Discouraged borrowers: examining farmers' latent demand for subsidized credit in Algeria

Purpose The objective of this study is to analyze how relationship banking, application costs, and information-acquisition behavior impact borrowing discouragement among farmers seeking subsidized loans offered by the BADR Bank in Algeria. Design/methodology/approach Data were collected from 282 farmers using a structured survey in the Tlemcen region, Algeria. Probit regression and the Karlson–Holm–Breen decomposition method were used to analyze the data. Findings Over half of the surveyed farmers were found to be discouraged from applying for subsidized credit. The results show that discouragement was significantly more likely among farmers living farther from bank branches, those with shorter banking relationships with the BADR, and those who relied on peer farmers rather than official channels for credit-related information. In contrast, consulting the BADR for guidance has the opposite effect. Furthermore, the mediation analysis reveals that the effect of off-farm income is partially mediated by the duration of the bank-farmer relationship. Practical implications The findings of this study are of relevance to policymakers and financial institutions seeking to improve access to agricultural credit. Effective interventions should extend beyond supply-side measures to address information asymmetry and application costs through streamlined application procedures and online platforms to reduce application frictions. Originality/value This research is among the first to explore borrowing discouragement in the agricultural credit market under zero-interest-rate conditions. It contributes to the literature by identifying previously underexplored factors that influence farmers' borrowing behavior in a developing economy.