The Demand for Loans for Major Rice in the Upper North of Thailand

Abstract

Though Thailand is the largest rice exporting country, its yield is relatively low. This might be a result of the under use of purchased input factors. Amongst other factors, high input prices and capital constraints could be some reasons. The latter could be removed by loans providing favorable market conditions exist. This paper seeks to investigate factors affecting the decision to borrow, and the demand for loans, for rice. The Tobit type-II models are estimated using the survey data collected from 656 rice farmers in the Upper North of Thailand in 2004. It is found that significant factors affecting the decision of borrowing include; the land planted to rice, dummy variable for off-farm income sources, and annual interest rates. In the second step, the farmers who borrowed from the rural financial sources, including 202 and 250 farmers from Chiang Mai and Chiang Rai respectively, are considered. According to the OLS estimation, only the land planted to rice has a positive significant effect on the amount of loans for major rice. Further, the interest rate affects the probability of loans but has no impact on the amount of loans, for rice.Upper North of Thailand, Tobit type-II model, Probability of loans for rice, Amount of loans, Rural financial sources, Agricultural Finance, Crop Production/Industries,