The Impact of Agricultural Subsidies on the Credit Demand of Farm Holdings in Bulgaria

This study investigates the role of agricultural subsidies as a determinant of credit demand among Bulgarian farms over the period 2010–2024. Using micro-level panel data from FADN, Ministry of Agriculture subsidy records, and bank lending statistics, the analysis employs logit, panel regression, instrumental variables, and propensity score matching methods to examine the impact of subsidies on borrowing behavior. The results show a dual effect: subsidies increase credit demand for medium- and large-scale crop farms by improving creditworthiness and enabling investment, whereas for small, highly subsidy-dependent farms, subsidies reduce borrowing by providing sufficient liquidity. The effect is heterogeneous across farm sizes and production types. The findings highlight the importance of tailored policy design, suggesting that investment-oriented subsidies can stimulate productive credit use. At the same time, small farms may benefit from complementary financial instruments to support investment. Integrating subsidy and credit policies can enhance financial resilience and promote sustainable growth in Bulgarian agriculture.