Journal Article

Promoting Efficient Rural Financial Intermediation

Jacob Yaron, McDonald Benjamin and Stephanie Charitonenko

in The World Bank Research Observer

Published on behalf of World Bank

Volume 13, issue 2, pages 147-170
Published in print August 1998 | ISSN: 0257-3032
Published online August 1998 | e-ISSN: 1564-6971 | DOI: http://dx.doi.org/10.1093/wbro/13.2.147
Promoting Efficient Rural Financial Intermediation

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Although governments have traditionally used subsidized credit programs to promote agricultural growth, this approach has generally failed to improve incomes and alleviate poverty in rural areas. It has also led to the mistaken belief that rural credit programs cannot be profitable. A new approach seeks to raise standards of living in rural areas by casting the government in a very d role—one of setting a favorable legal andpolicy environment for rural financial markets and addressing spec market failures cost effectively through well-designed and self-sustaining interventions. There is evidence that this approach can be highly successful. The Village Bank system of Bank Rakyat Indonesia has shown that financial services can be extended to millions of low-income rural clients without relying on subsidies. Indeed, the program has generated enormous profits for the bank by using simple, innovative, and largely replicable techniques.

Journal Article.  0 words. 

Subjects: Development Planning and Policy

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