YANGON UNIVERSITY OF ECONOMICS

DEPARTMENT OF COMMERCE
MASTER OF BANKING AND FINANCE PROGRAMME

EFFECT OF CREDIT ACCESSIBILITY ON FARM

PERFORMANCE IN KAN GYI TAUNG TOWNSHIP,
AYEYARWADY DIVISION

MYA YI MON THWIN

(MBF - 4th BATCH)

DECEMBER, 2018
 EFFECT OF CREDIT ACCESSIBILITY ON FARM
PERFORMANCE IN KAN GYI TAUNG TOWNSHIP,
AYEYARWADY DIVISION

A thesis submitted as a partial fulfillment towards the requirements for

the degree of Master of Banking and Finance (MBF)

Supervised By: Submitted By:

Professor Dr Tin Tin Htwe Mya Yi Mon Thwin

Department of Commerce MBF 4rd Batch - 41
Yangon University of Economics Yangon University of
Economics

DECEMBER, 2018
 ABSTRACT
This study aims to examine the credit accessibility and agricultural loan on
farm performance in Kan Gyi Taung Township based on primary and secondary data.
The sample size of 150 farmers was randomly selected and surveyed using structured
questionnaires. Descriptive analysis and multiple regression method are used.
According to the survey, the household size of the respondent is from two to seven
members. Their farming experience is from 15 to 35 years and their main source of
earning is farming. Their living standard is above average level with the ownership of
home, motorcycle, and almost they owned farm land and cows. They owned
cultivated land of acres fifteen at maximum. Average paddy yield per acre is round
about 80 bushels. They borrowed loan from MADB bank and some from other
financial organizations. However, most of farmers received loan just after farming
period. More than half of farmers covered about fifty percent loan sufficient rate.
According to multiple regression analysis, Frequency of borrowing, loan coverage
percent and period of loan received ,Amount of credit are significantly related with
paddy yield per acre. The study showed that the effect of loan performance of
agriculture profit and productivity. Therefore, agricultural credit should be provided
to farmers sufficiently and timely manner.

i
 ACKNOWLEDGEMENTS
Primarily, I would like to express my gratitude to Dr. Tin Win, Rector of
Yangon University of Economics, for giving me the opportunity to do this thesis as
requirement of master degree.
I would also like to acknowledge and thank Dr. Soe Thu, Professor and Head
of the Commerce Department, Yangon University of Economics, for helping me to
accomplish this study and for her invaluable advices, thoughtful comment and support
for my research.
I would like to express my sincere thanks and deep respect to my supervisor,
Professor Dr. Daw Tin Tin Htwe, Department of Commerce, Yangon University of
Economics, for her kind guidance, great supervision and invaluable suggestions and
for spending her previous time in reading and correcting this manuscript throughout
the study period. Then I would like to thank all Professors and Lecturers for their
constant encouragement to complete this thesis successfully.
Moreover, I would like to thank MADB managers and all staff in Yangon
head office and Kan Gyi Taung Township and all respondents who participated in
collecting data for their kindness to answer the questionnaire.
Finally, I would like to thank my friends, my parents and my family for their
support during all my years of academic studies.

ii
 TABLE OF CONTENTS
ABSTRACT i
ACKNOWLEDGEMNTS ii
TABLE OF CONTENTS iii
LIST OF TABLES v
LIST OF FIGURES vi
CHAPTER 1 INTRODUCTION
1.1 Rationale of the Study 3
1.2 Objectives of the Study 3
1.3 Scope and Method of the Study 3
1.4 Organization of the Study 4
CHAPTER 2 THEORETICAL BACKGROUND
2.1 The Role of Agriculture Finance 5
2.2 Source of Farmers 6
2.3 Credit Accessibility 7
2.4 Credit Access for Agricultural Productivity 8
2.5 Relationship Between Credit Accessibility and
Performance of Agriculture 8
2.6 Previous Studies 9
2.7 Conceptual Framework
10
CHAPTER 3 BACKGOUND STUDY ON
AGRICULTURE FINANCE IN MYANMAR
3.1 Overview on Agricultural Sector in Myanmar 12
3.2 Financial Institustion in Myanmar 13
3.3 Background of Kan Gyi Taung Township 16
3.4 Economic Background 17
3.5 Economy in Kan Gyi Taung Township 17
3.6 Sample Size and Sampling Technique 18
CHAPTER 4 ANALYSIS OF AGRICULTURAL EFFECT OF CREDIT
ACCESSIBILITY ON FARM PERFORMANCE
4.1 Research Design 21
4.2 Background Characteristics of Respondents 22

iii
 4.3 Credit Accessibility of Respondents 27
4.4 Farm Performance of Farmers 31
CHAPTER 5 CONCLUSIONS
5.1 Findings and Discussions 36
5.2 Suggestions and Recommendations 37
5.3 Needs for Further Research 38
REFERENCES
APPENDIX

iv
 LIST OF TABLES
Table No. Title
Page
Table (3.1) Climate of Kan Gyi Taung Township 17
Table ( 3.2) Usage of Agricultural Land in Kan Gyi Taung Township 18
Table (4.2) Demographic Characteristics of Respondents 22
Table (4.3) Annual Household Income 24
Table (4.4) Main Source of Earning 24
Table (4.5) Type of Properties 25
Table (4.6) Cultivated Acres (paddy) 26
Table (4.7) Paddy Yield per Acre of Respondents 27
Table (4.8) Sources of Finance 28
Table (4.9) Year of Connection with 28
Table (4.10) Amount of loan received from MADB 29
Table (4.11) Amount of Loan Received from Other Organization 29
Table (4.12) Loan Coverage Percent
30
Table (4.13) Constraints for Procurement of Agricultural Credit 30
Table (4.14) Barriers of Not Getting Loan for Non-borrowing Farmers 31
Table (4.15) Paddy Yield per Acre and Farmer’s Income 32
Table (4.16) Regression Result for Paddy Yield per Acre 33
Table (4.17) Regression Result for Farm Income 34

v
 LIST OF FIGURES
Figure No. Title Page
Figure (2.1) Conceptual Framework 11
Figure (3.1) Map of Kan Gyi Taung Township 16

vi
 CHAPTER I
INTRODUCTION

Micro and small enterprise (MSEs) have become the focus of attention for the
economic development, economic growth and job creation in the world. The
importance of Micro and Small Enterprises in the economics has been recognized by
many players such as World Bank, UN, governments, non-governmental
organizations and private entities.
Agriculture in Myanmar is a major source of income; over 60% of the
population survives by farming and livestock rearing. In a bid to develop the
agricultural sector, farmers have been encouraged to work together in small groups-
agricultural sectors. The Ministry of agriculture has implemented various programs
such as training in storage techniques and encouraging Micro Finance Institutions
(MFIs) to extend credit in the sector.
Agriculture accounts for 30% of Myanmar’s GDP and 61.2% of the
population works in the agricultural sector (Myanmar Ministry of Agriculture and
Irrigation, 2016). Furthermore, approximately 70% of the population resides in rural
areas where agriculture is the primary source of jobs. One part of these development
activities is an agricultural financing scheme at the Ministry of Agriculture and
Irrigation (MOAI) to assist farmers.
However, there is a shortage of funds at Myanmar Agricultural Development
Bank (MADB), a unit of MOAI that extends loan to farmers. There are also issues
involving capabilities needed for the loan approval process. For these reasons, there is
a need to provide small loan services on a medium to long-term basis to end-users by
extending two-step loans for agriculture and rural development. In addition, end
users/ sub-borrowers must be given the agricultural management skills needed to
enable them to repay these agricultural loans. There is also a need for participating
financial institutions to devise a framework that creates an environment in which non-
performing loans will not be a serious problem.
Credit terms are the minimum conditions set by lending institutions to which
borrowers must adhere in order to qualify for loan. Enforcing credit terms involve the
screening of customers so that only those who are credit-worthy are allowed to do
business.

1
 Credit accessibility refers to the ease or difficulty of acquiring credit by
borrowers for purposes such as to enhance business performance. In order to ensure
continuity and realized successes, SMEs need to acquire the necessary financial
resources/ credit to allow them to invest now so that they will obtain income in the
future. Acquisition of such credit is difficult for the SMEs because of high rates of
interest on lending, and this has constrained private sector demand for the credit and
limited their progress. The accessibility of credit is still fairly constrained, and
particularly access to formal credit for small and medium farmers. Therefore, there is
a need to understand factors that affect agricultural performance and the measures that
can be adopted to overcome them.
Participating financial institutions (PFIs) will be performed that includes
determining how much expertise these institutions currently have for the creation of
this framework. Extending loans to farmers does not use the same logic as loans for
small and medium-sized enterprises (SME). Agricultural loans are likely to involve
almost entirely borrower-side risks. Examples are risks associated with weather and
other forces of nature. This creates the problem of what type of institutions would
guarantee the repayment of loans.
Ayeyarwady Region covers mainly the fertile, low-lying and densely-
populated areas also known as the Irrawaddy Delta, one of Myanmar’s main river
systems that the Region takes its name from. The river and its delta occupy a position
of central importance in the history, economy and the daily life of the Region. Rice
cultivation and fishing dominate economic activity in still largely rural communities.
Meanwhile, the development of industry, infrastructure and service sectors such as
tourism still lag behind the Yangon-Mandalay central axis areas of Myanmar and give
much of the region on air of remoteness and underdevelopment.
Currently, in principle, regulations allow banks in Myanmar to extend loans
only when these are secured by real estate. Loan applications are rarely examined
based on a business plan. As as result, companies with no land and companies that
have submitted all their land as collateral are unable to obtain loans or additional
loans. Although there are 26 townships of Ayeyarwady Division in different parts of
Myanmar, Kan Gyi Taung Township is studied.

