The Credit Market

15. Traditional regulations governing the credit market help to produce the effects described above. Small farmers find it very difficult to gain access to the credit needed to improve production techniques, to expand their holdings and cope with adversities, because of the role given to land as a guarantee, as well as the higher costs that small loans entail for credit institutions.(¹¹)

In rural areas, there is often no legal credit market, so that small farmers have to turn to money-lenders if they need loans, thus exposing themselves to risks that can lead to the partial or even total loss of their land — for property speculation is usually the real focus of such moneylenders' operations. This results in a raking in of smaller properties, swelling both the ranks of the landless and the size of the holdings of large landowners, richer farmers or local traders.

Basically, in poor economies, access to long-term credit tends to be directly proportionate to ownership of production inputs, particularly land, and therefore to be the exclusive prerogative of major landowners.