Estimation of Transaction Costs of Obtaining Formal Credits by Farmers (Case study: Golestan Province)

The main reason why farmers lack access to formal financial are concerned to limitations of high transaction costs in the system of credits. The objective of this study is to estimate transaction costs of obtaining credits in formal financial institutions provide facilities by farmers in Golestan Province. Data were gathered from farmers selected through simple random sampling in Golestan province in 2011. Our findings suggest that payments to the guarantor, direct and opportunity cost of obtaining facilities are the largest costs that farmers have to pay for obtaining facilities of financial resources. To reduce transaction costs, increasing banking productivity, flexibility on credit payments, facilitation of the lending process especially in obtaining securities, and mechanization of operations are recommended.