2
1.1 Rationale of the Study
The Myanmar government has made several attempts to promote rural
development in an effort to increase the living standard of the people who reside in
rural areas These projects have failed for several reasons, including the high cost of
living for farmers, and the lack of coordination between government agencies More
farmers in the rural areas do have problems in dealing with the rural banks or the
credit unions Some of these problems include preparing viable business proposals
and collateral securities that the banks do demand Meanwhile, majority of the
farmers are not well educated in order to plan or write their own business proposals
In addition, it becomes very difficult for farmers to secure loans because of the
collateral securities demanded by the banks
Some of the banks even look at the scale of the farm before granting loans
The most alarming problem that the farmers do face is the high interest rates or bank
changes It is very difficult these days for the farmers to borrow money from the rural
banks because of the high interest rates More of the farmers do even end up by
selling their lands or assets in order to pay the loans they have borrowed This has
therefore increased the bank changes According to him, the problem of high interest
rates is an impediment on the economy since it forces more businesses to close down
This research therefore looked at the impact of these credit unions or rural banks on
farmers in the rural areas

1.2 Objectives of the Study

The specific objectives of the study are as follows:
1. To identify the credit accessibility of agriculture in Kan Gyi Taung Township.
2. To analyze effect of credit accessibility on farm performance of agriculture.

1.3 Scope and Method of the Study

Although there are 26 townships of Ayeyarwady Division in different parts of
Myanmar, Kan Gyi Taung Township is studied. A Likert Scale questionnaire was
used to measure on credit accessibility and the effectiveness of loan on farm’s
performance (Case Study in Kan Gyi Taung Township, Ayeyarwady Division).
Primary data was collected by using well structured questionnaires. Secondary data

3
was collected from related textbooks, published reports, relevant websites etc. This
study used both primary and secondary data.
The researcher did encounter the following limitations. The study covered Kan
Gyi Taung Township (Ayeyarwady Division) and therefore a nationwide study
covering the variables presented in this study is required. Despite these limitations,
the researcher believes that the findings of this study will be useful in filling the
knowledge gap that it set out to fill.
There is a need for further research on the external factors that have an impact
on credit access by the agricultural factors such as entrepreneurial competence,
managerial competence and financial performance. With lower correlation and
predictive effect, credit terms components vary from country to country overtime.
Future longitudinal studies should examine trends in credit terms and the financial
performance of agriculture.
This thesis paper took reference on relationship between credit accessibility
and effectiveness of loan farm’s performance of agriculture and some previous
research papers Master graduate. In previous research papers, they studied on credit
accessibility and the effectiveness of loan on farm’s performance (Case Study in Kan
Gyi taung Township, Ayeyarwady Division). Therefore, Kan Gyi Taung Township,
Ayeyarwady Division is chosen credit accessibility and the effectiveness of loan on
farm’s performance as as study.

1.4 Organization of the Study

This paper is organized by five chapters. Chapter One contains introduction,
rationale of the study, objectives, scope and method of the study and organization of
the study. Chapter two includes theoretical background of Credit Accessibility and the
effectiveness of loan. Chapter three describes the profile of Kan Gyi Taung Township,
Ayeyarwady Division. Chapter four includes analysis on Credit Accessibility and the
effectiveness of loan on firm’s performance (Case study in Kan Gyi Taung Township,
Ayeyarwady Division). Finally, Chapter five is conclusion for showing findings,
recommendations and suggestions and the need for further research.

4
 CHAPTER II
THEORETICAL BACKGROUND

This chapter to make literature review regarding of the agriculture financing

activities, the concept and theoretical perspective of farm, credit accessibility and
performance of agriculture.

2.1 The Role for Agriculture Finance

Agriculture finance refers to public or private funds in the form of equity, gift
or loan for improving social welfare through expansion of agricultural sector
(Shreiner and Yaron, 2001). It encompasses not only government funds but also funds
of non-governmental organizations that use matching grants to attempt to encourage
community and sector development, income equal opportunity and local
empowerment. Public funds are subsidized funds and private funds regardless of their
price are not subsidized unless a contribution is tax free or the market price is affected
by an explicit or implicit state guarantee of the liabilities of a development finance
institution (Shreniner and Yaron, 2001).

2.1.1 Need for Credit

The Concise Mc Graw-Hill Dictionary of Modern Economics defines credit as
an exchange of goods and services for a promise of the future repayment. It is also
indicates that credit is necessary in a dynamic economy because of the time that
elapses between the production of a good and its ultimate sale and consumption and
credit bridges this gap. The risk in extending credit is the probability that future
payment by the borrower will not be made (Greenwal & Associates, 1983).
Credit is the key input in every development program; this is particularly true
for rural development because so long as sufficient credit is not provided to the
development programs of poor sections of the society, the goal of development cannot
be achieved. Access to capital in the form of either accumulated savings or a capital
market is necessary in financing the adoption of many new agricultural technologies
(Feder et al., 1985).
The importance of credit facilities to smallholders of less developed countries
has been underlined by several authors (Adams and Graham, 1981; FAO, 1996;

5
Gonzalez-Vega, 1977; Pischke, 1980). Governments of less developed countries and
aid agencies have extended a large amount of money in the form of agricultural loans.
The motivation has been the belief that loans are an essential part of various input
packages that are prescribed as part of agricultural investment projects designed to
introduce modern technologies and thus stimulate change and growth in agriculture.
Generally, credit removes a financial constraint and helps accelerate the
adoption of new technologies, increase productivity and improves national and
personal incomes. In addition, it constitutes an integral part of the process of
commercialization of the rural economy and a convenient means of redressing rural
poverty (MOA, 1995).

2.1.2 Agricultural Credit in Developing Countries

Fertilizer consumption in developing countries is closely linked with access to
input credit. 70-90% of the annual fertilizer sales in these countries is on credit bases
as compared to less than 30% in the developed nations (K.Wierer & J.C.Abbott, FAO,
1995). Among other measures, unless otherwise input credit is made available for
farmers, the low level of fertilizer consumption will not be improved us required.
In developing countries, there are a number of credit resources. Government
banks, credit and saving institutions, fertilizer retailers etc are among the major ones.
Though, public banks are the main sources of credit in many of the developing
countries, unfortunately, in the greater number of cases, small farmers do not have
easy access direct to bank credit as they lack land titles or other acceptable collateral.
In the eye of banks, loans to small holders are too risky and costly to supervise
(Zemen, 2005).

2.2 Source of Farmer

The expression “smallholders” is generally understood as smallholder farmers
who cannot claim or solely manage the land they farm. There are various attributes of
smallholders, regardless of whether they control the land they cultivate or the
products they harvest; they harvest generally little produce on moderately little pieces
of land. They can grow commodities for export as their main source of income or as
portion of an investment of subsistence income generating activities. They are for the
most part less all well equipped than commercial farmers. They are typically thought

6
to be a piece of the informal economy. They may rely on family labor, however may
employ additional workers (ETI, 2005).

2.3 Credit Accessibility

The access to finance by SMEs is a subject of significant research to
academics and policy makers and issue of great importance to policy makers for both
developing and developed economies for many years. One of the factors is that there
is some empirical evidence that the expansion of access may reduce prevailing
poverty in developing countries (World Bank, 2008). Access to credit represents one
of the most significant challenges for entrepreneurs and for the creation, survival and
growth of small businesses. Financial access help SMEs start up and expand their
businesses through development of new products and production processes and
investment in human capital. A variety of financial services are crucial for growth in
the SME. Ensuring that SMEs have adequate access to financial resources is a key
talent of successful development strategies.
Most low income countries’ economies are agriculturally based and thus credit
is as a major component of agricultural and rural development programmes and also
considered as an important instrument in helping small farmers and micro-
entrepreneurs increase their income. Advocates of credit as a poverty alleviation
measure (Howse 1978, Adam et. Al., 1984, Boomgard 1989, & Mutua 1996) contend
that limited availability of credit services has undermined rural micro-enterprise
activities due to lack of capital for investment and has prevented farmers to adopt
improved farming practices because of their inability to purchase the necessary inputs
required in the production.
Gilla and Lassalle (1994) show that rapid development reached in Europe and
Asia was highly facilitated by the availability of credit to the majority. However, Guli
and Berger (1999) point out that access to credit is important for micro-enterprise
development but not necessarily the main constraint. This view is shared by Von
Pischke (1992) who observed that lack of funds is not the most important problem of
small farmers and micro-entrepreneurs noting that product prices, poor education
system and training, low output, land tenure, modern input costs and availability and
risk turn out to be more important factors limiting small farmers and micro-enterprise
development.

7
 Furthermore, SMEs have access to well-designed credit services can avail
themselves of capital to finance the inputs, labor and equipment they need to generate
income; can afford to invest in riskier but more profitable enterprises ans=d asser
portfolios, can reach markets more effectively and can adopt more efficient strategies
to stabilize their food consumption (Zeller et al., 1997).

