The political economy of specialized farm credit institutions in low-income countries
VON PISCHKE, J. | HEFFERNAN, P. | ADAMS, D.
A paradigm, or pattern, incorporating financial logic and elements of political economy is developed to explain performance problems found in specialized farm credit institutions in low-income countries. The paradigm indicates that assumptions and welfare biases often used in institutional design paradoxically can lead to results which depart widely from initial objectives. It identifies policies and critical decisions leading to perverse development, and the types of costs imposed by the poor performance of these public sector financial intermediaries. Although stated in worst case terms for purposes of presentation, the systematic basis provided by this approach is useful in explaining why superior institutional achievement occurs when motivating assumptions, policies and decisions are altered to reduce or remove the inconsistencies which produce the problems typically found in specialized farm credit institutions in low-income countries. An annex containing case studies drawn from the credit literature of nine countries illustrates the applicability of the pattern presented in the text.
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