Yangon University of Economics Department of Commerce Master of Banking and Finance Programme
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YANGON UNIVERSITY OF ECONOMICS DEPARTMENT OF COMMERCE MASTER OF BANKING AND FINANCE PROGRAMME INFLUENCING FACTORS ON FARM PERFORMANCE (CASE STUDY IN BOGALE TOWNSHIP, AYEYARWADY DIVISION) KHET KHET MYAT NWAY (MBF 4th BATCH – 30) DECEMBER 2018 INFLUENCING FACTORS ON FARM PERFORMANCE CASE STUDY IN BOGALE TOWNSHIP, AYEYARWADY DIVISION A thesis summited as a partial fulfillment towards the requirements for the Degree of Master of Banking and Finance (MBF) Supervised By : Submitted By: Dr. Daw Tin Tin Htwe Ma Khet Khet Myat Nway Professor MBF (4th Batch) - 30 Department of Commerce Master of Banking and Finance Yangon University of Economics Yangon University of Economics ABSTRACT This study aims to identify the influencing factors on farms’ performance in Bogale Township. This research used both primary and secondary data. The primary data were collected by interviewing with farmers from 5 groups of villages. The sample size includes 150 farmers (6% of the total farmers of each village). Survey was conducted by using structured questionnaires. Descriptive analysis and linear regression methods are used. According to the farmer survey, the household size of the respondent is from 2 to 8 members. Average numbers of farmers are 2 farmers. Duration of farming experience is from 11 to 20 years and their main source of earning is farming. Their living standard is above average level possessing own home, motorcycle and almost they owned farmland and cows. The cultivated acre is 30 acres maximum and 1 acre minimum. Average paddy yield per acre is around about 60 bushels per acre for rainy season and 100 bushels per acre for summer season. They borrowed loan from MADB and some also obtain loan from other organizations. However, most of farmers received loan only after farming period. More than half of farmers covered about fifty percent loan sufficient rate. The finding shows that according to linear regression analysis, credit accessibility to farmers indicated that credit is the most influencing factors on farm yield per acre in summer season and farming experience of farmers indicated that farming knowledge is also the most influencing factors on paddy yield per acre in rainy season. Therefore, the farming experience, the new technologies for maintaining farms after environmental effects and financial knowledge should also be supported to farmers to manage agricultural credit as effectively and efficiently. Furthermore agricultural credit should also be provided to farmers sufficiently and timely manner. i ACKNOWLEDGEMENTS Firstly, I would like to convey my gratitude to the Rector, Prof. Dr. U Tin Win, Yangon University of Economics for giving me opportunity to do this thesis as requirement of Master Degree. My sincere appreciation is extended to Prof. Dr. Daw Soe Thu, Head of Department of Commerce and Program Director of Master of Banking & Finance Programme, Yangon University of Economics for her invaluable advices, thoughtful comment and support for my research. I would also like to thank again to my supervisor, Prof. Dr. Daw Tin Tin Htwe for her helpfulness and her useful advices for the early stages of preparing this thesis as well as giving me proper guidance through the whole period of preparing theses. I would also like to thank my all teachers for sharing their knowledge and experience. Moreover, I would like to thank MADB managers and all staffs in Yangon Head Office and Bogale Township and all respondents who participated in collecting data for their kindness to answer the questionnaire. Besides, I also thank all friends and classmates of Master of Banking & Finance for sharing spirit of friendship and passing together along the Master programs. Finally, I would like to thank everybody who was important to the successful realization of thesis, as well as expressing my apology that I could not mention personally one by one. ii TABLE OF CONTENTS Page ABSTRACT i ACKNOWLEDGEMENTS ii TABLE OF CONTENTS iii LIST OF TABLES v LIST OF FIGURES vi LIST OF ABBREVIATIONS vii CHAPTER (1) INTRODUCTION 1.1 Rationale of the Study 2 1.2 Objective 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 Nature and Sources of Agricultural Finance 5 2.2 Credit Accessibility to Farmers 8 2.3 Types of Credit 9 2.4 Credit Utilization of Farmers 10 2.5 Influencing Factors on Farm Performance 11 2.6 Review on Previous Studies 20 2.7 Conceptual Framework of the Study 21 CHAPTER (3) BACKGROUND STUDY OF AGRICULTURE CREDIT IN BOGALE TOWNSHIP 3.1 Overview on Agriculture Sector in Myanmar 23 3.2 Agriculture Finance in Myanmar 25 3.3 Financial Institutions for Agricultural Credit in 27 Myanmar 3.4 Background Description of Bogale Township 31 3.5 Financial Institutions in Bogale Township 33 iii CHAPTER (4) ANALYSIS OF AGRICULTURE CREDIT ACCESSIBILITY AND THE INFLUENCING FACTORS ON FARMS’ PERFORMANCE 4.1 Research Design 37 4.2 Background Characteristics of Respondents 