2.4 Credit Access for Agricultural Productivity

According to Auma and Mensah (2014), local credit is considered a viable
source of poverty reduction as well as development in rural areas. Agricultural credit
is used to provide farmers in developing countries the resources they need in cases
where their income is not sufficient. Most often, credit determines access to most of
the resources on which smallholder farmers depend for agricultural production
because of lack of adequate capital to access these resources (Ololade and Olagunju,
2013).
The provision of credit is an important aspect of local development because it
helps to achieve sustainable growth of agriculture. Local credit acts as a catalyst for
agricultural production as it covers for deficit in individual savings. Local credit
enables farmers to afford expensive agricultural technologies which boost agricultural
production. The financing of agricultural activities requires liquid cash which in most
cases small-scale farmers lack. As a result, the expansion of local credit amounts is
efficient in increasing agricultural productivity (Briquette, 1999).
Farmers may demand credit if there are adequate financial institutions.
Improved technology, enabling policies on land security, access to markets and
extension services also create incentives for farmers to demand credit in order to
increase farm productivity. Taking into consideration the fact that farming households
are resource poor in the study area, limited access to credits is assumed to cause
vulnerability to various stuns, for example, plant or livestock infection, absence of
reception of new farming innovations and food insecurity. Then again, it is assumed
that farming households who are able to access credit have the potential to adopt new
and improved technology, hire labor, increase farm productivity and reduce food
insecurity and poverty.

2.5 Relationship between Credit Accessibility and Performance of

Agriculture

8
 The growth of a farm is dependent on its productivity and the farmers’
effectiveness in the use of the inputs to operate it (Bolo, 1996). For small and medium
scale farmers to improve their performance, they have to improve their productivity
by employing techniques such as the use of fertilizers, spraying their crops against
pests and diseases, training labor, quality seeds and machinery (Klaus, 1994). Small
and medium scale farmers have limited capital to afford such techniques and limited
access to credit, putting the agricultural sector in a vulnerable situation.
Yet studies show that improvement in rural credit encourages improved
resource allocation. Loans also follow farmers to make better allowance for risks
associated with nature of the agricultural production such seasonality issues. They are
also enabled to afford larger investments (Stevens et al, 2001). In addition, access to
credit is an important instrument for improving the welfare of the poor directly
(consumption smoothing that reduces their vulnerability to short term income shocks)
and for enhancing the productive capacity through financing investments (Binswanger
and Khandker, 1995).
Availability of finance determines the capacity of an enterprise in a number of
ways, especially in choice of technology, access to markets and access to essential
resources which in turn greatly influence the viability and success of a business
(Wole, 2009). Wole further states that securing capital for business start-up or
business operation is one of the major obstacles every entrepreneur faces particularly
those in the SME sector. Within the SME sectors lack of access to credit is one of the
major factors accountable for hindering the emergence and growth of their businesses.
The ability of SMEs to grow depends highly on their potential to invest in
restructuring and innovation. All these investments require capital and therefore
access to finance. Against this background, the consistently repeated conception of
SMEs about their problems regarding access to credit is a priority area of concern,
which if not properly addressed, can endanger the survival and growth of SMEs
sector. According to Evans and Carter (2000) and Whincop (2001), large firms benefit
from established capital markets where small firms cannot raise funds. Owing to lack
of well-developed finance information systems, the financial sector is the main source
of SMEs external funds.

2.6 Previous Studies

9
 Interest in access to credit has led to a number of impact studies published in
scholarly journals. The impact of credit access can be economic, social-cultural or
personal. For the purpose of this study, emphasis will be laid on the impact of credit
access on the SMEs. A number of studies have been carried out to ascertain the
impact of credit access on SMEs. Some of the variables that have been investigated
are indicators of change on the enterprise such as increased production, level of sales,
net profit, fixed assets and working capital. Some of the studies are discussed below.
From a study carried out in India Banerjee and Duflo (2004) studied financial
performance of small and medium sized firms both before and after they accessed
loan. The study concluded that these firms began to expand their sales proportionately
to the additional loan sources which suggest that these firms must have previously
been credit constrained.
Bolnick and Nelson (1990) conducted a study in Indonesia to evaluate the
impact of credit programs on small enterprises. They found that those who
participated in programs their production level increased as well as sales. Copestake
et al. (2001) found that those borrowers who were able to obtain two loans
experienced high growth in profits and household income compared to a control
sample but borrowers who never qualified for the second loan were actually worse
off.
Dunn (2001) conducted a study on the impact of micro credit or micro-
enterprises in Peru. She found that program client enterprises performed better than
non client enterprises in terms of profit, fixed assets and employment. In Bangladesh
Khandker et al. (1998) found that program participation has positive impact on
household income, production and employment particularly in rural non-farm sector
and that the growth in self employment was achieved at the expense of wage
employment which implies an increase in rural wages.
Zeller et al. (2001) presents evidence that credit access has a significant and
strong effect on income generation and food and calorie consumption. In the
Philippines Mahabub and Catila (1997) compared older borrowers of card
microfinance with newer borrowers. They found that productive capital as well as
ability to finance expansion from borrowers own funds increased with the number of
loans taken from CARD microfinance. Income from older borrowers micro
enterprises was 3.5 times higher than for newer borrowers enterprises. Older
borrowers also increased income from other sources.

10
2.7 Conceptual Framework of the Study
This framework represents a model of credit accessibility and performance of
agriculture. The model describes credit accessibility as the independent variable, and
the performance of agriculture as the dependent variable.

Figure 2.1 Conceptual Framework of the Study

Credit Accessibility

• Frequency of Performance of
borrowing Agriculture
• Loan
Coverage% • Farm Income
• Period of • Yield Per
loan received Acre
• Amount of
credit

Source: Own Compilation, 2018

It is posted that influence credit accessibility, and access to credit improves the
performance of agriculture, all other factors remaining constant. Credit accessibility
was measure of the frequency of borrowing, amount of loan coverage percentage,
period of loan received amount of credit. In this framework, performance of
agriculture was measured of profitability and productivity.

11
 CHAPTER III
BACKGROUND STUDY ON AGRICULTURE FINANCE IN
MYANMAR
In this chapter there is overview agriculture sector, financial sector in
Myanmar and background study of Kan Gyi Taung Township and an account of how
the research was conducted. The research method is described, followed by a
description of the research location. The sampling procedure and the choice of
samples are discussed as also are the processes used for data collection and data
analysis is.

3.1 Overview on Agriculture Sector in Myanmar

Agriculture is the dominant sector of Myanmar economy. It employs 65% of
the labor force, accounts for 76% of total commodity production and contributes
about 50% of GDP. In addition, about 40% of exports consist of agricultural goods.
Though fairly richly endowed with agricultural resources, Myanmar economy
exhibited, in the last three decades, only a slow and sluggish performance in its
agricultural sector. Myanmar still possesses unexploited land and water resources and
enjoys favorable climatic conditions for both tropical and subtropical agriculture,
located close to the zones of large potential market. Myanmar agriculture obviously
suffered from the excessive government controls and also from the underdevelopment
of its market system. Its technological basis is weak and almost underdeveloped. It is
felt that developing the agriculture to its fullest potential should be the main task of
Myanmar development at this juncture.
The agricultural sector of Myanmar has lagged behind that most other
countries of the region and has fallen far short of its potential. The most glaring result
of 2 million tons in 1962 to a fraction of that 35,000 tons in 1995. In that same year,

12
Thailand exported 5 million tons of good quality rice. Myanmar’s export of rice has
been relegated to a minor position only 23% of the total agriculture export, replaced
by beans and pulses as the sole major export product, whereas Thailand in 1995 has
diversified well into fruits, feeds, vegetables, sugar, each constituting a major part of
agriculture exports.
The fact that productivity is low in the dominant sector has been a constraint
on the economy as a whole. On the other hand, the low level of the national economy
means that people spend a high proportion of their incomes on food, and hence a high
proportion of the labor force has to work in the agricultural sector. Among other
proximate causes of the shortfall of agricultural development, three factors are
particularly important. The first factor is the pressure of population on the land; and
second the low level of technology and support services; and finally the very
extensive intervention of the market in the whole agriculture sector.
Myanmar’s current agricultural performance offers opportunities for
successful agricultural development. Average yield and labor productivity is still one
of the lowest in Asia but at the same time labor costs are low. Rapid gains can be
made by better inputs, better seeds and improvement of logistical and marketing
arrangements. It is paramount that improvement of agri-finance is urgently needed to
capitalize this emerging demand.

3.2 Financial Instituation in Myanmar

The Myanmar government aims to develop horticulture, among other
agricultural sectors, by improving access to credit. Farmers can access finance from
various finance providers, such as banks, credit associations, private money lenders,
relatives, micro finance institutions (MFI), traders. This section discusses in detail the
requirements to obtain finance, which are set by the different finance provider types in
Myanmar.

