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close this bookRural Finance and Poverty Alleviation - Food Policy Report (IFPRI, 1998, 32 p.)
View the document(introduction...)
View the documentPreface
View the documentIntroduction
View the documentClient Profile
View the documentCommitting Public Resources to Rural Finance
View the documentInformal Markets: What Lessons Can We Learn from Them?
View the documentPublic Policy: Supporting Institutional Innovation
View the documentConclusions
View the documentNotes

Notes

1.

In all countries, with the exception of China, Pakistan, and Egypt, the household samples were chosen from areas where formal financial institutions were operating. Hence, they are not representative of areas that do not benefit from such services. However, they do provide a useful picture of the characteristics of the poorest compared with the nonpoor in the selected areas. A summary of study countries and related data sets is provided in M. Zeller, et al., “Research Proposal for IFPRI’s Multicountry Project (MP5) on Rural Finance Policies for Food Security for the Poor” (International Food Policy Research Institute (IFPRI), Washington, D.C., 1994). An earlier cross-country synthesis for up to seven case study countries is contained in M. Zeller, et al., “Financial Services for the Rural Poor: A Multicountry Synthesis and Implications for Policy and Future Research,” a final report to the German Ministry for Economic Cooperation and Development (BMZ) (IFPRI, Washington, D.C., December 1996, photocopy). Detailed information on sampling and results is available in the final reports for the following case studies. For Bangladesh, see M. Zeller, M. Sharma, and A. U. Ahmed, “Credit for the Rural Poor: Country Case Bangladesh,” a final report submitted to the German Agency for Technical Cooperation (GTZ) (IFPRI, Washington, D.C., 1996, photocopy). For Cameroon, see G. Schrieder and F. Heidhues, “Credit Policies for Food Security in Sub-Saharan Africa: The Case of Cameroon,” a final report submitted to GTZ (IFPRI, Washington, D.C., 1993); G. Schrieder, The Role of Rural Finance for Food Security of the Poor in Cameroon (Frankfurt, Germany: Lang Verlag, 1995). For China, see L. Zhu, Y. Jiang Zhong, and J. von Braun, “Credit for the Rural Poor in China,” a final report to GTZ (IFPRI, Washington, D.C., 1996, photocopy); and L. Zhu, Y. Jiang Zhong, and J. von Braun, Credit Systems for the Rural Poor in China (New York: Nova Science Publisher, 1997). For Egypt, see M. Sharma and M. Zeller, “An Analysis of Household Level Credit Transaction in Egypt,” a report prepared for the U.S. Agency for International Development (USAID) (IFPRI, Washington, D.C., March 1998). For Ghana, see E. Kennedy, E. Payongayong, L. Haddad, T. Tshibaka, R. Agble, and R. Tetebo, “Impact of Credit Programs on Food Security and Nutrition in Ghana,” a report to USAID (IFPRI, Washington, D.C., 1994, photocopy). For Madagascar, see M. Zeller, “Credit Policies for Food Security in Sub-Saharan Africa: The Case of Madagascar,” a final report to GTZ (IFPRI, Washington, D.C., 1993). For Malawi, see A. Diagne, M. Zeller, and C. Mataya, “Rural Financial Markets and Household Food Security: Impacts of Access to Credit on the Socioeconomic Situation of Rural Households in Malawi,” a final report submitted to the Ministry for Women, Children Affairs, Community Development, and Social Welfare, Malawi (IFPRI and the University of Malawi, Washington, D.C., 1996). For Nepal, see M. Sharma, “Rural Credit Institutions and Subsistence Consumption: An Empirical Study Based on Household Data from Nepal” (Ph.D. diss., Cornell University, Ithaca, N.Y., 1998). For Pakistan, see S. J. Malik, “Credit Use, Poverty, and the Role of Institutional Rural Credit: The Case of Pakistan” (IFPRI, Washington, D.C., 1994, photocopy).



2.

International Food Policy Research Institute, A 2020 Vision for Food, Agriculture, and the Environment: The Vision, Challenge, and Recommended Action (Washington, D.C.: IFPRI, 1995).



3.

Sharma, “Rural Credit Institutions and Subsistence Consumption: Nepal”; Zeller, “Credit Policies for Food Security in Sub-Saharan Africa: The Case of Madagascar”; Malik, “Credit Use, Poverty, and the Role of Institutional Rural Credit: The Case of Pakistan.”



