Assessing Rural Credit Access in Tamil Nadu Dairy Cooperatives, India

Thesis Abstract

Access to timely and affordable rural credit remains a persistent constraint for dairy farmers organized under Tamil Nadu’s dairy cooperatives, undermining productivity gains, cash flow stability, and risk management in a sector pivotal to rural livelihoods and regional food security. This study investigates the determinants of credit access, identifies bottlenecks in the supply chain, and evaluates the impact of cooperative-financial interfaces on member households’ financial outcomes. The aim is to assess how Tamil Nadu Dairy Cooperatives (TNDCS) and allied financial institutions influence credit access for dairy farmers, with objectives to quantify access levels, examine factors shaping credit uptake, evaluate product design and service delivery bottlenecks, and propose policy and managerial reforms. The research adopts a mixed-methods design anchored in the Capability Approach and supported by Transaction Cost Economics to interpret institutional frictions within credit provisioning. The study covers dairy farming households affiliated with primary dairy cooperatives across five districts (Erode, Coimbatore, Namakkal, Tiruppur, and Kanyakumari) over 2019–2024. A multi-stage sampling frame yields a quantitative survey of 600 farm households, complemented by 30 in-depth interviews with cooperative managers, credit officers, and field extension agents. To triangulate findings, 20 focus group discussions were conducted with farmer groups stratified by herd size and production intensity. Instruments include a structured questionnaire measuring credit awareness, collateral requirements, interest rates, repayment terms, loan utilization, and perceived risk, alongside interview guides capturing institutional processes and governance. Quantitative data are analyzed using descriptive statistics, chi-square tests, and multivariate logistic regression to identify determinants of loan uptake and probability of access. A propensity score matching (PSM) approach is employed to estimate the causal impact of accessing cooperative credit on key household outcomes, including output expenditure on feed, milk yield, household income, and debt service burden. The qualitative data are analyzed via thematic analysis, with coding framed around supply-side constraints, demand-side constraints, and institutional alignment, followed by a cross-case synthesis to triangulate with quantitative results. The study engages relevant theories, notably the Theory of Planned Behavior to explain credit-seeking intentions, and the Resource Dependence Theory to illuminate power dynamics between farmers and cooperatives, with references to the Farm Credit System theory where applicable. Key expected findings include (i) a moderate level of credit access among dairy cooperative members, with significant variation by district, farm size, and membership tenure; (ii) salient determinants of access such as collateral substitutes provided by the cooperative, cooperative liquidity, credit officer proximity, social capital, and past repayment performance; (iii) persistent bottlenecks in product design (limited loan?term flexibility for working capital vs. investment loans), information asymmetry, and risk-based pricing that deter uptake among smallholders; (iv) evidence that timely and affordable credit correlates with higher feed expenditure efficiency, improved milk yield, and greater household resilience during price shocks; and (v) mixed perceptions of governance practices, with member empowerment linked to higher credit utilization. The study contributes to knowledge by elucidating how structured dairy cooperatives in a high-variance agro-ecological region shape credit access, validating a causal link between cooperative credit and farm-level productivity, and offering a framework to assess inclusive finance within rural agribusiness ecosystems. Policy and managerial implications include designing collateral substitutes, expanding credit product menus tailored to seasonality, deploying near-site credit officers, strengthening financial literacy and governance at the village cooperative level, and leveraging digital platforms to reduce information frictions. The main conclusion anticipated is that enabling finance within Tamil Nadu dairy cooperatives requires aligned institutional incentives, flexible product design, and strengthened governance to convert credit access into measurable productivity gains. Recommendations include implementing tiered collateral policies with group guarantees, introducing seasonal credit lines for fodder and animal health, enhancing credit appraisal with farmer-larm dashboards, training programs for cooperative managers on risk-based lending, and policy support for liquidity buffers in primary societies to sustain credit supply during lean seasons.