The demand for funds among agricultural households in the Philippines

Abstract

This paper addresses the interdependency of farm household decisions by quantifying a demand for credit that considers not only the household's loan needs but its overall liquidity position. Section 2 presents the issues raised in the study. This is followed by the description of the methodology and a definition of variables in Section 3. Section 4 starts with a brief discussion of the saving, borrowing and asset structure of the sample households, followed by a discussion of the results of the empirical analysis of the demand for credit. Finally, Section 5 presents the conclusions and policy implications of the study. Several key issues surrounding the interdependent-decisions approach are discussed here. First, the controversy about simultaneity in farm household models is reviewed. Then a preview of the linkages between different components of the household's liquidity management is presented. Finally, the section discusses the variables likely to influence the demand for funds under interdependency of farm decisions.