Can Technical Assistance Sow the Seeds for Rural Finance?
Government interventions to lower interest rates and expand credit to the rural sector are common in developing countries. Some of these policies, like interest rate subsidies, though well-intentioned, can be distortionary and achieve opposite results. Interventions that tackle constraints that prevent the market from allocating credit on its own may achieve better results. One such constraint often present in rural areas is lack of technical capacity. Rural financial institutions are often ill-equipped to screen, monitor and manage risk and to price products. This lack of capacity increases operational costs which are passed on to borrowers in the form of higher interest rates and less lending.
| Main Authors: | , , |
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| Format: | Brief biblioteca |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018-06
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| Subjects: | RURAL FINANCE, TECHNICAL ASSISTANCE, RURAL CREDIT UNIONS, MICROFINANCE, |
| Online Access: | http://documents.worldbank.org/curated/en/439421530030039244/Can-technical-assistance-sow-the-seeds-for-rural-finance https://hdl.handle.net/10986/29968 |
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| Summary: | Government interventions to lower
interest rates and expand credit to the rural sector are
common in developing countries. Some of these policies, like
interest rate subsidies, though well-intentioned, can be
distortionary and achieve opposite results. Interventions
that tackle constraints that prevent the market from
allocating credit on its own may achieve better results. One
such constraint often present in rural areas is lack of
technical capacity. Rural financial institutions are often
ill-equipped to screen, monitor and manage risk and to price
products. This lack of capacity increases operational costs
which are passed on to borrowers in the form of higher
interest rates and less lending. |
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