3.2.1 Bank of Finance

Farmers can access finance from banks by applying for commercial credit.
The loan duration depends on the policy of the bank, the type of commercial credit
and the amount of credit applied for. For instance, farmers may apply for working
capital credit for a duration of 12 or 36 months, dependent on the amount of credit
needed. A farmer can apply for commercial credit by completing a credit application

13
form and providing supporting documents. The supporting documents are required to
provide identity and provide evidence of collateral. Examples of supporting
documents include such as photocopies of the identity cards of the applicant and
his/her partner in case of marriage and photocopies of land certificates, salary slips,
deposits or a certificate of vehicle ownership. Banks then analyze the credit
application by interviewing the applicant or conducting a farm visit.
Farmers can also apply for a subsided credit programmed, offered by banks
collaborating with the Indonesian Government. An example is the programme of
micro credit loans. Looking forward, Myanmar’s agricultural potential is enormous
given the country’s rich natural resources and favorable geographical location.
Among the government institutions supporting the agriculture sector, the Myanmar
Agriculture Development Bank (MADB) plays an important role. MADB is currently
the largest financial institution serving the rural areas and financing agriculture
activities. At the end of 2012, MADB served 1.87 million customers, mostly farmers
and had a network of 206 branches. Since its creation, MADB has played an
important economic and social role by providing loans to a large segment of low-
income households engaged in agricultural activities. Loans are the main financial
product offered by MADB to its clients. MADB offers two types of loans to its
customers nationwide: the seasonal crop production loan (designed to cover the
working capital needs of smallholder farmers at the beginning of agriculture season)
and the term loan (short term loan, farm machinery loan and special project loan).
Most trade loans are collateralized.

3.2.2 Micro Finance Institutions (MFI)

MFI plays an important role in the provision of credit to farmers in Indonesia.
To obtain credit from MFI, farmers are required to register as a member of the MFI.
Following membership, a farmer is allowed to submit a credit application. The
financing from MFI benefits small farmers who cannot obtain credit from banks.
Microfinance is widely seen as a key development tool to promote financial
inclusion and alleviate poverty in Myanmar. A recent survey of 4000 households
conducted by LIFT found that only 16 percent of households used formal financial
services. According to the survey, the most common sources of loans were family,
friends, and moneylenders. This recent survey supports earlier claims that a large
section of the population relies on informal lenders to meet its cash flow needs. Most

14
notably, while the agricultural sector represents 43 percent of GDP and employs 54
percent of population, only 2.5 percent of all outstanding loans are made to this
sector. Even a small working capital loan of $100 can be enough to launch a small
business in a developing country that could help the benefactor pull themselves and
their family out of poverty. Micro financing can help create new employment
opportunities, which has a beneficial impact on the local economy.

3.2.3 Farmers’ Associations

Farmers’ associations generally exploit many activities, including selling the
products of their members. Farmers’ associations have access to finance, especially
through government programmes. Farmers’ associations channel government aids to
farmers who are members of the farmers’ associations. The government provides the
associations with cash aids, seed and fertilizer aids, farm equipment and subsidies to
purchase seed and fertilizer. Cash aids are provided through the rural agribusiness
development programme. This programme targets farmers’ associations to motivate
farmers to increase productions.
For upgrading the Social Economic life of the farmers, Myanmar Farmers
Association under the direction of Myanmar Rice Federation will deduce the farmers’
unity in supporting and performing the all-round sectors. Myanmar Farmer
Association seriously believe that the farmers are the important primary class people
of the state. As the increase development in Socio Economic Sectors of the farmers
has been found related with the increase production of farm, meat, fish and also
related with independently marketing and gaining appropriate values, the Myanmar
Farmers Association will all round support the increase production of the farmers
agriculture production, independently marketing, servicing the appropriate values and
transforming to the modern agriculture technology sector.

3.2.4 Financial Sector Overview in Myanmar

The financial sector in Myanmar has been growing since the introduction of
financial sector reforms in 2008. Banking assets as a percentage of GDP have
increased from 8% in 2008 to 21% in 2012 and operational costs ratios have
decreased from 52% to 41% over the same time (CBM, 2012). However, the growth

15
has been off a small base and does not yet translate into widely available regulated
financial services. Myanmar still lags behind its Southeast Asia neighbors. The
financial sector landscape includes providers that can be broadly categorized into
regulated and unregulated institutions.
Regulated financial services providers are registered legal entities that are
regulated for the provision of financial services. Regulated financial services
providers include banks, Microfinance Institutions (MFIs), state-regulated pawnshops.
Banks in Myanmar include local and foreign owned private banks, purely state-owned
banks, banks considered as semi-private as they are co-owned by the government and
banks with government representation on their boards. There are four types of MFIs
operating in Myanmar and include International Non-Governmental Organizations
(INGOs) and domestic Non-Governmental Organization (NGOs) that are donor
funded and dictated to by donor interests, local for-profit MFIs, foreign-owned MFIs.
Regulated pawnshops are divided into two categories, Myanmar Small Loans
Enterprise’s network of pawnshops and other pawnshops that are licensed by local
government across Myanmar.
Unregulated financial service providers are not registered with any public
authority and are not subject to any institutional, prudential or market conduct
supervision in their provision of financial services. Even though legislation or
regulation may exist that govern their provision of financial services, unregulated
providers are not registered under such regulation. Unregulated financial service
providers include agricultural input providers, unregulated money-lenders,
community-based assistance groups, and unregulated pawnshops.

3.3 Background Study of Kan Gyi Taung Township

Kan Gyi Taung Township is located in eastern part of Pathein District,
Irrawaddy Division, Myanmar.
Figure 3.1 Map of Kan Gyi Taung Township

16
 Source
The- MIMU 1236v01,
township the MIMU,
is located at©about
Myanmar
27 Information
feet above Management
sea-level.Unit
It 2016
was formally
called as “Kan Gyi” by the water lake located in the area of township. The area of the
township is 19 miles from east to west and 28 miles from south to north. There are
Kyaung Kone Township, Einme Township and Myaung Mya Township at the east
side of Kan Gyi Daunt Township, Nga Pu Taw Towship at the southern part and Thar
Paung Towship at the northern side. The township has a population of 176,114
according the official records of 2017. The majority of the population are Bamar and
Karen ethnicity and the minority are Rakhine ethnicity.

3.4 Economic Background

Kan Gyi Taung has a Tropical Monsoon climate. Highest temperature is 32°C
and the lowest temperature is 13°C. The weather of Kan Gyi Taung Township
experiences a rainy season from June through August and the dry season is from
December through April.
Table 3.1 Climate of Kan Gyi Taung Township
Climate Data for Kan Gyi Taung Township (2011-2017)

No. Year Rainfall Temperature

17
 Total Total Summer
Winter (°C)
raining rainfall (°C)
days (inches) Highest Lowest

1. 2011 126 88 32 13

2. 2012 108 110 32 13

3. 2013 124 86 32 13

4. 2014 115 99 32 13

5. 2015 116 92 34 13

6. 2016 123 110 39 15

7. 2017 98 70 39 15
Source: Administrative Division, Kan Gyi Taung Township, Pathein District, Ayyewarwaddy

3.5 Economy in Kan Gyi Taung Township

Kan Gyi Taung Township is one of the economic developing regions in
Ayeyarwaddy Division.
Table 3.2 Usage of Agricultural Land in Kan Gyi Taung Township

No. Type of Land Area (Acre)

1. Total Agricultural Land 156,071

- Paddy Fields 141,560

-Garden 13,059

-Rain forest 1,435

2. Feedlots 19,571

3. Industrial 259

4. Urban Development 942

5. Villages 2,575

6. Others 15,728

7. Wasted Land 39,075

18
 Total 195,147
Source: 2018 Year Report of the Pathein District, Ayyewarwaddy
The main business of local people is agriculture, mainly rice production. As
Kan Gyi Taung is located in central place for transportation paths, local people also
do business concerning transportation services.
Since Agricultural is the main business for people in Kan Gyi Taung
Township, locals grow rice and export to other states and divisions in Myanmar.
Local people also grow other agriculture plants such as Peanut, Sesame, Sunflower,
Peas, Beans, and Green Peas. The following tables include the data of agricultural
plantation in Kan Gyi Taung Township. There are also some long-planning
agriculture plants like rubber, pepper, palm, coconut, banana, mango, lime, pineapple
and betel.

3.6 Sample Size and Sampling Technique

Due to sparsely distributed population, time constraint and resource
constraints, a combination of convenient and judgmental sampling procedure has been
used to select 120 farmers out of all the farmers who used the credit facility for
agricultural production and 30 farmers out of the farmers who did not use credit
facility. The farmers who did not use credit facility were selected from the vicinity of
the farmers using agricultural credit facility and having similar socioeconomics
characteristics (income level, amount of wealth, access to education and health
facilities, farming practices) as the credit users.

3.6.1 Data Collection Instruments

A structured questionnaire was used as the major instrument for data
collection. The questionnaires were filled up by the researcher for recording the
responses of the farmers. Besides this, interview technique was also used to extract
detailed information wherever needed for open end questions. The purpose is to
ensure the data are in the standard of quality. Ayeyarwady Region is a region of
Myanmar, occupying the delta region of the Ayeyarwady River. The Ayeyarwady
division is Pathein. Pathein district is a district of Ayeyarwady Division, Myanmar.
Pathein District contains nine cities such as Pathein, Kan Gyi Taung Township,
Thabaung, Yekyi, Ngathain Chaung and Kyaungoon. In Kan Gyi Taung (13), Shan
Village (10), Kyo Kalet Sakhan Chote (10), Kan Village (6),Ta Kone Gyi (6), Myin

19
Ka Seik (6), and Khaunt Island (8). Among them, the survey are collected only five
villages such as Bel Gayet, Shan Village, Kyo Kalet, Ta Kone Gyi and Myin Ka Seik.
The key informants’ interviews were conducted to obtain the necessary
data on the availability of credit services in the research area and the processes
involved in obtaining credit. The key informant interviews were used to validate the
results obtained from the farmers’ interviews. To address the objectives of the key
informant interviews, a guideline was prepared prior to the interviews. The interviews
were conducted in the local dialect.

