Determinants of Credit Constraints: Evidence from Sindh, Pakistan

ABSTRACT

This article investigates the determinants of credit constraints: evidence from Sindh, Pakistan. Cross-sectional farm-level data is collected during November and December 2016. A sample of 180 farm households is selected for interviews by using a multistage, random sampling technique. This study employed a probit regression model, frequency counts, and percentages to analyze the data. Access to formal agricultural credit is relatively low in Sindh province of Pakistan, the findings of the study show that the major constraints comprise distance to the formal credit sources, lending procedure, time lag, and interest rate whereas land ownership has a negative association and reduces the constraints to access formal credit. The findings of this study also show that for efficient allocation of resources, institutional sources of credit preferred to disburse agricultural credits toward educated and young age farmers as they are more inclined to adopt new farm technology for better farm production.

KEY WORDS:

• credit accessibility
• credit constraints
• Pakistan
• probit model

Acknowledgments

The authors of this article sincerely thank the anonymous reviewers for their insight comments that have significantly improved the manuscript. The authors cordially accredit the support of the editor Ali Kutan of this journal for their time and kind communication.

Additional information

Funding

Lastly, the authors are thankful to the College of Economics, Sichuan Agricultural University, Chengdu, China, for its financial and moral support.