FACTORS AFFECTING INPUT PROCUREMENT IN DEBT OF RICEFARMERS IN AN GIANG PROVINCE

MASTER PROJECT FACTORS AFFECTING INPUT PROCUREMENT IN DEBT OF RICE FARMERS IN ANGIANG PROVINCE FEBRUARY, 2012 TUTOR : DR NGUYEN MINH HA STUDENT: PHAN BA NGOC PHUONG – MBAVB4 CONTENT PART INTRODUCTION PART LITERATURE REVIEW & PREVIOUS STUDIES PART RESEARCH METHOD PART EMPIRICAL RESUTLS PART RECOMMENDATIONS RATIONALE OF THE STUDY VANTAGE OF CIRCUMSTANCES INTRODUCTION VANTAGE OF LOCATION HUMAN VANTAGE RATIONALE OF THE STUDY 95% of farmers lack of capital for production and they fall in debt chronically INTRODUCTION RATIONALE OF THE STUDY INTRODUCTION RESEARCH OBJECTIVES 600 500 400 300 200 100 1990 1994 2000 2004 2008 2009 Plant Protection import value (Mil USD) INTRODUCTION 2010 RESEARCH OBJECTIVES TO IDENTIFY FACTORS CAUSING PURCHASE OF INPUTS IN DEBT AND DEFAULT OF RICE FARMERS TO MEASURE FACTORS EFFECT RICE FARMERS TO PROCURE INPUTS IN DEBT TO SUGGEST SOME POLICY IMPLICATIONS FOR RICE FARMERS TO AVOID GETTING INDEBTEDNESS AND DEFAULT INTRODUCTION RESEARCH QUESTION WHAT FACTORS INFLUENCE RICE FARMERS TO PROCURE FARM INPUTS IN DEBT? INTRODUCTION THEORIES OF POVERTY Theory #6: Social welfare programs cause poverty Theory #5: Poor people make choices Theory #1: The economy is underdeveloped or inefficient Theory #2: Poor people lack skills and abilities Theories of Poverty Theory #4: Social and political force cause poverty Theory #3: Capitalism causes poverty Source: Blank (2003) INTRODUCTION PREVIOUS STUDIES REVIEWING PREVIOUS STUDIES PUJARI (2011) MAIN CAUSE OF THE INDEBTEDNESS OF THE FARMERS IS THEIR POVERTY JONATHAN (2003) DEBT HOLDINGS BY AGE FOLLOWS THE LIFE CIRCLE PATTERN IN ALL COUNTRIES KE & MALI (2008) CREDIT (IN KIND OR IN CASH) DETERMINED BY HOUSEHOLD HEAD, HOUSEHOLD SIZE, HOUSEHOLD INCOME, INPUT EXPENDITURE, AND FARMER’S EXPERIENCE IN FARMING SHAMIKA (2003) MOST LOANS FOR BUYING INPUTS & MACHINERY RISE WITH FARM SIZE HELENA ET AL., (2003) THE OVERUSE OF INPUTS HAS CAUSED FARMERS TO FALL INTO DEBT INTRODUCTION PREVIOUS STUDIES RESEARCH METHODS RESEARCH METHODOLOGY FINDING KEY FACTORS INFLUENCE THE OBJECTIVE FARMERS’ PURCHASE OF INPUTS IN DEBT _ DIRECT INTERVIEW HOW _ QUESTIONNAIRE _ RICE FARMERS IN COMMUNES IN TINH BIEN DISTRICT, ANGIANG PROVINCE WHO _ SAMPLE SIZE: 250 TWO WEEKS FOR DATA COLLECTION WHEN INTRODUCTION PREVIOUS STUDIES RESEARCH METHOD PART THREE INTRODUCTION PREVIOUS STUDIES RESEARCH METHOD DATA ANALYSIS PROCESS Input data in excel Data test and initial processing Transfer data into S.P.S.S software Data analysis Sampling statistic INTRODUCTION PREVIOUS STUDIES Descriptive statistic (quantitative) RESEARCH METHOD Regression analysis PROPOSED RESEARCH MODEL Rice farmers’ low income and lack of capital for cultivation Householder's characteristics G1 G2 G3 Households' expenditure for living needs G9 G8 Rice farmers purchase inputs indebt or on credit Pestilent insects