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14
DOI: http://dx.doi.org/10.20534/EJEMS-17-3-76-81
Zahoaliaj Dorjana, PhD Candidate, Agricultural University of Tirana, Albania E-mail: [email protected] Osmani Adela, PhD, Agricultural University of Tirana, Albania E-mail: [email protected] Skunca Dubravka, PhD, Assoc. Prof., "Union-Nikola Tesla" University, Belgrade, Serbia E-mail: [email protected] Kolaj Rezear, PhD, Agricultural University of Tirana, Albania E-mail: [email protected]
FACTORS THAT DETERMINE FINANCING OF ALBANIAN AGRICULTURE - THE CASE OF PRODUCERS IN GREENHOUSES
Abstract: Agriculture in Albania is a problematic sector in the economic and social aspect. An essential problem for its development lies in its financing and structure. Interest rate or external capital price represent an important variable for basic objective that every traditional farmer has, which is profit maximization and this becomes even more complicated especially in conditions of a wide variety of operators in the financial market. The problem of agricultural financing is typically present in the areas of intensive agriculture, such as Lushnja — the main agro-production area in Albania. Agriculture financing and its determining factors have been subj ects of a broad theoretical debate. Authors support the thesis that agricultural production, market access, physical and human capital are influential factors for agricultural financing. The objective of this study was to evaluate the factors affecting the farmers financing opportunities in Albania — and specifically farmers producers in greenhouses in the area of Lushnja. In order to achieve the objective a questionnaire was structured and the sample of220 people was selected by random choice in a defined region. The result of the used model shows that none of the above factors affected the increasing of the potential for farmers financing. Production in greenhouses represents a complicated activity, which on one hand is a part of conventional agriculture, but on the other hand is an economic activity with high added value. These specific characteristics and its high geographic concentration over the last decade require practical attention in the area of policy-making and should be explored theoretically by researchers in the future.
Keywords: Financing agriculture, factors, farmers', producers in greenhouses, Albania. Introduction continues to be an important sector in the economic
Despite the well-known transformation of the and social aspect of the country. An essential prob-Albanian economy over the last decades, agriculture lem for its development constitutes its funding and
the structure. Agricultural production in Albania is characterized by prices seasonality and the specific conditions of small farm are realized by a large number of producers. Agricultural financing and conditions represent an issue of decisive importance for providing inputs and creating the entire value chain in agriculture activities.
For Albanian farmers agricultural financing generally means support from the microcredit structures, second level banks and their branches or using a number of support programs and grants that government has offered over the years. This problem has been acute in the mountainous areas or those areas with insufficient sources, where the lack of conditions facilitating the agricultural financing activities combined with specific external factors has made the development of the Albanian farms slower. On the other hand, even in areas with intensive agricultural activity such as Lushnja, main agricultural production area of the country, it has not been so easy for farmers to build success strategies in their activities, especially in conditions of a wide variety of operators in the financial market. Interest rate or external capital price represent an important variable for basic objective that every traditional farmer has, which is maximizing the profit. In these circumstances, recognition of the problem and the identification of factors that are affecting Albanian agriculture financing represent an opportunity for better understanding and influencing the structure of agricultural financing in Albania, with the aim to improve the conditions in perspective. The problem of agricultural financing in Albania represents a problem discussed by the number of researchers. Our research identifies and measures these factors in one of the main areas of agricultural activity in Albania - the production of greenhouses in Lushnja. In this context, the research problem can be formulated - the increase of Albanian agriculture financing is determined by factors related to the economic and social environment at the individual and group level.
1. Literature review
Agriculture and agricultural financing has been subject of a broad debate. Among the most important factors evidenced in the agricultural production are the farmer access to the market and the risks. Between the main categories of risk for agricultural financing — the risk to agricultural production is the main one, as it relates to changes in crop varieties and livestock production due to weather conditions, diseases and pests [1]. The risk of agricultural production may be particularly evident for farmers seeking to increase their incomes through higher risk farming activities and relying on high-return production strategies [2]. Market risk is usually more pronounced in agriculture than in other sectors of the economy. Instability of input prices and production are the main sources of market risk with the impact on agricultural economic activity [3]. Increased market access for small producers will contribute to increased incomes and more opportunities for rural employment and sustainable agricultural growth [4].
Other influential factors are physical capital and human capital. Over decades, there is a link between increasing physical capital and agricultural development [5]. Sustainable physical capital stock tends to increase, but it is still linked to investment and if the level of investment in agriculture is low, this can destabilize the labor supply [6]. Human capital also has a major role in the development of agriculture, assessing the costs and returns of education and expansion in areas at different levels of modernization [7]. Financing of agriculture and agro-processing industries is essentially linked to human capital and its scale [8].
2. Objectives and hypotheses
The study objective is to evaluate the factors affecting the farmers financing opportunities in the main agricultural production area in Albania and more specifically farmers, who are producers in greenhouses in area of Lushnja.
Study hypothesis:
• HI- with increase of agricultural farm production, the opportunities for financing of farm agricultural activity are increasing;
• H2 - with increase of agricultural farm market access, the opportunities for financing of farm agricultural activity are increasing;
• H3 - with increase of farm physical capital, the opportunities for financing of farm agricultural activity are increasing;
• H4 - with increasing of human capital stock, the opportunities for financing of farm agricultural activity are increasing.
Table 1. - Data averaging (average).
X2 X3 X4 X5 X6 D1 X7 X20 Y4 X8 X9 Y2
4.94 4.93 4.94 3.54 1.44 1.02 2.88 2.56 2.15 2.81 1.53 4.94
X10 X11 X12 Y1 X13 X14 X15 X16 X17 X19 Y5 X1
4.97 4.95 4.96 3.55 1.44 1.02 2.89 2.56 2.14 2.81 1.52 4.94
Source: Data processing by authors
Following, it became a graphical representation, according to the average values (Figure 1.).
