Microscope: What Have We Learned in the Past Two Decades, and What Do We Need to Know?," Annual Review of Economics, Annual Reviews, vol. 5(1), pages 487-519, May.
    9. Abhijit V. Banerjee & Esther Duflo, 2014. "Do Firms Want to Borrow More? Testing Credit Constraints Using a Directed Lending Program," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(2), pages 572-607.
    10. 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.
    11. Juan José Echavarría, 2018. "Impacto del crédito sobre el agro en Colombia: evidencia del nuevo Censo nacional agropecuario," Chapters, in: Mauricio Villamizar-Villegas & Sara Restrepo-Tamayo & Juan David Hernández-Leal (ed.), Superando barreras: el impacto del crédito en el sector agrario en Colombia, chapter 2, pages 41-72, Banco de la Republica de Colombia.
    12. Gin, Xavier & Yang, Dean, 2009. "Insurance, credit, and technology adoption: Field experimental evidencefrom Malawi," Journal of Development Economics, Elsevier, vol. 89(1), pages 1-11, May.
    13. Guido Imbens & Karthik Kalyanaraman, 2012. "Optimal Bandwidth Choice for the Regression Discontinuity Estimator," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(3), pages 933-959.
    14. João Alberto De Negri & Alessandro Maffioli & César Rodríguez & Gonzalo Vázquez, 2011. "The Impact of Public Credit Programs on Brazilian Firms," IDB Publications (Working Papers) 61998, Inter-American Development Bank.
    15. Sidhu, R.S. & Vatta, Kamal & Kaur, Arjinder, 2008. "Dynamics of institutional agricultural credit and growth in Punjab: contribution and demand-supply gap," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 21(Conferenc).
    16. 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.
    17. Suresh de Mel & David McKenzie & Christopher Woodruff, 2009. "Returns to Capital in Microenterprises: Evidence from a Field Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(1), pages 423-423.
    18. Alessio D'Ignazio & Carlo Menon, 2012. "The Causal Effect of Credit Guarantees for SMEs: Evidence from Italy," SERC Discussion Papers 0123, Centre for Economic Performance, LSE.
    19. 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.
    20. 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.
    21. 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.
    22. Marcela Eslava & Alessandro Maffioli & Marcela Meléndez, 2014. "Credit constraints and business performance: evidence from public lending in Colombia," Documentos CEDE 12277, Universidad de los Andes, Facultad de Economía, CEDE.
    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. Nusrat Abedin Jimi & Plamen V. Nikolov & Mohammad Abdul Malek & Subal Kumbhakar, 2019. "The effects of access to credit on productivity: separating technological changes from changes in technical efficiency," Journal of Productivity Analysis, Springer, vol. 52(1), pages 37-55, December.
    2. Nusrat Abedin Jimi & Plamen Nikolov & Mohammad Abdul Malek & Subal Kumbhakar, 2020. "The Effects of Access to Credit on Productivity Among Microenterprises: Separating Technological Changes from Changes in Technical Efficiency," Papers 2006.03650, arXiv.org.
    3. Kersten, Renate & Harms, Job & Liket, Kellie & Maas, Karen, 2017. "Small Firms, large Impact? A systematic review of the SME Finance Literature," World Development, Elsevier, vol. 97(C), pages 330-348.
    4. Mohamed Abouaziza, 2022. "Farmer constraints and relational contracts: evidence from agricultural value chains in East Africa," Economics PhD Theses 0122, Department of Economics, University of Sussex Business School.
    5. Shukri Ahmed & Craig McIntosh & Alexandros Sarris, 2020. "The Impact of Commercial Rainfall Index Insurance: Experimental Evidence from Ethiopia," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(4), pages 1154-1176, August.
    6. Nakano, Yuko & Magezi, Eustadius F., 2020. "The impact of microcredit on agricultural technology adoption and productivity: Evidence from randomized control trial in Tanzania," World Development, Elsevier, vol. 133(C).
    7. Balana, B. B. & Mekonnen, D. & Haile, B. & Hagos, Fitsum & Yimam, S. & Ringler, C., 2022. "Demand and supply constraints of credit in smallholder farming: evidence from Ethiopia and Tanzania," Papers published in Journals (Open Access), International Water Management Institute, pages 159:106033..
    8. Temesgen Belissa & Robert Lensink & Anne Winkel, 2020. "Effects of Index Insurance on Demand and Supply of Credit: Evidence from Ethiopia," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(5), pages 1511-1531, October.
    9. Ahlin, Christian & Gulesci, Selim & Madestam, Andreas & Stryjan, Miri, 2020. "Loan contract structure and adverse selection: Survey evidence from Uganda," Journal of Economic Behavior & Organization, Elsevier, vol. 172(C), pages 180-195.
    10. de Janvry, Alain & Sadoulet, Elisabeth, 2020. "Using agriculture for development: Supply- and demand-side approaches," World Development, Elsevier, vol. 133(C).
    11. Naranjo, María A. & Pieters, Janneke & Alpízar, Francisco, 2019. "Credit, insurance and farmers’ liability: Evidence from a lab in the field experiment with coffee farmers in Costa Rica," Journal of Economic Behavior & Organization, Elsevier, vol. 166(C), pages 12-27.
    12. Rosenzweig, Mark & Udry, Christopher, 2016. "External Validity in a Stochastic World," Center Discussion Papers 242440, Yale University, Economic Growth Center.
    13. Apurba Shee & Calum G. Turvey & Ana Marr, 2021. "Heterogeneous Demand and Supply for an Insurance‐linked Credit Product in Kenya: A Stated Choice Experiment Approach," Journal of Agricultural Economics, Wiley Blackwell, vol. 72(1), pages 244-267, February.
    14. Cariappa, A. G. Adeeth & Sendhil, R, 2021. "Does Institutional Credit Induce on-Farm Investments? Evidence from India," 2021 Conference, August 17-31, 2021, Virtual 315221, International Association of Agricultural Economists.
    15. Chaurey, Ritam & Le, Duong Trung, 2018. "Infrastructure Grants and the Performance of Microenterprises," IZA Discussion Papers 11749, Institute of Labor Economics (IZA).
    16. Karlan, Dean S. & Knight, Ryan & Udry, Christopher R., 2012. "Hoping to Win, Expected to Lose: Theory and Lessons on Micro Enterprise Development," Center Discussion Papers 133405, Yale University, Economic Growth Center.
    17. 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.
    18. Erhardt, Eva, 2017. "Microfinance beyond self-employment: Evidence for firms in Bulgaria," MPRA Paper 79294, University Library of Munich, Germany.
    19. repec:luc:wpaper:18-04 is not listed on IDEAS
    20. Michael R. CARTER & Alain de JANVRY & Elisabeth SADOULET & Alexandros SARRIS, 2014. "Index-based weather insurance for developing countries: A review of evidence and a set of propositions for up-scaling," Working Papers P111, FERDI.
    21. Alain de Janvry & Elisabeth Sadoulet, 2019. "Transforming developing country agriculture: Removing adoption constraints and promoting inclusive value chain development," Working Papers hal-02287668, HAL.

    More about this item

    Keywords

    agricultural finance; credit constraints; development finance institutions; investmentcapital; working capital;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:idb:brikps:11332. 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: Felipe Herrera Library (email available below). General contact details of provider: https://edirc.repec.org/data/iadbbus.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.