Consuming very inputs for crops G7 High input cost G4 G6 G5 Farm size and assets INTRODUCTION PREVIOUS STUDIES Bank's complicated procedures RESEARCH METHOD Depending upon input traders DESCRIPTIVE STATISTICS INTRODUCTION PREVIOUS STUDIES RESEARCH METHOD EMPIRICAL RESULTS MULTI CO-LINEARITY TEST REGRESSION MODEL HAS A DETECTION OF MULTI COLINEARITY: _ T-STATISTIC IS LOW _ CORRELATION BWT CSE09 & CSE10 IS 0.97 (HIGH) UW H TIR NIT 0.02 -0.10 -0.01 -0.07 0.05 -0.03 -0.07 1.00 0.12 0.02 0.05 0.12 UWH -0.10 -0.03 TIR -0.01 NOT Correlations (SEE MORE IN APPENDIX 1) INTRODUCTION YLC YPT IUW YLC 1.00 -0.10 -0.27 YPT -0.10 1.00 IUW -0.27 IDE NM P CSE 09 CSE 10 LAT CDT -0.49 0.28 0.12 0.23 0.11 0.09 -0.02 0.13 0.05 -0.06 0.01 -0.07 -0.06 -0.09 0.22 0.30 0.04 0.05 -0.16 0.06 0.05 1.00 0.40 -0.25 -0.11 -0.09 -0.03 0.07 0.15 0.14 -0.09 0.40 1.00 -0.47 -0.14 -0.24 -0.06 0.23 0.11 0.13 -0.02 0.22 -0.25 -0.47 1.00 0.09 0.18 0.14 -0.05 -0.03 -0.05 -0.49 0.13 0.30 -0.11 -0.14 0.09 1.00 -0.24 -0.19 -0.51 -0.08 -0.07 LAT 0.28 0.05 0.04 -0.09 -0.24 0.18 -0.24 1.00 0.12 -0.04 0.11 0.10 CDT 0.12 -0.06 0.05 -0.03 -0.06 0.14 -0.19 0.12 1.00 0.10 0.02 0.02 NMP 0.23 0.01 -0.16 0.07 0.23 -0.05 -0.51 -0.04 0.10 1.00 0.04 0.03 CSE09 0.11 -0.07 0.06 0.15 0.11 -0.03 -0.08 0.11 0.02 0.04 1.00 0.97 CSE10 0.09 -0.06 0.05 0.14 0.13 -0.05 -0.07 0.10 0.02 0.03 0.97 1.00 PREVIOUS STUDIES IDE RESEARCH METHOD EMPIRICAL RESULTS AUTOCORRELATION TEST DURBIN – WATSON IS AT INTERVAL OF TO THERE IS NO EVIDENCE OF AUTOCORRELATION IN THE RESIDUALS (NGUYEN TRI CAO & VU MINH CHAU, 2010; NGUYEN TRONG HOAI ET AL., 2009) Model summary R R square Adjusted R Square Std Error of the Estimate Change Statistics R Square Change F Change Sig F Change DurbinWatson Model 0.739 0.546 0.494 8.245 0.546 10.560 1.435 Model 0.740 0.547 0.495 8.237 0.547 10.595 1.467 THE NULL HYPOTHESIS OF NO AUTOCORRELATION IS ACCEPTED INTRODUCTION PREVIOUS STUDIES RESEARCH METHOD EMPIRICAL RESULTS   Model Variables Model EMPIRICAL RESULTS Unstandardized Coefficients   B (Constant) Standardized Coefficients Std.Error Beta -34.015*** 9.676 HHA 0.057 0.074 HHG 4.147 HHE Unstandardized Coefficients Sig Std.Error Beta -33.335*** 9.655 0.05 0.439 0.051 0.074 0.045 0.49 3.117 0.068 0.185 4.021 3.114 0.066 0.198 -0.007 0.199 -0.002 0.971 -0.02 0.198 -0.006 0.92 HHR -0.141 0.085 -0.117 0.101 -0.153* 0.085 -0.127 0.074 HHD 1.189** 0.525 0.124 0.025 0.943* 0.526 0.098 0.075 RPD 0.368 0.368 0.067 0.318 0.388 0.367 0.07 0.292 RSP -2.764*** 1.027 -0.162 0.008 -2.734*** 1.026 -0.16 0.008 TCT 0.602*** 0.09 0.423 0.593*** 0.09 0.417 RSA -95.601** 48.387 -0.118 0.05 -93.307* 48.33 -0.115 0.055 RGL 1.975** 0.879 0.152 0.026 2.118** 0.882 0.163 0.017 TVA -0.017* 0.01 -0.102 0.095 -0.019* 0.01 -0.11 0.07 YLC -0.06 0.043 -0.091 0.163 -0.05 0.043 -0.075 0.244 YPT -1.701 1.825 -0.049 0.353 -1.719 1.824 -0.049 0.347 IUW 0.741 1.488 0.032 0.619 0.806 1.487 0.034 0.588 IDE 1.329 1.416 