Recent Developments in Agricultural Finance by Regional Banks

Abstract

This paper provides a comprehensive overview of recent trends in agricultural finance among regional banks, using multiple regression analysis with financial indicators and regional statistics. It also examines the perceptions of regional banks toward agricultural finance and the evolution of their initiatives, based on interviews with three institutions. The analysis reveals that external factors such as the prominent role of agriculture in the regional economy, have a greater influence on banks’ willingness to engage in agricultural finance than their internal resources. Qualitative findings on the development process of regional bank’ initiatives highlight three key points: (1) the difficulty of risk assessment in agriculture has been alleviated through accumulated knowledge; (2) information asymmetry has been reduced as a result; and (3) a division of roles still exists between government-led financing programs and regional banks. Within this context, regional banks have begun developing strategies to explore new opportunities in agricultural finance.