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Undermining Rural Development with Cheap Credit
Adams, D., Graham, D. , von Pischke, J. & Eds.
Publication Date: 1984
Published by: Boulder, CO, USA: Westview Press
Document Type: Book
Reasons for the disappointing results of agricultural credit programmes in low-income countries
This comprehensive book is made up of 23 chapters based on research done in more than 25 countries. The broad categories covered are : - Problems in rural finance
- Interest- rate policies
- politics and finance
- New directions for rural financial markets.
The arguments are often controversial in challenging traditional thinking on rural financial markets. Five points were particularly stressed : - Credit should be viewed as a product of financial intermediation and not as an input
- Commonly accepted assumptions about rural financial markets, savings behaviour and agricultural credit, to date, were weak or even wrong
- Cheap-credit policies were probably the most important factor causing the failure of agricultural credit programs
- Political considerations often block rural financial market reform
- Recent research and evaluation could help improve performance
Further argues that informal lenders provide more valuable services than is generally thought, and recommends among other policy changes, voluntary savings mobilisation and more access to formal loans by non-farm rural firms.
The book concludes that many traditional agricultural credit programmes undermine efficient, equitable rural development while attractive product and input prices, along with higher yields, would be much more powerful ways of stimulating rural development.
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