A thesis submitted in partial fulfillment of the requirements for the degree of Master of Science

Thesis (M.Sc.) - Asian Institute of Technology, 1985

This study establishes that there are connections between formal a nd informal credit markets in both irrigated and rainfed areas. however, there is more empirica1 evidence in Pleon Long, the irrigated vi1lage than in dong Smong, the rained one. The objectives for obtaining loans in the irrigated village are investment in agricultural machines and covering expenses tor arranging jobs in the Middle East. The objectives for obtaining loans in the rainfed area are to cover household consumption and emergencies such as expenses tor ill-health. It has been found that the distribution of loans from both forma1 and informal lenders is a very strongly correlated with household wealth, especially loans from formal lenders such as commercial banks. This happens because the villagers in the rich or miad1e income group can supply collateral for the guarantee, both with formal and informal lenders. The villages in the poor group have no assets or collateral to guarantee repayment. Even though, there are governmental credit projects f or small farmers such as the Bank tor Agriculture and Agricultural Cooperatives (BAAC) and the Government Credit Cooperatives, the small farmers still face problems of social constraints. Only few of them can be embers of these credit groups through enlisting the support from the rich and for al leaders in their community.