38 4.3 Credit Accessibility of Respondents 42 4.4 Influencing Factors on Farm Performance 45 CHAPTER (5) CONCLUSIONS 5.1 Summary of Findings 49 5.2 Recommendations and Suggestions 50 5.3 Needs for further research 51 REFERENCES APPENDIXES iv LIST OF TABLES Table No. Particulars Page 3.1 Seasonal Loan Program by MADB 28 3.2 Seasonal Loan Condition in Bogale Township 34 4.1 Sample Size of Respondents 37 4.2 Demographic Characteristics of Respondents 38 4.3 Farming Characteristics of Respondents 39 4.4 Annual Household Income of Respondents 40 4.5 Respondents’ Source of Earning 40 4.6 Type of Properties Ownership 41 4.7 Financial Institutions’ Credit Services 44 4.8 Loan Coverage Percent 44 4.9 Paddy Yield Per Acre of Respondents 45 4.10 Correlation between the Influencing Factors and the Farm 46 Yield 4.11 Regression Result of Influencing Factors on Paddy Yield 47 (Rainy) 4.12 Regression Result of Influencing Factors on Paddy Yield 48 (Summer) v LIST OF FIGURES Figure No. Particulars Page 2.1 Conceptual Framework of the Previous Study 20 2.2 Conceptual framework of the Study 21 3.1 Bogale Township Map 32 3.2 Credit Process of MADB 34 3.3 Credit Application Process for Farmers 35 4.1 Sources of Finance 42 4.2 Year of Connection with MADB 43 4.3 Interest Rates of Financial Institutions (Monthly) 43 vi LIST OF ABBREVIATIONS ADB Asia Development Bank CSO Central Statistical Organisation FAO Food and Agriculture Organisation GDP Gross Domestic Product HDI Human Development Initiative JICA Japan International Cooperation Agency LIFT Livelihoods and Food Security Fund MAB Myanmar Apex Bank MADB Myanmar Agricultural Development Bank MAP Making Access Possible MEB Myanma Economic Bank MFI Microfinance Institution MIMU Myanmar Information Management Unit NGOs Non-government Organizations RRBs Regional Rural Banks SHG Self Help Groups UNDP United Nations Development Programme vii CHAPTER 1 INTRODUCTION Agriculture occupies one of the key position in country’s economy growth. Agriculture has a greater role in the development of industries such as textiles, sugar, tea etc. The contribution of the banking and financial sector to the current economic growth of the country’s economy is very significant. Most of the developing countries have been attempting to provide agricultural credit to farmers for increasing productivity of farm’s performance that will be effected to economy growth of the country. Across Southeast Asia, agricultural growth has historically been a major driver of overall economic growth and poverty reduction (Chris-tiaensen, Demery, and Kuhl 2011). India, Bangladesh, Indonesia, Malaysia, Thailand and Vietnam all enjoyed rapid agricultural growth as part of their successful development over the past several decades. Given broad similarities in the economic structures of these countries in the 1970s, 1980s and 1990s in comparison with Myanmar today, the historical evidence suggests that rapid agricultural growth in Myanmar has the potential to be the engine for broad-based economic growth and poverty reduction. Moreover, the current democratic reforms in Myanmar create opportunities for development of agricultural and economic policies for greater food security and poverty reduction. (Than Tun, Adam Kennedy and Ulrike Nischan, Nov 2015) Agriculture is the backbone of the Myanmar economy with a contribution of about 38% to Myanmar’s GDP and 23% in exports, agriculture is the leading employer in the economy (60%). Out of 67.6 million hectares of land in Myanmar, 12.8 million hectares are cultivated land. When measured by value of production, rice is the dominant commodity, accounting for 43% of production value, which is almost five times as high as the second highest value commodity. (CSO 2017). The Government of Myanmar is at this moment facing critical decisions that will determine the future direction of agriculture. Myanmar’s agricultural potential is enormous, given the country’s resource endowments as well as its favorable geographic location in the Greater Mekong Sub region, which places Myanmar advantageously between two huge markets, India and China. Nowadays, two-thirds of the population of Myanmar is primarily engaged in agriculture although about one quarter of the population still falls below the national poverty line. (MIMU 2016). 1 At the same time, the agricultural potential of Myanmar is largely an available opportunity, as agricultural development to date is limited. Land productivity likewise trails most neighbors. Furthermore, most farms with low input, low productivity, low quality output, and low returns are caught in a “low equilibrium trap.” In Myanmar two- thirds of population involved directly or indirectly in agriculture, this “low equilibrium trap” has contributed to high rates of poverty and food insecurity. (ADB Report Dec 2015) As Myanmar is one of the developing countries, whenever rural development is considered, it is needed to think of farm performance. External factors and internal factors are also affected to the performance of farms’.