0.056 0.349 1.323 1.414 0.056 0.351 UWH 1.263 1.914 0.045 0.51 1.258 1.912 0.045 0.511 TIR 3.626*** 1.051 0.221 0.001 3.611*** 1.05 0.22 0.001 NIT -0.171 0.7 -0.02 0.807 -0.149 0.699 -0.017 0.831 LAT 0.011 0.015 0.046 0.456 0.011 0.015 0.046 0.457 CDT 2.853 1.915 0.083 0.138 3.049 1.913 0.089 0.113 NMP 0.726 1.49 0.03 0.627 0.667 1.489 0.028 0.655 13.661***PREVIOUS 2.156 0.334     CSE09 CSE10 Valid N   STUDIES     RESEARCH METHODS  216 EMPIRICAL 14.031*** RESULTS 2.203   Sig 0.001 INTRODUCTION   B Standardized Coefficients 0.001     0.335 MULTIPLE REGRESSION ANALYSES Total cost of rice production (+TCT) Reddy (2007): high cost, low remuneration, declining growth, and debt impacts diectly and is positively proportional to has the same direction in descriptive statistics & initial expectation Selling price (-RSP) Ke & Mali (2008): higher income, less spending because of a surplus has inversely relation to has not match with research expectation Farm size (+RGL) Shamika (2003): most loans for purchase of inputs rise with farm size is positively propotional relation to has the same research expectation as mentioned in chapter two Experience (-HHR) INTRODUCTION Farmers are prone to apply the sciencetific & technical progress has inversely propotional to PREVIOUS STUDIES RESEARCH METHOD EMPIRICAL RESULTS THE PURCHASE OF INPUTS IN DEBT has the same expectation as aforementioned and previous studies MULTIPLE REGRESSION ANALYSES Cash shortage (+CSE) Andrew (2001): many farmers are in near permanent indebtedness, pay off debts, then fall into new debt to pay for farm inputs is evidenced through 99% level of confidence for regression coefficient the un-standardized coefficient reflected research’s expectation Household size (+HHD) Wan & Cratty (2007): bigger household size leads the poverty worst and lacks of capital for production -> procure inputs in debt has positively propotion relationship to Residential area (-RSA) & asset’pocession (-TVA) Interest of purchase of inputs (+TIR) INTRODUCTION have the same expectation as forecasted in previous part Le (2002): householder pocesses many assets that has a higher repayment capacity and default may be lower are inversely prone to has the contrary to the research expectation Singh & Lakhwinder (2008):the root cause of the indebtedness was informal money lenders with exortbitant rate has positively propensity relation to PREVIOUS STUDIES RESEARCH METHOD EMPIRICAL RESULTS THE PURCHASE OF INPUTS IN DEBT has positively relation to CONCLUSION Rice farmers’ low income and lack of capital for cultivation Cost shortage (+CSE) Selling price (-RSP) Farm size and assets Rice farmers purchase inputs in debt High input cost Householder's (- Cost of rice production (+TCT) Household size (+HHD) Householder’s experience (-HHR) characteristics Interest of purchase of inputs in debt (TIR) Depending upon input traders INTRODUCTION Rice growing area (+RGL) Asset’s