Flood, Farms and Credit: How Bank Ties Keep Farmers, Young and Female, above Water
51 Pages Posted: 16 Jun 2022
Date Written: June 11, 2022
Using a rare flood in April 2019 in Iran as a natural experiment, we study the role of local banks in mitigating the financial consequence of natural disasters to smallholder farmers. We find that local branches immediately react to the disaster by increasing their lending for two months following the flood. Analyzing proprietary information on more than 70,000 farmers, we find that farmers with a stronger relationship with their bank - in particular when they are young and female - have a higher chance of access to new credit. Our findings underscore the importance of the presence of local banks in agricultural areas which are exposed to climate risk.
Keywords: Local banks, Relationship lending, Climate Change, Farmers
JEL Classification: G21, G28, O13, Q14, Q54
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