The potential for rural savings mobilization: some evidence from Latin America
1980
Vogel, R.C.
Extract: The view is widely held that the primary role of financial institutions which serve the rural sector in developing countries is to provide abundant credit at subsidized low rates of interest in order to promote agricultural output and to redistribute income toward the rural poor. However, there is increasing evidence that subsidized low interest rates on agricultural loans have failed to achieve these two objectives. Because credit is fundible, it is difficult and costly, if not impossible, to tie subsidized credit to specific agricultural activities. In addition, recent studies focusing on the recipients of subsidized agricultural credit indicate that the main beneficiaries are not the rural poor, as credit is highly concentrated in large loans to relatively wealthy farmers. The purpose of the present paper is not to pursue these arguments further, but rather to examine the issue of the abundance of credit, that is, whether some alternative to the current approach might not facilitate a larger volume of credit for the rural sector in developing countries and thereby do more to promote agricultural output and redistribute income toward the rural poor.
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