Dale W Adams

MICROENTERPRISE CREDIT PROGRAMS: DEJA VU

Abstract Microenterprises in low-income countries are the target of an increasing number of credit programs. These efforts resemble earlier problematic attempts to assist operators of small farms with credit. Similarities discussed include target group definition, assumptions, policies, and project justifications. Authors go on to list a dozen lessons from the experience with small- farmer credit that might apply to microenterprise credit efforts. Authors then conclude that debt is not an effective tool for helping most poor people to enchance their economic conditions, be they operators of small farms or microenterprises.

Rural Financial Markets in Low Income Countries: Recent Controversies and Lessons

Abstract Recently some researchers have criticized traditional agricultural credit policies in low-income countries. This article identifies the major points of controversy between traditional views and these new views and also summarizes the primary lessons learned from these controversies. Savings mobilization, more flexible interest rate policies, less loan targeting, and greater emphasis on improving the quality of financial services in rural areas are new views that are emphasized.

A critique of traditional agricultural credit projects and policies

Abstract Authors critique the results, assumptions, and policies commonly associated with agricultural credit projects in low income countries. A summary of new views on these projects is present. These views emphasize voluntary savings mobilization and positive real rates of interest. Several explanations are given for why few of these new views have been adopted by policymakers.

Agricultural Credit in Latin America: A Critical Review of External Funding Policy

During the 1960s aid agencies channelled over one billion dollars to agricultural credit systems in Latin America. This plus local funds boosted the real value of rural credit by 12 percent per year. A number of assumptions underlying past credit policy are critically examined. It is argued that currently credit shortage is not the most pressing issue. Rather, emphasis should be placed on realistic pricing of rural credit and mobilizing rural savings for credit use through interest incentives.

Economics of Cost-Share Leases in Less-developed Countries

Economists have long recognized that output-share leases result in inefficiencies in variable resource use. Cost-share leases have been suggested as a way of overcoming this inefficiency. Only in rare cases, however, has cost sharing become a part of share leasing in less-developed countries. It is argued in this article that in less-developed countries landowners generally make more net income by not adopting cost-share leases. The societal loss due to output-share leasing, and several policy alternatives, in addition to cost-sharing, which might help resolve this inefficiency problem, are discussed.

Informal finance in Egypt: “Banks” within banks

Abstract Policy makers often assume that individuals using informal finance are forced to do so because they lack access to formal financial services. Research in a large agricultural bank in Egypt, however, showed that many of its employees participated in informal finance. Interviews with villagers in a community with a branch of the bank also showed extensive involvement in informal finance. The popularity of informal finance among people with easy access to banks suggests that formal finance in Egypt may not be providing the types of financial services that people demand and they therefore, create these services informally.

Voluntary Rural Savings Capacities in Taiwan, 1960–70

A large amount of attention has been given to mobilizing capital in and from rural areas of low income countries. In most cases, involuntary techniques such as taxes, price manipulation, forced labor, and expropriation of products have been used to do this. Rarely have policy makers considered voluntary techniques for stimulating rural savings. In part, this is due to the stereotype widely applied to rural savings behavior. This stereotype depicts rural households as having low incomes and very high consumption propensities. The lack of adequate household data on income, consumption, and savings has discouraged research that might test these assumptions (Mikesell and Zinzer). In the following, we provide information on rural household savings and some of its determinants in Taiwan during the 1960s. Taiwan is one of the few countries that has systematically collected farmhousehold data for a number of years that are rich enough in detail to allow such analysis. In addition, the agricultural sector in Taiwan has experienced rapid economic and social development over the past three decades. Overall, agricultural output has increased at a rate in excess of 5% per year since the early 1950s, while the value of agricultural exports has more than tripled. The benefits from this rapid growth have been relatively equitably spread (Oshima). Furthermore, Taiwan is one of only a handful of countries that has aggressively promoted mobilization of voluntary savings in rural areas. We will argue later that these positive policies toward voluntary rural savings, rather than frugal cultural characteristics, make the Taiwan experience almost unique with regard to rural savings mobilization.

Rural Household Savings Behavior in South Korea, 1962–76

This study documents the extent of savings in representative rural households in South Korea during 1962–76. A technique for measuring permanent income from cross-section data is used to estimate marginal savings behavior. The results show that households saved a remarkably large part of their incomes. During the late 1960s these savings were, on the margin, about one-fifth of permanent incomes and about four-fifths of transitory incomes. Authors also conclude that useful measures of permanent and transitory income can be estimated from cross-section data.

Differences in uses of rural financial markets in Taiwan and the Philippines

Abstract Taiwan and the Philippines had many similarities after WWII, especially in agriculture, but they were quite dissimilar in the early 1990s. Authors argue that Taiwan used its formal rural financial market more effectively than did the Philippines and that this explains an important part of the superior economic performance in Taiwan. The Philippines used financial markets to handle targeted loans and subsidies while Taiwan mostly used these markets to support the efficient allocation of resources. The authors discuss 10 policies that help explain the superior performance of rural financial markets in Taiwan.

Income instability and consumption-savings in South Korean farm households, 1965–1970

Abstract This paper describes the sources and extent of income instability among a representative sample of South Korean farm households during 1965–1970. An index of income instability is included in a consumption function to estimate its effects on saving-consumption behaviour. Authors conclude that the households studied saved large amounts and that part of this saving was due to unstable incomes.