3.6.2 Data Analysis

150 sets of questionnaire distributed are returned from the farmers and the data
is processed via SPSS. The processes include checking, editing, coding and
transcribing. Initially, the researchers check and review each questionnaire to verify
its completeness and incomplete questionnaire will be discarded. After receiving the
raw data, the next step step was to input the data in software to get the frequencies,
the software used for input the data is SPSS. Frequencies and percentages are used to
analyze the socioeconomics and demographic characteristics of the sample farmers.
The quantitative research method especially frequency distribution, percentage
distribution, measure of central tendency, measure of variability and regression
analysis are used in this study.
The socio-economics data from the questionnaires were tabulated and
categorized. Responses to the questions on the socio-economic characteristics of
farmers were first categorized. The following variables such as gender, age, education
level, household size, number of farmers, duration of farming, annual household
income, main source of earning were tabulated. The frequencies and corresponding
percentages for the different socio-economic characteristics were described and
compared.
The responses to the questions regarding access to credit were categorized.
Similar responses were classified, grouped and connected to other responses.
Responses from the key informant interviews were described and connected to the
responses of the farmer respondents in the analysis. The secondary data cover the
profile of the study area such as the geographical characteristics, availability of rural
financial institutions and rural credit programmes and the credit status of the small
farmers in the research area.

20
 CHAPTER IV
ANALYSIS OF AGRICULTURAL EFFECT OF CRDIT
ACCESSIBILTY ON FARM PERFORMANCE

This chapter presents agricultural credit accessibility of farmer and the effect
on farm performance in Kan Gyi Taung Township, Ayeyarwady Divistion. This
analysis is based on empirical data collected from Kan Gyi Taung Township,
Ayeyarwady Division. There are four main parts in this chapter. They are resarch
design, background characteristics of respondents, credit accessibility of farmers and
farm performance.

4.1 Research Design

This study is conducted with the objective of examining and analyzing the
determinants of performance of agricultural loan in Kan Gyi Taung Township and
making critical assessment of the relative importance of the factors in determining

21
performance of agricultural loan. Although there are 26 township of Ayeyarwady
Division in different parts of Myanmar, Kan Gyi Taung Townhsip are studies. 120
farmer who are getting agricultural loan (borrower) and 30 farmers who are not
getting agriculture loan (non-borrower) are collected as size of sample for this study.
After the identifying the required sample size, two methods of data collection are in
general used to collect data, primary and secondary method. In this section, the
primary data are collected by interview, questionnaire method. 150 sets of
questionnaire distributed are returned from the sampled farmer and the data is
processed via SPSS version.
The purpose is to ensure the data are in the standard of quality. The process
includes checking, editing, coding and transcribing. Initially, the researchers check
and review each questionnaire to verify its completeness and incomplete
questionnaire will be discarded. The total of the response rate was 100 percent. After
receiving the raw data the next step was to input the data in software to get the
frequencies, the software used for input the data is SPSS version 22. It took 12 hours
to input the data. The quantitative research method especially frequency distribution,
percentage distribution, measure of central tendency, measure of variability and
regression analysis are used in this study.

4.2 Background Characteristics of Respondents

The first section in this study analyses the background characteristics of two
types of the respondents which are borrowing farmers and non-borrowing farmers.
The characteristics of respondents are divided into two: demographic characteristics
and economic characteristics.

4.2.1 Demographic Characteristics of Respondents

Demographic characteristics of respondents are firstly analyzed. They are
gender, age, education level, and household size, number of farmers and year of
farming. The following shows in Table (4.2).
Table (4.2) Demographic Characteristics of Respondents
Borrowers Non-borrowers
Characteristics Number Percent Number Percent

22
 Gender
Male 85 71 21 70
Female 35 29 9 30
Age (Year)
35-44 32 27 10 34
45-54 58 48 16 53
55-64 30 25 4 13
Education Level
Primary 40 33 6 20
Middle 66 55 21 70
High 14 12 3 10
Household Size
2-4 64 53 28 93
5-7 56 47 2 7
Number of Farmer
1 30 25 20 67
2 55 46 10 33
3 16 13 - -
4 19 16 - -
Duration of Farming (Year)
<10 9 8 12 40
11-20 52 43 11 37
21-30 35 29 7 23
31-40 24 20 - -
Source: Survey Data (2018)
According to Table (4.2), gender ratio of loan borrowers is 71:29- and non-
borrowers are 70:30. The age distribution of most borrowing farmers is from 45 to54
years as nearly 48% of total respondents and over 30% are the age level of 35 to 44
years and 55-64 years. For non-borrowing farmers, within the age level of 45 to 54
years are more than half of total respondents. The age distribution of second highest
non-borrowing farmers is from 35 to 44 years as 33 percent of total respondents.
Regarding the education, all the respondents are literate, of which most of the
farmers (55%) are with middle education level and for non-borrowers group, 70% are
with middle education level.
For household size, 53.3 percent of the household size of the loan borrowing
farmers is 2 to 4 family members and one-third of the borrowing farmers have 5 to 7
family members. For non-borrowing farmers, over 90 percent of households have the

23
most within the 2 to 4 family members. Only nearly 7 percent of the farmers have 5 to
7 family members.
Half of borrower’s farming year is within the year of 11 to 20. Moreover, one-
third of borrowing farmers are within the farming year of 21 to 30. From less than 10
and 31 to 40 years of farming is the small percent of respondents. For non-borrowing
farmers, less than 10 years of farming is the most percent as 40 percent of farmer.
One-third of respondent are the second highest farming year of 11 to 20.

4.2.2 Economic Profile of Respondents

Regarding the economic condition, two type of respondent are involved. These
characteristics are their source of earning, annual household income and type of
properties (such as living ownership and business ownership), cultivated acre and
yield per acre.
Annual Household Income
Farmer’s annual household income is between from 1500,000 to 6400,000
Kyat. The Table (4.3) shows the annual household income of the respondents.
According to Table (4.3) annual household income of most borrowing farmers
is from 2500,000 to 3400,000 kyats as over 40 percent of total respondents. Annual
household income of borrowing farmers from 5500,000 and 6400,000 are the smallest
percent. For the non- borrowing farmers, two-third of annual household income is
within the amount of 1500,000 to 2400,000 kyats. The smaller annual household
income percent is nearly 27% of non-borrowing farmers.
Table (4.3) Annual Household Income
Annual Household Income Borrowers Non-borrowers
(Kyat Lakh) Number Percent Number Percent
15-24 33 27 22 73
25-34 42 35 8 27
35-44 20 17 - -
45-54 23 19 - -
55-64 2 2 - -
Total 120 100 30 100
Source: Survey data (2018)
Annual household income of most borrowing farmers is from 2500,000 to
3400,000 kyats as over 42 percent of total respondents. Annual household income of

24
borrowing farmers from 5500,000 and 6400,000 are the smallest percent. For the non-
borrowing farmers, two-third of annual household income is within the amount of
1500,000 to 2400,000 kyats. The smaller annual household income percent is nearly
27% of non-borrowing farmers.
Main Source of Earning
Main source of earning of respondents are classified as farming, government
employment salary and general workers.
Table (4.4) Main Source of Earning
Borrowers Non-borrowers
Main source of earning Number Percent Number Percent
Farming 111 92 22 74
Government employee 8 7 4 13
General Workers 1 1 4 13
Total 120 100 30 100
Source: Survey data (2018)
Table (4.4) shows that almost all of loan borrower households answered that
farming is their major job. The remaining are government employees and general
workers. For non-borrowing farmers, over 73 percent of respondents are the major
farming. The government employees and general workers have over 13 percent of
respondents.

Types of Properties
Types of properties are classified living ownership and business ownership.
Living ownership include home, cycle, bicycle, water-pump and TV. Business
ownership contains farmland, cows, bullock cart, ploughing machine and water-
pump. These shows in Table (4.5).
Table (4.5) Type of Properties
Borrowers Non-borrowers
Ownership Number Percent Number Percent

25
Living Properties
Home 120 100 30 100
Motorcycles 79 78 18 60
Bicycles 54 53 7 23
Water-Pump 23 23 2 7
TV 78 77 20 67
Farming Properties
Farmland 120 100 30 53
Cows 78 77 11 37
Bullock Cart 71 70 11 37
Ploughing Machine 9 9 - -
Water Pump 24 24 1 3
Business Properties
Shop 11 11 5 17
Source: Survey data (2018)
According to Table (4.5) all farmer respondents have a home. More than two-
third of borrower and nearly two-third of non-borrowing farmers have motorcycles.
Half of loan borrowing farmer have bicycles. Only less than one-third of non-
borrowing farmers have bicycles. Loan borrowing farmers have more water pump
than non-borrowing farmers. Moreover, loan borrowing farmer have more TV than
non-borrowing farmers. All borrowing farmers have their own farmlands. But only
over half of non-borrowing farmers have farmland. Borrowing farmers own cows as
78% of respondents. But one-third of non-borrowing farmers own cows as nearly
37%. Only borrowing famers own ploughing machine. Borrowing farmers have
owned water pump as 24% and non-borrowing farmer slightly have owned water-
pump. Borrowing farmer and non-borrowing have owned shop as 10.8% and 16.7
percent. Non-borrowing farmers are more than borrowing farmers in the percent of
shop ownership.
Cultivated Acres (paddy)
Almost of farmer respondents are small cultivated acres. The smallest
ownership acres of farmers are 1 acre and the largest is 12 acres. They are described
in Table (4.6).
Table (4.6) Cultivated Acres (paddy)

