Abstract:

Relationship lending mainly based on soft information was used by financial institutions when the borrower lack of hard information such as audited financial statements, credit score, qualified collateral et al. It was crucial to farmer’s credit availability that weather the new rural financial institutions apply relationship lending technology. The aim of this paper was to explore the impact of banking relationship and its length, as proxies of soft information, on farmer borrowing from the farmer’s fund cooperation. The results of ordered logistic regression model and OLS model showed that the farmer with banking relationship was easier to access to credit than ones with no banking relationship, and the longer the banking relationship was the more credit were attained during the 2005—2007. So the business relationship between farmers and cooperative organizations would be beneficial to increase the farmers’ credit availability and ease the difficulty in rural financing.