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Improving donor intervention in rural financial markets (English)

Credit projects have provided substantial amounts of liquidity in rural areas and are frequently thought to produce high economic returns. However, critics have argued that the impact of these projects may be considerably more complex than suggested by their design. This paper attempts to explain how rural credit projects are presently designed and why present design techniques often cause serious problems. It suggests an alternative approach that stresses debt capacity and views credit as part of a financial process. The extent to which financial and non-financial stimulants to rural development may be substitutes or complementary is also examined. The principal modifications required for a reorientation of approaches to farm credit include recognition and accommodation of risk, attention to creating confidence in debtor-creditor relationships, viewing finance as part of a process rather than as an input, and consideration of non-financial as well as financial means of creating debt capacity. This implies a dramatic change in credit project design.

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Citation

VON PISCHKE, J. AGR

Improving donor intervention in rural financial markets (English). AGREP Division working paper ; no. AGP 0050 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/585321467980543430/Improving-donor-intervention-in-rural-financial-markets