Original Contribution CREDIT RATIONING IN AGRICULTURAL CREDIT MARKETS IN BULGARIA

Agricultural sector in Bulgaria faces severe credit constrains and limited access to credit market. As a result we observe small amount of overall bank credit advanced to farmers. Bank credit is the main source of external financing for farmers, government also intervenes on financial markets in an attempt to increase financial funds to agriculture and to improve farmers’ access to credit market. Nevertheless, farmers are a subject to high bank requirements in respect to collateral value, financial performance and co-finance of investment projects, which results in smaller loans or rejection for credit at all. High banks’ requirements reflect restrictive credit policy to agriculture and turn into effective mechanisms of credit rationing. Agricultural credit markets are characterized by small size of the loans and low overall credit amount at a price determined by lenders, as the latter use non-price mechanisms to constrain farmers’ access to credit. Commercial banks prefer to allocate funds to more profitable and less risky economic sectors. Various factors could be taken into consideration to explain credit rationing in agricultural credit markets; some of them consider traditional information problems, and others emerge from sector specific characteristics.