Barter Credit: Warehouses as a Contracting Technology

A large Brazilian agriculture lender introduced grain storage, resulting in a new loan contract, according to research. This contract lets borrowers repay their debt by bartering grain, boosting debt capacity, and lowering borrowing rates. Areas with more grain price risk, weaker courts, and financially limited borrowers benefit most from this contract. These findings show that barter credit can reduce financial market flaws by addressing borrowers’ output price risk.

Image courtesy of interviewee. January 8, 2024

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