26
 Borrowers Non-borrowers
Paddy Cultivated Acres Number Percent Number Percent
1-3 69 58 21 70
4-6 37 31 8 27
7-9 10 8 1 3
10-12 4 3 - -
Total 120 100 30 100
Source: Survey data (2018)
Table (4.6) shows that half of borrowing farmer’s cultivated 1 to 3 paddy acres
as 57.5% of respondent. In remaining borrowing farmers, 4 farmers of 10 to 12
cultivated acres is the smallest percent as nearly 4% of respondents. For loan non-
borrower farmers, from 1to 3 paddy cultivated acres are the highest respondent. At
least, over 3. % of 30 respondents cultivate from 7 to 9 paddy acres. Therefore,
borrowing farmers is more paddy cultivated acres than non-borrowing farmers.
Paddy Yield per Acre
Paddy yield per acre of respondents are within the range between 40 to 80
bushels. Table shows paddy yield per acre of respondents. It shows that paddy yield
per acre of borrowing farmers produced within the range between 40 to 80 bushels
and non-borrowing farmers produced within the range between 40 to 55 bushels.

Table (4.7) Paddy Yield per Acre of Respondents

Borrowers Non-borrowers
Paddy Yield per Acre Number Percent Number Percent
40 1 1 8 27
45 3 3 8 27
50 28 23 13 43
55 11 9 1 3

27
 60 36 30 - -
65 1 1 - -
70 25 21 - -
80 15 12 - -
Total 120 100 30 100
Source: Survey data (2018)
Majority of borrowing farmers produce 60 bushels per acre and non-
borrowing farmers produce 50 bushels per acre. Therefore, this analysis founded loan
borrowing farmer yield per acre more than non-borrowing farmers.

4.3 Credit Accessibility of Respondents

This section identifies the finding from survey on credit accessibility of
borrowing and non-borrowing farmers.

4.3.1 Credit Accessibility of Loan Borrowing Farmers

This analysis of the credit accessibility for borrowing farmers includes sources
of finance, year of connection with bank, amount of loan borrowed, and period of
loan received from MADB, Loan coverage percent and used of loan, constraints for
procurement of agricultural credit.
Sources of Finance
In the study area, farmers may borrow various finance institutions. These are
MADB, Myanmar Apex bank, Sathapana microfinance limited, and friend and
relatives. The situation is showed in Table (4.8).

Table (4.8) Sources of Finance

Borrower
Source of Finance
Number Percent

28
 MADB 120 100
Apex 10 8.30
Sathapana Limited 5 4.20
Friend and Relative 4 3.90
Source: Survey data (2018)
According to Table (4.8), all borrowers borrowed from MADB. In other
sources of finance, Apex bank are the second sources of finance for farmers.
Moreover, over 8% of respondents borrowed from Apex Bank and only 4.2% of the
respondents are borrowed from Sathapana Limited. At least, farmers borrowed from
Friend and Relatives with 3.9%. Therefore, it can be conclude that almost all of
farmer rely on MADB.
Year of Connection with MADB
Year of connection with MADB include 3 categories. They are 1 to 10, 11 to
20 and 21 to 30 years. Loan borrower farmers need to save at least 10,000 kyats in his
saving account as a member of MADB bank. All non-borrowing farmers have not
saving deposit with MADB. They are described the following table.
Table (4.9) Year of Connection with MADB
Borrower
Year Number Percent
1-10 76 63
11-20 33 28
21-30 11 9
Total 120 100
Source: Survey data (2018)
In Table (4.9), 1 to 10 years is the most connection with MADB as 63.3%.
Moreover, one-third of respondent connected with MADB in 11 to 20 years. The
remaining respondents are 21 to 30 years of connection as nearly 11 percent.
Amount of Loan Borrowed
In Kan Kyi Taung Township, as described in chapter 3, there are four financial
institutions. Mostly farmers borrowed from MADB and in addition some of farmers
also borrowed from loan by other organizations. MADB bank lends the seasonal loan
at the minimum amount is 150,000 and the maximum amount is 1500,000 for ten
acres. The loan amount are divided into four groups. The Loan amount depending on
cultivated acres. Table (4.10) shows amount of loan received from MADB.

29
Table (4.10) Amount of loan received from MADB

Paddy Cultivated Acres Loan Amount(Kyat) Number Percent

1-3 150,000-450,000 69 58
4-6 600,000-900,000 37 31
7-9 1050,000-1350,000 10 8
10-12 1500,000 4 3

Total 120 100

Source: Survey data (2018)
According to the survey data, half of borrowing farmers from 1to3 cultivated
acres borrows 150,000 to 450,000 kyats. One third of farmers from 4 to 6 acres
borrow 600,000 to 900,000 kyats which amount is the second highest percent. At
least, 10 to 12 paddy cultivated acres is nearly 4%. MADB loan interest rate is 8% per
year.
The other organizations include Apex Bank, Sathapana microfinance limited
and friend and relatives. The smallest amount is Kyats 50,000 and the highest amount
is Kyats 500,000. Table (4.10) shows amount of loan received from other
organizations.
Table (4.11) Amount of Loan Received from Other Organization

Amount(Kyat) Number Percent

50,000 2 2
100,000 2 2
120,000 1 1
180,000 20 20
200,000 1 1
240,000 20 20
300,000 5 5
Total 51 100
Sourc
e: Survey Data (2018)
According to survey research, half of farmers did not borrow from other
organizations. Only 50% of respondents borrowed from other organizations. Average
lending amount is 206, 276 kyat of borrowing farmers. Other organizations loan

30
interest rates are 18%, 30%, 48% and 60% respectively. Other organization loan
interest rate is greater than MADB.
Loan Coverage Percent
All farmers answered that MADB loan amount not cover their farming. The
following Table show their loan coverage percent of respondents. Most of farmer is
more used in farming. Therefore, farmer’s farm machinery is weak for farmer.
Table (4.12) Loan Coverage Percent
Borrowers
Loan Coverage Percent
Number Percent
30 3 3
40 4 3
50 48 40
60 25 21
70 40 33

Total 120 100

Source: Survey Data (2018)
Table (4.12) shows that half of respondents answered 50 percent sufficiency.
It is followed by over one-third of respondents covered 70 percent. At least, only 1%
of respondent answered 30 percent. The most sufficient percent is 70%.
Constraints for Procurement of Agricultural Credit
There may have constraints for borrowing the agricultural loan. They are
interest rate, documentation required, waiting time and travel mile distance, etc. In
this survey, accessibility of loan condition of the farmers are identified in terms of
their ease of getting loan, waiting time and travel distance to go the MADB. The
conditions are shown in Table (4.13).
Table (4.13) Constraints for Procurement of Agricultural Credit
Characteristics Number Percent
Difficulty of Credit
Easy 78 77
Difficult 24 23
Waiting Time for Credit
Half of day 59 58
More the half of day 43 42
Source: Survey data (2018)

31
 More than 76 percent of the respondents have experienced as it’s easy to
credit. Only 24% of the respondents who have taken agricultural credit responded that
it is difficult to obtain such credit. As regards the waiting time, nearly 60% of farmer
respondents answered that it takes half of the day whereas 43% respondents more
than half of the day.

4.3.2 Credit Accessibility of Non-borrowing Farmers

Credit accessibility of non-borrowing farmers contains barriers of not getting
loan for non-borrowing farmers from formal financial institutions.
Barriers of Not Getting Loan for Non-borrowing Farmers
In this study, non-borrowing farmers analyzed barriers of not getting loan for
non-borrowing farmers from formal financial institutions. These barriers are
insufficiency document required, passing decline and lack of farmland owned.
Table (4.14) Barriers of Not Getting Loan for Non-borrowing Farmers
Barriers to Credit Accessibility Number Percent
Insufficiency Document Required 20 67
Missing Deadline 7 23
Lack of Farmland Owned 3 10
Total 30 100
Source: Survey data (2018)
In Table (4.14), result of the analysis, it was found 20 respondents with 67%
replied that insufficient document required such as land use right certificate.
Moreover, 7 respondents over 23 percent replied that they did not access to credit
because of passing decline and 3 respondents answered lack of farmland owned.

4.4 Farm Performance of Farmers

Farm performance of farmers contains paddy yield per acre, farming income
and annual household income for borrowing and non-borrowing farmer, background
information of farmers include difference between background information of
borrowing farmers and non-borrowing farmers and relationship between independent
variable and paddy yield per acre and regression analysis on paddy yield per acre.

