Files
Abstract
In a competitive and deregulated financial market such as Chile’s, most of the formal lenders to
the farming sector are private. However, the total volume of lending has decreased in the last ten years.
This phenomenon creates unsatisfied demand for credit, especially for medium-scale farmers who feel
credit constrained in their strategies to improve their production system. Most of the studies about credit
constraint in developing countries take into account strategies which do not work any longer for market-oriented
fruit growers, as farmers in Chile. These types of farmers are in conditions to undertake export
processes on their own, without any intermediary trade company. In such a situation, farmers demand
long-term credit from formal institutions, which, for some reasons, cannot overcome screening,
monitoring or enforcement problems. This study analyzes three models derived from the theory of
contracts, using five criteria in assessing credit constraint in middle-scale farming in Chile. The results
of this paper determine that the dynamics investment model (Bond and Meghir, 1994), best explains the
dynamics of formal credit market in rural areas in Chile.