4.94 4,93 4.94 4.97 4.95 4g6
----------4 4 94 t h l \ \ \ \ * i i i i i i i « 1 H 1 H \ \ 1 . 4.9 i
« t 3.54 I 1 I t « % \ 3.55 t 1 1 \ \
' /..2.88 -, \ / X2-56 / \ \ \ 1 1/215 » \ rkS9 A "i / N-56 / \ \ / \ ; i ' \ ' \ 1 « 2.14 \ ;
\ 1 \ 1 » * \ 1 1 1 \ 1 II \i W V -, * 1.44 ' ; > \ ; 53 V 1.44 / '' 152 \ 1 v. *
X2 X3 X4 X5 Xb X7 X20 Y4 X8 X9 Y2 X10 Xll X12 Y1 X13 X14 X15 X16 X17 X19 Y5 XI
Figure 1. Graphical representation of data by average value Source: Data processing by authors
3. Measurement procedure
The study objective is achieved through the quantitative observation method. The questionnaire was initially tested in a focus group and after that the measurement procedure was developed. The sample of220 people was selected by random choice and interviewed. The method is based on econometric model which was used after collecting data from questionnaires in the defined section. Firstly there was an averaging of data (Table 1.).
Further, data were grouped according to the similarity of the average value (Table 2).
Table 2. Grouping data by similarity of the average value.
X2 X3 X4 Y2 X10 X11 X12 X1
X7 X8 X15 X19
X6 X9 X13 X14
Y4 X17
Source: Data processing by authors
The variables were tested by least squares method (Table 3).
Table 3. Testing of variables.
Dependent Variable: Y6
Method: Least Squares
Date: 05/23/17 Time: 08:15
Sample: 1 220
Included observations: 218
Excluded observations: 2
Variable Coefficient Std. Error t-Statistic Prob.
C 1.416011 0.736339 1.923042 0.0558
Y5 - 0.028306 0.029943 - 0.945331 0.3456
Y1 0.006701 0.033472 0.200183 0.8415
X8 - 0.131062 0.179341 - 0.730797 0.4657
X10 - 0.015380 0.060455 - 0.254409 0.7994
R-squared 0.036173 Mean dependent var 1.527523
Adjusted R-squared - 0.000720 S. D. dependent var 0.500391
S. E. of regression 0.500571 Akaike info criterion 1.494273
Sum squared resid 52.36941 Schwarz criterion 1.634000
Log likelihood - 153.8758 F-statistic 0.980486
Durbin-Watson stat 2.157418 Prob (F-statistic) 0.452243
Source: Data processing by authors.
Conclusions
Agricultural production (measured agri-prod - Y5) does not affect potential for agricultural financing in case of farmers, who are greenhouse-producers, in Lushnja region. In fact, agricultural production in greenhouses does not tend to be unpredictable (excluding specific cases), if we compare it to the other conventional agricultural activities. Greenhouses production represents an economic activity that intensely embodies factors of work and knowledge. Due to the high concentration, the practice of agricultural production is typically well-known by farmers and they are familiar with the work operations.
Moreover, this activity is not conditioned by workers as the basic unit is the family farm. In this context, the success rates in agricultural production in greenhouses are slightly different and the differences between producers are generally also low.
Market access (measured mark-access - Y1), otherwise from what it is hypothesized does not affect the increase of farmers' financing opportunities. Greenhouse production in contrast to other forms of agricultural production does not compete in markets because it comes out on the market over a time interval when the offer of this product is low and this is also supported by literature. Tomato production in green-
houses offers an opportunity to interested growers to produce a commercial product at a time when offerings are low [9]. Farm access to high-value-added crops has a greater impact on the concentration of many farmers' production towards a maj or crop [10]. In this context, given that (similar) farmers compete slightly with each other within the same production region due to the frequent demand for their products, access to the market is almost a constant among them.
Physical capital (measured phys-cap - X8) does not impact on the funding opportunities of farmers producers in greenhouses. We already emphasized that greenhouses production represents an economic activity, offering products on the markets at intervals when their offer is at low quotas, providing on average more favorable prices. As a result, the financial resources used by farmers to purchase inputs in the periodic production cycle are provided from the income generated by this activity. In such activities that are characterized by high added value, it is understandable that physical capital may not be viewed as an influential factor by farmers for agricultural financing, since such a need does not exist. Moreover, the data provided during farmers' interview illustrate that farmers, newly involved (1-2 years) in this activity, even at the initial stage (start-up), mainly are using financial resources provided through remittances rather than lending from credit institutions.
Human capital (measured hum-cap - X10), does not affect farmers funding opportunities. In fact, it is well-known that mobility of human capital and qualified work force in urban areas or emigration in other countries exist. This finding is also the result of contemporary trends all over the world. People who possess a university degree (especially young people), consider it as an exit option, aiming to build their future beyond rural areas and in any case beyond agriculture. Such result is confirmed also by other similar estimates focusing on agriculture development generally. Consequently, it is explained why human capital indicators do not affect the increasing financing opportunities in case of producers in greenhouses in Albania.
Summarizing, we can conclude that agricultural production in greenhouses represents a complicated activity, which on the one hand is part of conventional agriculture as any other activity, but on the other hand is an economic activity with high added value. These specific characteristics and its high geographic concentration over the last decade, requires practical attention in the area ofpolicy-making from relevant institutions for selection of appropriate instruments and should be explored theoretically by researchers in the future.
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