32
4.4.1 Paddy Yield per Acre and Farmer’s Income
Table (4.15) Paddy Yield per Acre and Farmer’s Income
Variable Borrowers Number Borrowers t-value Sig
Paddy Yield per Acre 72.300 48.140 13.241 .000
(bushels)
Farming Income (Kyat lakh) 32.500 15.200 16.480 .000
Annual Household Income 36.200 16.930 8.257 000
(Kyat lakh)
Source: Survey Data (2018)
This section analyses paddy yield per acre and annual household income of
farmers. It shows in Table (4.15).Table (4.15) examines average paddy yield per acre,
farming income and annual household income for the loan borrowing and non-
borrowing farmers. It can be seen that the variable of average yield per acre, farming
income and annual household income of borrowing farmer are significantly (P<0.01)
higher than non-borrowing farmer. It indicates that borrowing farmer’s average yield
per acre, average farming income and average annual household income are more
than non-borrowing farmers.

4.4.2 Regression Analysis on Paddy Yield per Acre

In this study, regression analysis is applied in order to analyse the effects on
paddy yield per acre. The dependent variables (paddy yield per acre) are explained by
four independent variables (amount of credit, credit percent, period of loan received,
frequency of borrowing).
According to Table (4.16), analysis of variance was used to test the
significance of the regression model as pertains to differences in means of the
dependent and independent variables as shown on Table (4.16) above. The F=59.468
was positive and significant at P=0.000<0.05. Thus, the regression model is
statistically significant with paddy yield per acre.

Model Unstandardized Standardized

33
 Table (4.16) Regression Result for Paddy Yield per Acre

Coefficients Coefficients
B Std. Beta t Sig.
Error
(Constant) 44.450 1.260 35.100 .000
Frequency of borrowing .990 .360 140 2.490 .020
Loan Coverage Percent 4.920 1.630 .200 3.010 .000
Period of Loan Received 9.610 1.840 .360 5.230 .000
Amount of credit 11.980 1.700 .400 7.020 .000
n=120, R2=.657, Adjusted R2=.646, F= 59.468 (p value = 0.000)
Source: Survey Results
Table (4.16) describes regression results among dependent variable (paddy
yield per acre and independent variables (amount of credit, credit percent, period of
loan received, frequency of borrowing). These results show that the coefficients for
frequency of borrowing at 5% level, loan coverage percent, and amount of credit and
period of loan received is significant at 1% level.
In Table (4.16), the value of adjusted R2 is .646 that revels 64.6% of total
variation in paddy yield per acre are explained by four factors, amount of credit, credit
percent, period of loan received, frequency of borrowing. These results suggest that
the four variables have significantly explained 64.6% of the variance in paddy yield
per acre. The regression coefficient of frequency of borrowing is .990 at 5%
significance level. The regression coefficient of loan coverage percent is 4.921 at 1%
significance level. The regression coefficient of period of loan receive is 9.618 at 1%
significance level. The regression coefficient of amount of credit is 11.983 at 1%
significance level. These variables are positively correlated with paddy yield per acre.
Furthermore, the value of standardized coefficients for amount of credit (.40)
is highest among variables. It can be said that the effect of amount of credits is
greatest among variable on paddy yield per acre.

4.4.3 Regression Analysis on Farm Income

In this study, regression analysis is applied in order to analyse the effects on
paddy yield per acre. The dependent variables (paddy yield per acre) are explained by
four independent
Table variables (amount
(4.17) Regression Result of
forcredit,
Farmcredit percent, period of loan received,
Income
frequency of borrowing).

34
 Unstandardized Standardized
Model Coefficients Coefficients
B Std. Error Beta t Sig.
(Constant) 5.450 0.260 20.440 .000
Frequency of borrowing .540 .040 .320 12.970 .000
Loan Coverage Percent .420 .080 .280 5.130 .040
Period of Loan Received 3.210 .240 .620 13.410 .000
Amount of credit (Kyats) 10.490 1.700 .850 6.170 .000
n=120, R2=.751, Adjusted R2=.692, F= 85.680 (p value = 0.000)
Source: Survey Results
According to Table (4.16), analysis of variance was used to test the
significance of the regression model as pertains to differences in means of the
dependent and independent variables as shown on Table (4.16) above. The F=59.468
was positive and significant at P=0.000<0.05. Thus, the regression model is
statistically significant with paddy yield per acre.
Table (4.17) describes regression results among dependent variable (farm
income) and independent variables (amount of credit, credit percent, period of loan
received, frequency of borrowing). These results show that the coefficients for loan
coverage percent at 5% level, frequency of borrowing and amount of credit and period
of loan received is significant at 1% level.
In Table (4.17), the value of adjusted R2 is .692 that revels 69.2% of total
variation in farm income are explained by four factors, amount of credit, credit
percent, period of loan received, frequency of borrowing. These results suggest that
the four variables have significantly explained 69.2% of the variance in paddy yield
per acre. The regression coefficient of frequency of borrowing is .54 at 1%
significance level. The regression coefficient of loan coverage percent is .42 at 5%
significance level. The regression coefficient of period of loan receive is 3.21 at 1%
significance level. The regression coefficient of amount of credit is 10.49 at 1%
significance level. These variables are positively correlated with farm income of
farmer.
Furthermore, the value of standardized coefficients for amount of credit (.85)
is highest among variables. It can be said that the effect of amount of credits is
greatest among variable on farm income of farmer.

35
CHAPTER V
CONCLUSION

36
 In this chapter, there has the combination of theory with empirical study to
analyze and discuss the results of most significant factors affecting credit accessibility
and the effectiveness of loan on farm’s performance in Kan Gyi Taung Township.
This study only focus on farmers in Kan Gyi Taung Township and credit accessibility
of loan borrowing farmers and non-borrowing farmers and the effectiveness of farm’s
performance. To explore these credit access and the farm performance practices,
primary data was collected by conduction personal interview with sample farmers by
using structural questionnaire. Secondary data was obtained from conversation with
people in the township and annual report from Ayeyarwady Division.

5.1 Findings and Discussions

Based on the data analysis, we have two main parts for credit accessibility:
loan borrowing farmers and non borrowing farmers. For loan borrowing farmers, the
main sources of finance are Myanmar Agriculture and Development Bank (MADB),
Myanmar Apex Bank, Sathapana Microfinance and friends and relatives. Base on the
results, almost all of farmers heavily rely on MADB Bank. In years of connection
with bank, most of the farmers have connection in one to ten years with MADB. It is
the most connection with MADB. For the amount of loan borrowed, mostly farmers
borrowed from MADB and some of farmers borrowed from loan by other
organizations. From the survey data, half of borrowing farmers from one to three
cultivated acres borrow loan and MADB loan interest rate is eight percent per year.
From other organizations, only half of respondents borrow from them because their
loan interest rate is greater than MADB. For loan coverage percent, most of the
farmers are more used their loan in farming and small number of respondents used for
machinery. But there have constraints for borrowing agriculture loan such as
documentation required, waiting time. The results found that most of the farmers said
that it is easy to obtain credit and for the waiting time more farmers answered that it
only takes half of the day to get loan. For non borrowing farmers, they have some
barriers for not getting loan. Because of insufficiency document required, most of the
farmers did not get loan.
For the farm performance of farmers, borrowing farmers’ average yield per
acre, average farming income and average annual household income are more than

37
non borrowing farmers. There are four variables to indicate paddy yield per acre.
They are frequency of borrowing, loan coverage percent, period of loan received and
amount of credit. For the analysis of paddy yield per acre based on these four
variables, all of the factors are positively correlated with yield per acre. But the effect
of amount of credit is greatest among those variables. For the farm’s income, it also
has four variables to indicate it. These four variables and farm’s income of farmers
are positively correlated. The effect of amount of credits is also greatest for farm
income of farmers.

5.2 Suggestions and Recommendations

Since Myanmar is an agricultural country, and agriculture sector is the
backbone of its economy. Investment in agricultural research has a very high rate of
return and has a key role in improving productivity and competitiveness. Despite the
country’s richness in resources and having a strategic location, agriculture has
underperformed in Myanmar especially in terms of productivity, equity and stability.
Myanmar’s agriculture is characterized by low productivity, extreme inequality and
high volatility. Government should see agricultural growth as critical for inclusive
development so it aims to ensure that food security is achieved throughout the
country, and develop strategies that improve the welfare and income of farmers, farm
labors and their dependent families.
Weak rural financial systems, high levels of indebtedness and heavy
dependence on informal financing at high interest rate are a constraint to agricultural
production and marketing. Most of the farmers did not get their loans because of
insufficiency document required. So the transaction should provide faster to get loan
for their farm production. Many famers borrowed their loans only from MADB
because its interest rate is lower than other banks, microfinance. So, it is suggested
that other banks and microfinance should provide vehicles for savings and
opportunities for rural households to manage debt by refinancing consumer loans at
more manageable rates of interest.
Given the limited government credit programmes in the area, accessibility to
credit by small farmers could be improved by providing innovative credit schemes
that address problems of small farmers who lack collateral, and by minimizing long
processing times and other requirements. Also, farmer access to credit could be
improved by eliminating the specific commodity requirements for credit. The

38
government may need to consider conducting an informative drive aimed at
promoting credit awareness and the establishment of strong and viable farmer
organizations. So, savings mobilization programmes should be developed and
promoted in the area, which will encourage participation and provide incentives for
farmers to save and recycle their funds. Activities of credit organizations rooted in the
autonomy of the farmers can be a powerful tool in the improvement of their credit
accessibility.

