Asian Efforts to Develop Rural Financial Markets: Some Insights

Publication Date: 2000
Published by: OSU Rural Finance Program
Document Type: Paper

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What are Asian insights?

The paper revisits familiar territory and without any particular reference to Brazil. It lists nine characteristics of Asian rural financial markets:

• Interest rates for loans are subsidised and rates for small farmers are especially low;
• Governments and donors are major sources of funds and local savings mobilization is largely ignored;
• The policy objective is to increase the supply of loans made to farmers and microentrepreneurs with little attention paid to institutional sustainability;
• Production packages are created with credit treated as an input like seeds and fertiliser;
• Credit is targeted for 'productive purposes'. Loans for consumption and rural nonfarm enterprises are ignored and, in some cases, prohibited;
• Many credit programs target small farmers and employ supervised credit through co-operatives as a means to ensure it is used properly;
• Co-operatives are often the primary credit channels, while commercial banks and agricultural development banks are more important in some countries;
• Transaction costs for lenders and borrowers are largely ignored;
• Some recent programs have broadened their target from small farmers to the rural poor.