Access to capital in rural Thailand : an estimated model of formal versus informal credit

The aim of this paper is to understand the mechanism underlying access to credit. The author focuses on two important aspects of rural credit markets in Thailand. First, moneylenders and other informal lenders coexist with formal lending institutions such as government or commercial banks, and more recently, micro-lending institutions. Second, potential borrowers presumably face sizable transaction costs obtaining external credit. The author develops and estimates a model based on limited enforcement and transaction costs that provides a unified view of those facts. The results show that the limited ability of banks to enforce contracts, more than transaction costs, is crucial in understanding the observed diversity of lenders.Payment Systems&Infrastructure,International Terrorism&Counterterrorism,Environmental Economics&Policies,Banks&Banking Reform,Economic Theory&Research,Banks&Banking Reform,Economic Theory&Research,International Terrorism&Counterterrorism,Financial Intermediation,Environmental Economics&Policies

Cultivate or rent out ? Land security in rural Thailand

In the 1980s the Thai government tried to legalize squatters by issuing special titles that restricted the sale and rental of the land. Using data from 2,874 farming households collected in 1997, the author finds that in places where these government titles where issued, leased plots are more likely to be titled than those that are self-cultivated. For these areas, he uses a model to estimate a 6 percent risk premium in the rental rate for untitled plots. In other areas, however, land rights play no role in the decision to lease land and the rental rate of untitled plots does not include a risk premium. The results indicate that this policy distorted the land rental market by triggering a sense of insecurity among landowners.Wetlands,Forestry,Rural Land Policies for Poverty Reduction,Land Use and Policies,Municipal Housing and Land

Ownership structure and inventory policy

This paper explores the effect of a firm's ownership structure on its inventory policy. We have argued that the presence of institutional investors like banks as blockholders, reduces a firm's liquidity needs and prevents overinvestment policies. This, in turn, leads to lower inventory levels, especially for small and/or diversified firms. Also, we expect less inventory investment when bank equity financing is compared with bank debt financing. Finally, other components of ownership structure like the number of blockholders prevent overinvestment that may generate excessive inventory accumulation. We have proved these theoretical contentions making use of a database of Spanish manufacturing firms

Do reorganization costs matter for efficiency ? Evidence from a bankruptcy reform in Colombia

The authors study the effect of reorganization costs on the efficiency of bankruptcy laws. They develop a simple model that predicts that in a regime with high costs, the law fails to achieve the efficient outcome of liquidating unviable businesses and reorganizing viable ones. The authors test the model using the Colombian bankruptcy reform of 1999. Using data from 1,924 firms filing for bankruptcy between 1996 and 2003, they find that the pre-reform reorganization proceeding was so inefficient that it failed to separate economically viable firms from inefficient ones. In contrast, by substantially lowering reorganization costs, the reform improved the selection of viable firms into reorganization. In this sense, the new law increased the efficiency of the bankruptcy system in Colombia.Banks&Banking Reform,Corporate Law,Small Scale Enterprise,Microfinance,Economic Theory&Research

Group versus Individual Liability: A Field Experiment in the Philippines

Group liability is often portrayed as the key innovation that led to the explosion of the microcredit movement, which started with the Grameen Bank in the 1970s and continues on today with hundreds of institutions around the world. Group lending claims to improve repayment rates and lower transaction costs when lending to the poor by providing incentives for peers to screen, monitor and enforce each other’s loans. However, some argue that group liability creates excessive pressure and discourages good clients from borrowing, jeopardizing both growth and sustainability. Therefore, it remains unclear whether group liability improves the lender’s overall profitability and the poor’s access to financial markets. We worked with a bank in the Philippines to conduct a field experiment to examine these issues. We randomly assigned half of the 169 pre-existing group liability “centers” of approximately twenty women to individual-liability centers (treatment) and kept the other half as-is with group liability (control). We find that the conversion to individual liability does not affect the repayment rate, and leads to higher growth in center size by attracting new clients.Microfinance, group liability, joint liability, social capital, micro-enterprises, informal economies

On the cyclicity of weight-homogeneous centers

Let W be a weight-homogeneous planar polynomial differential system with a center. We find an upper bound of the number of limit cycles which bifurcate from the period annulus of W under a generic polynomial perturbation. We apply this result to a particular family of planar polynomial systems having a nilpotent center without meromorphic first integral.Comment: 13 pages, no figure

Insurance, credit, and technology adoption : field experimental evidence from Malawi

The adoption of new agricultural technologies may be discouraged because of their inherent riskiness. This study implemented a randomized field experiment to ask whether the provision of insurance against a major source of production risk induces farmers to take out loans to invest in a new crop variety. The study sample was composed of roughly 800 maize and groundnut farmers in Malawi, where by far the dominant source of production risk is the level of rainfall. We randomly selected half of the farmers to be offered credit to purchase high-yielding hybrid maize and improved groundnut seeds for planting in the November 2006 crop season. The other half of the farmers were offered a similar credit package but were also required to purchase (at actuarially fair rates) a weather insurance policy that partially or fully forgave the loan in the event of poor rainfall. Surprisingly, take up was lower by 13 percentage points among farmers offered insurance with the loan. Take-up was 33.0 percent for farmers who were offered the uninsured loan. There is suggestive evidence that the reduced take-up of the insured loan was due to the high cognitive cost of evaluating the insurance: insured loan take-up was positively correlated with farmer education levels. By contrast, the take-up of the uninsured loan was uncorrelated with farmer education.,Access to Finance,Debt Markets,Hazard Risk Management,Crops&Crop Management Systems

Credit Constraints as a Barrier to Technology Adoption by the Poor: Lessons from South-Indian Small-Scale Fishery

technology adoption, inequality, fishing sector, India

Weighted uniform consistency of kernel density estimators

Let f_n denote a kernel density estimator of a continuous density f in d dimensions, bounded and positive. Let \Psi(t) be a positive continuous function such that \|\Psi f^{\beta}\|_{\infty}<\infty for some 0<\beta<1/2. Under natural smoothness conditions, necessary and sufficient conditions for the sequence \sqrt\frac{nh_n^d}{2|\log h_n^d|}\|\Psi(t)(f_n(t)-Ef_n(t))\|_{\infty} to be stochastically bounded and to converge a.s. to a constant are obtained. Also, the case of larger values of \beta is studied where a similar sequence with a different norming converges a.s. either to 0 or to +\infty, depending on convergence or divergence of a certain integral involving the tail probabilities of \Psi(X). The results apply as well to some discontinuous not strictly positive densities.Comment: Published by the Institute of Mathematical Statistics (http://www.imstat.org) in the Annals of Probability (http://www.imstat.org/aop/) at http://dx.doi.org/10.1214/00911790400000006

R&D investment and financial contracting in spanish manufacturig firms

This paper presents a model in which a firm with a degree of R and D specialization raises external funds to develop a two-period project that involves some non-verifiable returns (R and D-type of project). Taking into account a possible opportunistic behavior by the manager, we find out that the optimal firm's debt equity ratio is negatively related to the firm's degree of R and D specialization, its internal funds, and the output generated by the R and D project. Moreover, the expected R and D output of the firm is related negatively to the firm's leverage and positively to the firm's degree of R and D specialization as well as the amount of internal funds. The novelty of this work is to derive these results from strategic default consideration of the managers of firms specialized in R and D investments, as opposed to the standard collateral arguments concerning debt financing. This has a consequence of a lower growth of the firm's debt-equity ratio once we compare firms specialized on R and D investments with others non specialized in these activities. We confirm our main theoretical findings making use of a Spanish data set of manufacturing firms during the period 1990-94