5.3 Needs for Further Research

This study is made only upon in Kan Gyi Taung Township, Ayeyarwady
Division. There are many other areas that can do agriculture. There are many ways of
studying about agriculture but this study only focus with finance and overall
agriculture sector. So, the research can be made detail in about how to improve in
rice, peanut, corns, bean etc. it can also be studied how to sustain the agriculture with
analysis, policy and planning.
The research was limited by time and resource constraints and the researcher
would like to suggest that a further detailed study on the exploration of small farmers’
credit perceptions at the regional or possibly national level be undertaken. This
research covered only on one municipality which may differ from other municipalities
in the country. The available of credit terms, credit accessibility and the performance
of agriculture may also differ from other municipalities.

39
 REFERENCES

Academic Journals and Research Papers

1. Adams, Dale W, Douglas H. Graham, and J. D. Von Pischke, eds. (1980).
Undermining Rural Development with Cheap Credit. Boulder, Colorado:
Westview Press.
2. Adera Adebe. (1987). ‘Agricultural Credit and Mobilization of Resources in
Rural Africa.’ Savings and Development, 1, 29-73.
3. Akram, W., Z. Hussain, N. Ahmad and I. Hussain (2013). “Does Agriculture
Credit Affect Production Efficiency?: Frontier Production Function
Approach” Pakistan Economic and Social Review. 51-2.179-190.
4. Banerjee, A. and Duflo, E. (2004). Do Firms Want to Borrow More? Testing
Credit Constraints Using A Directed Lending Program, Mainline Publishers
5. Binswanger, HP & Khandker S.R (1995). ‘The Impact of Formal Finance on
Rural Economy of India’. Journal of Development Studies. 32/2: 234-262.
6. Bolnick Bruce and Nelson Eric. (1990). Evaluating the Impact of Special
Credit Program in Indonesia. The Journal of Development Studies. 52-4, 144-
50.
7. Bolo Z. (1996). Strategies for improving Financial Management of Africa
Business. Paper presented during at Makerere University: Faculty of
Commerce.
8. Boomgard, J.J. (1989). Taking Stock of A.I.D Micro-Enterprise Portfolios:
Synthesis Report, Washington, D. C: Development Alternatives, Inc. and
Robert R. Nathan Associates, Inc.
9. Copestake James., Sonia Bhalotra, and Susan Johnson (2001). Assessing the
Impact of Microcredit: A Zambian case study, Journal of Development
Studies. African Development Bank.60-7, 55-64.
10. Feder, G. Just, R.E., and Zilberman, D. (1985). Adoption of Agricultural
Innovation in Developing Countries: A Survey World Bank Staff Working
Papers, 542. The World Bank, Washington DC, USA.
11. Gilla, A. S. and T. Lassalle (1994). “Akiba na Mikopo Kwa Vikundi Vya
Wakulima”, Morogoro, Tanzania.
12. Greenwald, A. G., & Albert, R. D. Acceptance and Recall of Improvised

39
 Arguments. Journal of Personality and Social Psychology, (1983), 8, 31-34.
13. Gulli, H. and M. Berger (1999). “Micro-Finance and Poverty Reduction:
Evidence from Latin America:, Small Enterprise Development.
14. Greenwald, A. G., & Banaji, M. R. The Second Generation Effect.
Unpublished Manuscript, Ohio State University, (1983).
15. Kashuliza A. 1993. Loan Repayment and its Determinants in Small holders
agriculture: A case study in the southern highlands of Tanzania, Eastern
African Economic Review Nairobi, 9-1.
16. Ololade R. A & Olagunju F. I (2013), Determinants of Access to Credit
among Rural Farmers in Oyo State, Nigeria, Global Journal of Science
Frontier Research Agriculture and Veterinary Sciences, 13-2, 50-56.
17. Schreiner, M.; and J. Yaron. (2001). Development Finance Institutions:
Measuring Their Subsidy, World Bank. Also in Chinese.
18. Von Pischke, J. D. (1992). Finance at the Frontier: Debt Capacity and the
Role of Credit in Private Economy. Washington DC: World Bank, EDI
Development Studies.

40
 APPENDIX

Questionnaire for Farmers to Agricultural Credit Accessibility and Its Effect on

Farm Performance in Kan Gyi Taung Township

Village Name………………….. CODE No…………….

Part A

1. Interviewer Name ………………..

2. Name of Household Name ……………….. Gender…………..
3. Age

( )<25

( )26-45

( )46-65

( )66 and above

4. Education

( ) Primary

( ) Middle

( )High School

( ) Under Graduate

( ) Graduate

( ) Others

5. Family Number (……………)

( )Farmer

( ) Government Staff

( )Selling

( ) Abroad Worker
 ( ) Dependent

( ) Others

6. Family’s Income (Average income per year) (…………………)

7. Main Source of Income

( ) Agriculture- Paddy

( )Agriculture- Other Fruits

( )Animal Husbandry

( )Merchant

( ) Shop

( ) Industry

( ) Others

8. Doing Agriculture of Length of time …………………

9. Farming Paddy Life Span ………………….

10. Farming Acre

(A) Own……….acre (B) Context …………acre

11. Types of Paddy ………………….

Part B

12. Own Farm

No Names Quantity Category Note

1 Tractor

2 Save Harvest
threshers

3 Water Pump
 4 Trolly

5 Truck

6 Cows, Bulls

7 Others

13. Types of Crops had grown in the last year

( ) Grain (Rain)

( ) Grain (Summer)

( ) Beans

( ) Corn

( ) Others

14. Crop Yields

Counting
Crops Outturn per One Selling Note
Unit Unit Acre Price s
(Tinn) (Viss)
Grain (Rain)

Grain
(Summer)
Bean
Corn
Others

15. Types of Harvests that Cultivated …………………….

16. Borrow Loans Yes (………..) No (………..)

17. If Borrowed Loans,

Period Interest Collaterals Loan per acre

Loan Association

MADB
Microfinance
Cooperative
Friends and Relatives
Others

18. Where do you borrow loans past three years?

Amount of Loan (Kyats)
No Loan Association
2016 2017 2018
1 MADB
2 Microfinance
3 Cooperatives

4 Friends and Relatives

5 Others

19. Given Interest in past three years?

Interest
No Loan Association
2016 2017 2018
1 MADB
2 Microfinance
3 Cooperatives

4 Friends and Relatives

5 Others

20. If you borrow loans from associations, do you give collaterals?

A. MADB ( ) Yes ( ) No
B. Microfinance ( ) Yes ( ) No
C. Cooperative ( ) Yes ( ) No
D. Friends and Relatives ( ) Yes ( ) No
 E. Others ( ) Yes ( ) No

21. If you do not borrow loan,

(A) Not Getting Loan ( )
(B) No Submission for Loan Application ( )

22. Reasons for Not Getting Loan

(1) No returning loan ( )
(2) No own land for cultivation ( )
(3) No complete vitae ( )
(4) No guarantor ( )
(5) Cannot submit collaterals ( )
(6) Cannot apply in time ( )
(7) Others ( )

23. Reasons for No Submission for Loan Application

(1) Having Own Capital ( )
(2) High Interest Rate ( )
(3) Not getting loan in time ( )
(4) Intricacy of bank process ( )
(5) Not getting information ( )
(6) Far away from bank, No contact with bank ( )
(7) Others (……………………..)

Part C

24. Utilize the loan Enough Yes or No (……………..)

25. If not, how do you find income?

……………………………………………………………………………………

……………………………………………………………………………………
26. Difficulty of credit when you apply for loan
(1) Submission of Vitae (Needed Vitae / Ownership Identities)
(2) Having Interpreter Yes (……..) No (……..)
(3) Costs (…………………..)
(4) Time to get loan (……………………)
(5) No Collateral (……………………)
(6) Others difficulties (……………………)

27. Methods (or) Places to get Information about Credit

(1) Newspapers (…………)
(2) Leaflets (…………)
(3) Radio (…………)
(4) Friends (…………)
(5) Village Administer (…………)
(6) Farmers (…………)
(7) Inform from Loan association (………….)

28. Which associations’ interest rate is more affordable?

(1) MADB (………….)
(2) Microfinance (………….)
(3) Cooperatives (…………..)
(4) Friends and Relatives (…………..)
(5) Others (………….)
 29. Advantages of Borrowing Loans
Social Impact

Strongly Disagree Neutral Agree Strongly

Disagree Agree

1 2 3 4 5

Reasons 1 2 3 4 5

Education

Health

Home

Other Ownership

Economic Impact

Strongly Disagree Neutral Agree Strongly

Disagree Agree

1 2 3 4 5
2 3 4
Reasons 1 5

Amount of own land

Own Cultivation Accessories

Can Cultivate Extra Crop

Advance Technologyွဳ

Improve other ownerships

 30. Outturn for Crops

Outturn Selling Price

Counting
2017 2016 2015 2017 2016 2015
Crops Notes
Grain (Rain)

Grain (Summer)

Peanut

Sesame

Others

31. Tenure of Loan

(1) MADB ( )
(2) Microfinance ( )
(3) Cooperatives ( )
(4) Friends and Relatives ( )
(5) Others ( )

32. To write your expectations for this region credit plan?

…………………………………………………………………………………….
……………………………………………………………………………………..
……………………………………………………………………………………..
…………………………………………………………………………………….
…………………………………………………………………………………….

33. If there is good suggestion, please express it.

………………………………………………………………………………………
………………………………………………………………………………………
………………………………………………………………………………………
………………………………………………………………………………………
………………………………………………………………………………………