Rural Finance in Developing Countries

Topic :

The establishment of formal agricultural credit systems in most developing countries over the recent decades was motivated by the belief that widespread shortages of short- and long-term finance constituted a constraint that arrested agricultural growth and development. The absence of what was perceived as affordable formal credit was also blamed for delaying, if not preventing, a timely adoption of new productiont echnologiesa nd the disseminationo f nonlabor intensivei nputs such as fertilizer, thereby slowingd own the growth and developmento f the agriculturals ector. The “infant industry” argument was frequently raised to support intervention in financial markets in favor of the sector as a whole or in support of specifics egmentso f it (small-scalef armers, promotiono of new technologies such as line of credit to finance shallow tube’,ells, and so on).

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