4.

The household sample in Ghana was drawn from villages with credit programs that targeted relatively large loans to poor women. The survey sampled many of these program beneficiaries, and the results reported in the figure are the simple, nonweighted sample means. All data from other case countries are weighted averages, thus correcting for oversampling of program beneficiaries in the survey villages.



5.

Zeller et al., “Financial Services for the Rural Poor.”



6.

Ibid.



7.

J. D. von Pischke and D. W. Adams, “Fungibility and the Design and Evaluation of Agricultural Credit Programs,” American Journal of Agricultural Economics 62, no. 4 (1980): 719-726.



8.

See G. Schrieder and F. Heidhues, “Reaching the Poor Through Financial Innovations,” Quarterly Journal of International Agriculture 34, no. 2 (1995): 132-148; and M. Zeller, “The Demand for Financial Services for Rural Households: Conceptual Framework and Empirical Findings,” Quarterly Journal of International Agriculture 34, no. 2 (1995): 149-170.



9.

D. Adams and D. Fitchett, eds., Informal Finance in Low-Income Countries (Boulder, Colo., USA: Westview Press, 1992). The Consultative Group to Assist the Poorest (CGAP) estimates that fewer than 10 million of the few hundred million small businesses in urban and rural areas have access to financial services. See Consultative Group to Assist the Poorest, CGAP: A Micro-Finance Program, Focus Note No. 1 (World Bank: Washington, D.C., 1996). The picture for rural and particularly agricultural entrepreneurs is likely to be worse than for those operating in urban areas, however, because banking services are mostly offered in urban and semiurban locations.



10.

See A. Diagne, M. Zeller, and M. Sharma, “Determinants of Household Access to and Participation in Formal and Informal Credit Markets in Malawi and Bangladesh,” a paper presented at the Annual Meeting of the American Economics Association, Chicago, Illinois, January 3-5, 1998.



11.

M. Zeller, “Determinants of Credit Rationing: A Study of Informal Lenders and Formal Groups in Madagascar,” World Development 22, no. 12 (1994): 1895-1907.



12.

J. Morduch, “The Microfinance Revolution” (Harvard University, Cambridge, Mass., 1997).



13.

M. Zeller, G. Schrieder, J. von Braun, and F. Heidhues, Rural Finance for Food Security for the Poor: Implications for Research and Policy, Food Policy Review 4 (Washington, D.C.: International Food Policy Research Institute, 1997).



14.

Joseph Stiglitz identifies 10 market failures in financial markets, most of them related to imperfect and costly information, and develops a set of principles for government intervention to respond to these market failures. J. E. Stiglitz, The Role of the State in Financial Markets, Working Paper No. 56 (Washington, D.C.: Institute for Policy Reform, 1992).



15.

BancoSol in Bolivia and the village banks of Bankya Rakyat Indonesia (BRI) are examples of successful banking institutions that provide savings and credit services on a sustainable, even profitable, basis to low-income clientele. On the profitability of BRI, see J. Yaron and B. McDonald, “Recent Developments in Rural Finance,” a paper presented at the 23rd Conference of the International Association of Agricultural Economists, Sacramento, California, U.S.A. August 1997.



16.

Morduch, “The Microfinance Revolution”; and D. Hulme and P. Mosley, eds., Finance Against Poverty (London: Routledge, 1996).



17.

The methodologies used in the impact evaluation in IFPRI’s country studies are described in Zeller et al., “Financial Services for the Rural Poor.” To account for potential selection bias, all IFPRI country studies use a two-stage econometric estimation procedure. The first stage measures the influence of factors that affect either access to or participation in the formal and informal credit market. The second stage then estimates the effects of predicted credit access or program participation on various outcome variables.



18.

M. M. Pitt and S. R. Khandker, Household and Intrahousehold Impacts of the Grameen Bank and Similar Targeted Credit Programs in Bangladesh, World Bank Discussion Paper No. 320 (Washington, D.C.: World Bank, 1996).

19.

A. Foster, “Prices, Credit Markets, and Child Growth in Low-Income Areas,” Economic Journal 105, no. 430 (1995): 551-570.



20.

H. Jacoby, “Borrowing Constraints and Progress through School: Evidence from Peru,” Review of Economics and Statistics 76, no. 1 (1994): 151-160.



21.

