Impact of credit access on farm performance: Does source of credit matter?

Tri Haryanto; Wahyu Wisnu Wardana; Iqram Ramadhan Jamil; Annisaa Rizky Dwi Brintanti; Kabiru Hannafi Ibrahim

doi:10.1016/j.heliyon.2023.e19720

Impact of credit access on farm performance: Does source of credit matter?

Heliyon. 2023 Sep 9;9(9):e19720. doi: 10.1016/j.heliyon.2023.e19720. eCollection 2023 Sep.

Authors

Tri Haryanto¹, Wahyu Wisnu Wardana^{1

2}, Iqram Ramadhan Jamil³, Annisaa Rizky Dwi Brintanti¹, Kabiru Hannafi Ibrahim^{1

4}

Affiliations

¹ Department of Economics, Faculty of Economics and Business, Universitas Airlangga, Indonesia.
² Research Institute of Socio-Economic Development (RISED) Surabaya, Indonesia.
³ Department of Economics, Faculty of Economics and Business, Universitas Padjadjaran, Indonesia.
⁴ Faculty of Social and Management Sciences, Federal University Birnin Kebbi, Nigeria.

Abstract

Access to credit is crucial to improve farm performance as it allows farmers to procure inputs and technology. However, on the empirical front, evidence of the impact of agricultural credit access remains scanty. This study examines how access to credit from formal and informal sources influences the productivity and technical efficiency of maize farming in ten major maize-producing provinces in Indonesia. Secondary Food Crops Survey data by Statistics Indonesia were employed and analyzed using a quasi-experimental approach, i.e., the propensity score matching (PSM). The estimation shows that agricultural credit access improves farm performance. In fact, the ability to obtain credit from institutions increased productivity and technical efficiency more effectively than from informal sources. This study suggests that agricultural credit access remains relevant in Indonesia and needs to be improved continuously.

Keywords: Agricultural credit; Agricultural development; Formal and informal sources; Indonesia; Maize productivity; Technical efficiency.