Microfinance in Rural Argentina

Publication Date: Jun 2001
Published by: Microfinance.com
Document Type: Journal Article

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How well do the lessons of urban microfinance transfer to rural areas?

The recent success of microfinance for the urban self-employed contrasts with decades of failure of development banks for small farmers

In Argentina, microfinance is unlikely to improve access to small loans and small deposits for many of the rural poor; distances are too great, farmers too specialised, and wages too high

Improved access will come not from loans targeted by government decree but from improvements in the institutions that support financial markets. Strict prudential regulation and supervision will increase efficiency and confidence in banks. As deposits increase and lengthen, so will loans

The establishment of a comprehensive credit bureau and a pledge registry for all kinds of movable goods will increase the usefulness of the assets owned by the rural poor as signals and guarantees of creditworthiness. The replacement of politics with profits through the privatisation of public development banks will also improve access for the rural poor since politics favours the rural elite

Concludes:

• the new microfinance technologies are not likely to improve access to small deposits and small loans for the poor in rural Argentina
• the likely uselessness of microfinance in rural Argentina is not a tragedy. Argentina is a middle-income country with a stable, growing economy. Input suppliers and output buyers do lend to some small farmers for specific uses.
• this work highlighted two types of public intervention aimed at the institutional infrastructure of rural financial markets. The first strengthened the power of the regulatory authority and extended it to the development banks owned by provincial governments. The second attempts to decrease the cost of use of the types of guarantees owned by the poor