Factors Affecting the Credit Constraint Condition of Rice Farmers in Victoria, Laguna

Date

6-2023

Degree

Bachelor of Science in Agribusiness Management

College

College of Economics and Management (CEM)

Adviser/Committee Chair

Juan Paulino S. Trespalacio, Junior

Committee Member

Dinah Pura T. Depositario

Abstract

Agricultural credit plays a crucial role in agricultural productivity and yield. This is especially crucial in the Philippines as it is known as an agricultural country. Even through there are studies showing its significance, there are still numerous factors that affect farmers' access to credit. Credit constraint hinders an individual's access to credit. If a farmer is credit constrained, it can affect their agricultural productivity, technology adoption, and household outcomes (Omolade & Adepoju, 2019). The study focused on the factors affecting the credit constraint condition of rice farmers in Victoria, Laguna. Specifically, it aimed to (1) Present the socio-economic characteristics and credit profiles of rice farmers; (2) Discuss the rice farmers' experiences and expectations when it comes to formal and informal credit; (3) Determine the perceptions of the farmers regarding the accessibility and availability of formal and informal credit; (4) Analyze the factors that affect the rice farmers' access to credit in terms of credit constraint; and (5) Provide insights and recommendations for rice farmers, LGUs, and credit providers to better improve formal and informal credit access.

This is significant as lack if capital, insufficient profits, rising price of inputs, and natural calamities continue to affect rice farmers in Victoria, according to the Municipal Agriculture Office. To add, it is also important to increase agricultural productivity and yield to improve food security and sustainable agriculture to cater to the growing population of the municipality.

Eighty two rice farmers in Barangay San Benito, Victoria were interviewed with the aid of questionnaire. Questions regarding the socio-economic, farm, and credit profile of the respondents were asked. Respondents also shared their experiences and problems when accessing credit, as well as their perception on the accessibility and availability of credit in the area. The core analytical tools used in the study were descriptive analysis, factor analysis, and logistic regression analysis. Descriptive analysis was used to present the socio-economic characteristics and credit profiles of rice farmers, to discuss the rice farmers' experiences and expectations when it comes to formal and informal credit, and to determine the perceptions of the farmers regarding the accessibility and availability of formal and informal credit. Factor analysis was used to analyze the underlying factors that produce a correlation among the different variables of the perceived availability and accessibility of credit. Logistic regression analysis was utilized to determine the significant factors that affect the credit constraint condition of the farmers.

The results of the study show that majority of the respondents are male, married, and have high school degrees. The average age of a farmer in the area is 55.07 years old. The average household size of the respondents is three to four people, with an average of one dependent. Majority of the farmers have a monthly agricultural income of Php 10,000 and below, have no yearly savings, and have other means of earning. Furthermore, the results show that the average farm size of the rice farmers in Barangay San Benito is 3.5 hectares, and majority have a farm size of more than one hectare. The average farm experience of rice farmers is 33.48 years, with majority being in the industry for more than 10 years. Half of the respondents are tenants of the farm. In terms of credit profile, more than half of the respondents have borrowing experience. Formal and informal credit sources are almost equally preferred by farmer-borrowers with experience in both credit sources. It is common for farmer-borrowers in the area to borrow from both credit sources. The formal credit sources farmers have borrowed from include banks, microfinance institutions, and cooperatives. The informal credit sources commonly borrowed from include relatives, neighbors, individual money lenders, and others. The average amount a farmer borrows per loan is PhP 37,312.5. More than one-third (36.6%) of respondents are reported to be credit constrained. This shows that there are still rice farmers in the area that are credit constrained, which means there is a need to further increase their access to credit.

Results of the factor analysis show that informal credit sources are more available and accessible as compared to formal credit sources. Moreover, even though informal credit sources are available and accessible in most aspects, it is not socially accessible. This means that there is still discrimination when accessing informal credit facilities. Additional results show that formal credit sources are not available, which means that they are non-existent in the area. There are also correlations between the farmers’ perception on the availability and accessibility of formal and informal credit. Findings include (1) Availability of informal credit sources and physical, financial, administrative, and information accessibility of informal credit sources are highly correlated with each other, (2) Physical, financial, social, and information accessibility of formal credit sources are highly correlated with one another, (3) Social accessibility in informal credit sources is not correlated with any of the other variables, and (4) Availability of formal credit sources is not correlated with any of the other variables.

Results of the logistic regression analysis showed that the significant factor affecting the credit constraint conditions of a farmer in Barangay San Benito is farm status. Owners of the farmland are less likely to be credit constrained as compared to tenants and other farm statuses.

The researcher recommends minimizing the number of steps in the loan process of formal credit facilities, minimizing increase in interest when overdue, and making the list of requirements and information about the different loans available more accessible to farmers in order to encourage them to loan. As the study area’s agricultural productivity and yield is affected by natural calamities very often due to its geography, credit sources in the area can also partner with government institutions to create a government guarantee program wherein the government will assume liability for a farmer’s loan in case of natural calamities affecting their farm. It is also recommended for the formal credit sources to put up more facilities in the barangay to increase the availability of formal credit in the area and to create additional loan programs wherein requirements can be adjusted such as no collateral or having other collateral substitutes aside from land. It is also recommended for informal credit sources who are in the business of lending have a standard treatment to their borrowers, regardless if there is trust between the two or not. Furthermore, for national and local and government units, seminars and programs can be made to encourage farmer participation in the financial market through educating them on the benefits and importance of agricultural credit to agricultural productivity, and the effects of being credit constraint. Improvement and implementation of different agricultural policies specifically aimed at farmers with different needs can also be done to further feel the effects of the policies.

Language

English

LC Subject

Agricultural credit, Rice farmers

Location

UPLB College of Economics and Management (CEM)

Call Number

LG 993 2023 M17 L33

Notes

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Document Type

Thesis

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