Comparative Analysis of Farm Credit Access and Productivity Across Regions

Thesis Abstract

Access to farm credit remains a critical determinant of agricultural productivity and rural development, yet substantial regional disparities persist that undermine overall sectoral resilience and growth. This study addresses the problem of uneven credit access and its differential impact on productivity across regions, with implications for policy harmonization and financial inclusion. The aim is to quantify how farm credit access influences productivity and to identify regional factors that constrain or enhance credit use. The specific objectives are (i) to measure the level of farm credit access across regions using indicators such as credit disbursement per hectare, loan approval rates, and credit utilization; (ii) to estimate the impact of credit access on agricultural productivity, operationalized by yield per hectare and total factor productivity (TFP); (iii) to compare the determinants of credit access and productivity across regional groups; (iv) to identify institutional, market, and policy drivers that mediate the credit-productivity relationship; and (v) to formulate region-specific policy recommendations to improve credit penetration and efficiency. The study adopts a cross-sectional research design complemented by a regional comparative framework. The population comprises licensed agricultural lenders, farming households, and agricultural firms across five distinct regions. A stratified random sample of 400 farm households and 40 financial institutions is selected, ensuring representation by farm size, crop systems, and lender type. Data collection employs structured questionnaires for farmers and semi-structured interviews with bank officers, along with secondary data from regional agricultural productivity statistics, credit registers, and policy documents. The instrument set includes a credit access index, farm financial performance metrics, and region-specific control variables such as input prices, extension services, and market access. Analytical methods combine econometric and comparative techniques. Descriptive statistics summarize regional disparities in credit access and productivity. Regression analysis, including fixed-effects and random-effects models, assesses the relationship between credit access and productivity while controlling for farm characteristics, technology adoption, and input costs. A difference-in-differences approach is considered to account for regional policy shocks where appropriate. Stochastic frontier analysis (SFA) is applied to estimate regional TFP and its sensitivity to credit variables. Instrumental variable (IV) techniques address potential endogeneity between credit access and productivity, using instruments such as proximity to financial institutions and historical credit culture. Theoretical grounding rests on the peasant credit market theory and the dual-gap framework, complemented by the theory of financial inclusion and transaction-cost economics. A conceptual model links lender characteristics, borrower attributes, and regional institutions to productivity outcomes. Key expected findings include (i) heterogeneous effects of credit access on productivity across regions, with higher marginal productivity gains in regions with stronger extension services and better collateral frameworks; (ii) credit access positively associated with yields and TFP, moderated by crop type, farm size, and technology adoption; (iii) identification of regional barriers such as high interest rates, limited loan tenure, information asymmetry, and insufficient collateral requirements that dampen the credit-productivity link; and (iv) evidence that policy environments promoting financial literacy, credit information sharing, and collateral simplification enhance the effectiveness of credit. The study contributes to knowledge by bridging a gap in comparative regional analyses of farm credit and productivity, offering a robust cross-region empirical framework, and informing targeted policy interventions to reduce financial inclusion gaps and boost agricultural productivity. The main conclusion is that improving access to affordable credit, particularly in lagging regions with enabling institutional reforms, can yield substantial productivity gains. Recommendations include tailored credit products for smallholders, enhanced outreach from financial institutions, strengthened collateral and information infrastructures, expansion of credit guarantee schemes, and region-specific policy harmonization to align credit supply with agronomic productivity drivers.