An Analysis of Transaction Costs of Obtaining Credits in Rural Iran

Household data are used in this study to assess the transaction costs of obtaining credit from formal and semiformal institutions in rural Iran. A survey was employed to gather the data needed to determine the transaction costs that must be borne by the borrower in each step of the credit procurement process. Data were collected from a random sample of ۴۵۹ households, including ۲۷۲ borrower households. OLS regression and F-test (in view of the authors, OLS is not regression but a method of estimating a regression. F-test is not an econometric method but perhaps a statistical one and still it is a key statistics toll of either ANOVA or a regression. So these cannot be employed to investigate something. On the other hand, regressions have been estimated below, and surely one should be able to assign names of them) were employed to analyse the transaction cost factors affecting the procurement of credit facilities. Similar to many financial institutions operating in other developing countries, access to a loan in Iran imposes high transaction costs upon mostly poor rural households. The results reveal that the transaction costs of receiving a loan are on the average equivalent to nine percent of the total loan size. Formal and semiformal institutions impose significantly different costs upon the rural loan applicants. Results reveal that contractual form, loan size, how far the borrower being away from the financial centre along with other borrower peculiarities are important determinants of transactions’ costs.