Abstract:
The non-government credit, in general and the consumer credit, in
particular, expanded rapidly during the last years, confirming the general
development trend of the economy. Still, the money supply and non
government credit in Romania as percentage of the GDP are lower than in
any other accession country and it is often argued that the supply of bank
loans to SMEs is weaker than the potential demand for such services. In this
study, the emphasis has been given to an assessment of the determinants of
the demand for credit by firms in rural areas, as well as to the factors which
constrain the supply of bank loans to these firms. Several reasons and
conditions concur to give rise to the under-representation of rural credit in
the overall loan portfolio of banks, such as: the banks’ presence in rural
communities is weak for profit considerations; the bankers continue to
believe that rural clients in general, and farmers in particular, have little
financial discipline and normally do not have the capacity to repay their
loans; the limited banking culture in rural communities and the lack of trust
in using bank services; the tough conditions in getting a loan (the high real
interest rates, the short grace period, the collateral requirement). Besides,
the elaboration of a business plan and submitting a loan application file
according to the banks’ demanding requirements are often beyond the
possibilities of common rural entrepreneurs. All these constraints are valid
for all rural businesses, but agriculture, with its assumed high risks, is by far
the most disadvantaged.