G. Buckley, “Financing the Jua Kali Sector in Kenya: the K-REP Juhudi Scheme and Kenya Industrial Estates Informal Sector Program,” in Hulme and Mosley, Finance against Poverty, Vol. II: Country Case Studies, 271-322. For a recent review of credit impact studies, see J. Sebstad and G. Chen, Overview of Studies on the Impact of Microenterprise Credit (Washington, D.C.: U.S. Agency for International Development, 1996).



22.

S. R. Schuler and S. M. Hashemi, “Credit Programs, Women’s Empowerment, and Contraceptive Use in Rural Bangladesh,” Studies in Family Planning 25, no. 2 (1994): 65-76; B. MkNelly, “Freedom from Hunger’s Credit with Education Strategy for Improving Nutrition Security: Impact Evaluation Results from Ghana,” paper presented at the mini-symposium on “Sustainable Nutrition Security for Sub-Saharan Women Subsistence Farmers,” held at the 23rd Conference of the International Association of Agricultural Economists, Sacramento, California, U.S.A., August 1997.



23.

MkNelly, “Freedom from Hunger’s Credit with Education Strategy.”



24.

On this argument, see, for example, Zeller et al., “Research Proposal for IFPRI’s Multi-Country Research Project on Rural Financial Services”; D. Van de Walle, “Comments on ‘Rural Finance in Africa: Institutional Developments and Access for the Poor’ by Ernest Aryeetey,” in Annual World Bank Conference on Development Economics, ed. M. Bruno and B. Pleskovic (Washington, D.C.: World Bank, 1996).



25.

Adams and Fitchett, eds., Informal Finance in Low-income Countries.



26.

See M. Zeller, S. Broca, and M. Sharma, “Financial Services for the Rural Poor: A Multicountry Synthesis and Implications for Policy and Future Research,” final report to the German Agency for Technical Cooperation (GTZ) (International Food Policy Research Institute, Washington, D.C., December, 1996, photocopy)



27.

See C. Udry, “Credit Markets in Northern Nigeria: Credit as Insurance in a Rural Economy,” World Bank Economic Review 4, no. 3 (1990): 251-269; S. Coate and M. Ravallion, “Reciprocity without Commitment: Characterization and Performance of Informal Insurance Arrangements,” Journal of Development Economics 40 (1990): 1-24; R. Townsend, “Risk and Insurance in Village India,” Econometrica 62, no. 3 (1994): 539-591.



28.

See Adams and Fitchett, Informal Finance in Low-income Countries, for various examples.



29.

See Zeller et al. Rural Finance for Food Security for the Poor.



30.

K. H. Jung, “Savings Conduct of Farmers in Cameroon,” Entwicklung und llicher Raum 27, no. 3 (1987): 85-97, cited in Zeller et al., Rural Finance for Food Security for the Poor.



31.

This section draws from M. Zeller and M. Sharma, “Rural Financial Services for Poverty Alleviation: The Role of Public Policy,” 1996 Report (Washington, D.C.: International Food Policy Research Institute, 1997).



32.

Zeller et al. Rural Finance for Food Security for the Poor.



33.

M. Huppi and G. Feder, “The Role of Groups and Credit Cooperatives in Rural Lending,” World Bank Research Observer 4, no. 2 (1990): 187-204.



34.

For discussions on actions by group members in cases of individual loan defaults, for Costa Rica, see M. D. Wenner, “Group Credit: A Means to Improve Information Transfer and Loan Repayment Performance,” Journal of Development Studies 32, no. 2 (1995): 263-81; and for Madagascar, M. Zeller, “Determinants of Repayment Performance in Credit Groups: The Role of Program Design, Intragroup Risk Pooling, and Social Cohesion,” Economic Development and Cultural Change (1998): 599-620.



35.

Zeller et al., Rural Finance for Food Security for the Poor.



36.

One in-depth study is supported by the World Bank and the Bangladesh Institute for Development Studies; see, for example, S. R. Khandker, “Grameen Bank: Impact, Costs, and Program Sustainability,” Asian Development Review 14, no. 1 (1996): 97-130.



37.

See C. Lapenu, Indonesie: Le Syst Financier Rural Indonen: RDe L’etat et Des Institutions Priv, Sustainable Banking with the Poor, Asia Series (Washington, D.C.: World Bank, 1998).

Manfred Zeller is a research fellow and Manohar Sharma is a postdoctoral fellow in the Food Consumption and Nutrition Division at the International Food Policy Research Institute.

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