Agricultural Credit Market Institutions: A Comparison of Selected European Countries

Factor Markets Working Papers No. 33, 2013

30 Pages Posted: 31 May 2013

See all articles by Kristina Hedman Jansson

Kristina Hedman Jansson

Swedish University of Agricultural Sciences (SLU) - Department of Economics

Chelsey Huisman

Swedish University of Agricultural Sciences (SLU) - Department of Economics

Carl Johan Lagerkvist

Swedish University of Agricultural Sciences (SLU) - Department of Economics

Ewa Rabinowicz

Swedish University of Agricultural Sciences (SLU) - Department of Economics

Date Written: January 7, 2013

Abstract

This paper describes and compares the institutional framework of the agricultural credit markets in selected European countries. The institutions can be both formal (rules, regulations, authorities and actors) and informal (norms, values and relations). They also interact and in situations where the formal institutions are weak, the informal ones increase in importance. The study is based on a questionnaire sent to agricultural financial experts in selected countries.

The case studies show that credit regulations are typically general, with no specific regulations for the agricultural credit market. On the other hand, several countries support agricultural credit in various forms, implying that the governments do not perceive the general credit market to function in the case of agricultural firms. In a risk assessment, the most frequent reasons for rejecting a loan application are all linked to economic performance and the situation of the farmer. Personal characteristics, such as educational level or lack of experience, were generally perceived as less influential. Another interesting point when it comes to risk assessment is that in some countries the importance of asset-based lending compared with cash flow-based lending seems to differ when concerning a first-time applicant and when there is an application to extend a loan. To get an idea of the availability of credit, the loan-to-value (LTV) ratio was calculated, and it showed remarkably low values for Poland and Slovakia. For all the countries, the calculated value was lower than what the financial experts would have expected. This might imply credit rationing in agriculture in some of the countries studied. The financial experts all judged the possibility of an agricultural firm obtaining a loan as higher than that for other small rural firms, implying that the latter are also credit-rationed.

Keywords: agricultural credit market institutions, agricultural, credit market, agricultural credit

Suggested Citation

Jansson, Kristina Hedman and Huisman, Chelsey and Lagerkvist, Carl Johan and Rabinowicz, Ewa, Agricultural Credit Market Institutions: A Comparison of Selected European Countries (January 7, 2013). Factor Markets Working Papers No. 33, 2013, Available at SSRN: https://ssrn.com/abstract=2198808

Kristina Hedman Jansson

Swedish University of Agricultural Sciences (SLU) - Department of Economics

Box 7013 (Johan Brauners väg 3)
S-901 83 Umea, 750 07
Sweden

Chelsey Huisman

Swedish University of Agricultural Sciences (SLU) - Department of Economics

Box 7013 (Johan Brauners väg 3)
S-901 83 Umea, 750 07
Sweden

Carl Johan Lagerkvist (Contact Author)

Swedish University of Agricultural Sciences (SLU) - Department of Economics ( email )

Box 7013 (Johan Brauners väg 3)
S-901 83 Umea, 750 07
Sweden

Ewa Rabinowicz

Swedish University of Agricultural Sciences (SLU) - Department of Economics ( email )

Box 7013 (Johan Brauners väg 3)
S-901 83 Umea, 750 07
Sweden

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