pocession TVA) & (-RSA) PREVIOUS STUDIES RESEARCH METHOD EMPIRICAL RESULTS CONCLUSION RECOMMENDATIONS PRODUCTION COSTS (varieties, fertilizers, pesticides, rental land, land preparation, irrigation, after-harvest, etc) play important role in rice cultivation So rice farmers have to use costs by the most effective way: Variety: (1) Good quality for domestic & export market; (2) High-yield breeding; (3) short growing period, pest resistance, and tolerance diificult conditions Fertilizer & Pesticide: complying with dosage or technician’s recommendations as well as avoiding use expensive products which have the same ingredient concentration After-harvest (harvesting, collecting, threshing, drying, storage, transportaion, and milling): the rice farmer should associate together to enhance agricultural mechanization & to build warehouse, drying ground, transportation means INTRODUCTION PREVIOUS STUDIES RESEARCH METHOD EMPIRICAL RESULTS CONCLUSION RECOMMENDATIONS SELLING PRICE & PADDY GROWING EXPERIENCE : Paddy farmers should follow official instructions in synchronization that makes good image, quantity and quality for rice  they will have seasonal and negotiable power to their products GOVERNMENT’S ROLE: They should fix gaps in “rice value chain”: Farm input aspect: Government should put more control over input distribution to ensure kinds of input, input’s origin, quality, and selling price Rice farmer aspect: The government should release “floor selling price” to rice to protect paddy farmers’ income The government should expand lending for rice production investment with preferential treatment by zero or very low interest rate Relevant Parties The government shoul provide or support capital and low interest rate to relevant parties in rice value chain to help them in buiding warehouses, drying grounds, transportation means, teachnologies, export markets, and management skills INTRODUCTION PREVIOUS STUDIES RESEARCH METHOD EMPIRICAL RESULTS CONCLUSION LIMITATION Collaborators Direct interview Convenient way Questionnair Chosen farmers may not represent the majority Remote areas Low living standard Low education COLLECTED INFORMATION MAY NOT REFLECT POPULATION AS A WHOLE INTRODUCTION PREVIOUS STUDIES RESEARCH METHOD EMPIRICAL RESULTS CONCLUSION ! G N I N I JO R O F S K N A TH ... POSITIVELY INFLUENCE ON PURCHASE OF INPUTS IN DEBT H9 BANK’S COMPLICATED PROCEDURES AFFECT POSITIVELY PURCHASE OF INPUTS IN DEBT INTRODUCTION PREVIOUS STUDIES RESEARCH METHODOLOGY FINDING KEY FACTORS INFLUENCE... H6 CONSUMING MUCH FARM INPUTS FOR CROPS AFFECT POSITIVELY PURCHASE OF INPUTS IN DEBT H7 HIGH INPUT COST IMPACTS POSITIVELY RICE FARMERS TO PURCHASE INPUTS IN DEBT H8 DEPENDENCE UPON INPUT TRADERS... OR WORKING CAPITAL IN PRODUCTION NARAYANAMOOR THY (2006) THE PARALLEL INCREASE IN THE COST OF INPUTS UNDER THE LIBERALIZED TRADE REGIME AND INCOME DECLINE, LEADING TO LOSES, DEBTS AND BANKRUPTCIES