Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agricultural Development

  • Boucher S
  • Carter M
  • Guirkinger C
  • 1


    Mendeley users who have this article in their library.
  • N/A


    Citations of this article.


We develop a model that shows that asymmetric information can result in two types of credit rationing: conventional quantity rationing, and “risk rationing,” whereby farmers are able to borrow but only under high-collateral contracts that offer them lower expected well-being than a safe, subsistence activity. After exploring its incidence with respect to wealth, we show that risk rationing has important policy implications. Specifically, land titling will be only partially effective because it does not enhance producers' willingness to offer up the collateral needed to secure loans under moral hazard constraints. Efforts to enhance agricultural investment and the working of agricultural credit markets must step beyond land titling and also deal with risk.

Author-supplied keywords

  • asymmetric information
  • credit rationing
  • land titling
  • moral hazard
  • risk rationing

Get free article suggestions today

Mendeley saves you time finding and organizing research

Sign up here
Already have an account ?Sign in

Find this document


  • Stephen Boucher

  • Michael Carter

  • Catherine Guirkinger

Cite this document

Choose a citation style from the tabs below

Save time finding and organizing research with Mendeley

Sign up for free