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on Microfinance |
| By: | Tazul Islam (American International University Bangladesh) |
| Abstract: | The wisdom in rural finance has long been that lending to and saving by the poor is doomed to failure: costs are too high, they are not creditworthy and they are not able to save. A number of success stories in microfinance industry (MFI) have changed this pessimistic assessment during the past twenty years or so. Recounting the failure of traditional financial liberalization theory in ensuring the access of the rural poor to the institutional sources of finance, this paper, taking the Grameen Bank (GB) of Bangladesh- the cradle of microfinance movement, as a case study, argues for a continuation of the support towards institutional innovation in MFIs that will help achieve the goal of ensuring the access of the rural poor to the institutional sources of finance. |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:aiu:abewps:34&r=mfd |
| By: | Shah, Deepak |
| Abstract: | In the era of financial sector reforms, sustainability, viability and operational efficiency of rural financial institutions (RFIs) are the major issues that need to be taken cognizance of in ensuring effective rural credit delivery system. However, the major problems plaguing the efficiency of rural credit delivery system are the mounting overdue and Non Performing Assets (NPAs) of RFIs. In the state of Maharashtra, the credit cooperatives have not only shown slower growth in their institutional finance coupled with much slower growth in their membership but also faster growth in outstanding loans as against their loan advances during the reform period. The reason for this dismal scenario can be associated with adverse environment created by the financial sector reforms, which have reduced the entire rural credit delivery through cooperatives to a moribund state. The financial sector reforms have accorded greater flexibility to cooperatives to invest in non-target avenues like shares and debentures of corporates, units of mutual funds, bonds of public sector undertakings, etc. This has affected credit flow from these major institutions operating in rural Maharashtra as most of their loans meant for farm finance are diverted to investments. The estimates of this study also show not only wide variation in total and crop loan advances of PACS but also their outstanding loans, overdue and per member borrowing across different regions of Maharashtra. The outstanding loan of PACS based on per hectare GCA is seen to have exceeded loan advances with a comfortable margin in all the regions of the state. Although increase in outstanding loan with rise in loan advances and GCA is another issue, the most important one among all is the mounting overdue and NPAs of cooperatives that sets a path where from there is no return and, which ultimately leads to inefficiency in cooperative credit delivery. In order to rejuvenate rural credit delivery system through cooperatives, the major problems facing the system, viz., high transaction cost, poor repayment performance, mounting NPAs, distributional aspect of credit, coverage of various social groups, etc., need to be tackled with more fiscal jurisprudence reserving exemplary punishment for willful defaults, particularly large farmers. In fact, insofar as the rural credit delivery system is concerned, the focus should be on strategies that are required for tackling issues such as sustainability and viability, operational efficiency, recovery performance, small farmer coverage and balanced sectoral development. |
| Keywords: | Institutional Credit Cooperatives Region-wise Analysis |
| JEL: | G21 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:7140&r=mfd |
| By: | Shah, Deepak |
| Abstract: | The credit cooperatives in Maharashtra have shown slower growth in their membership and institutional financing. On the other hand, a faster growth has been observed in outstanding against loan advances. A lackadaisical approach of Primary Agriculture Cooperative Credit Societies (PACS) has been observed towards SC/ST members, particularly in terms of their coverage, pattern of loan advances to them and recovery pattern. The study has identified several issues that need to be taken cognizance of to revitalize the rural credit delivery system through the cooperatives. One of these is wide variations in total and crop loan advances across various districts and regions of Maharashtra. A decline in the loan advances with rise in GCA in the Konkan region is another issue, but the most important one among all is the mounting overdues and non-performing assets (NPAs) of the cooperatives operating in both forward and backward regions of Maharashtra. The viability of two central level credit institutions, viz. Sangli District Central Cooperative Bank and Buldana District Central Cooperative Bank, has been estimated. In order to rejuvenate the rural credit delivery system through cooperatives, the major problems facing the system, viz. high transaction cost, poor repayment performance, mounting NPAs, distributional aspect of credit, low coverage of SC/ST members, etc. need to be tackled with more fiscal jurisprudence reserving exemplary punishment for willful defaults, particularly by the large farmers. |
| Keywords: | Banking Sector Reforms Co-operative Credit Institutions |
| JEL: | G21 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:7149&r=mfd |
| By: | Marc Prat Sabartes (Universitat de Barcelona) |
| Abstract: | Historians claim that in the nineteenth century Catalan cotton manufacturers were giving informal credit to their clients, and were therefore unable to transfer this credit to the banking system. Such circumstances would have had a detrimental effect on the profitability of the cotton firms. Based on an analysis of the archives of several firms, as well as judicial and notary sources, we can confirm this state of affairs, but present a more optimistic interpretation of the system. Manufacturers were, in fact, acting as their customers bankers because they were in the best position to perform this function. They built up a good information structure, managed the credit risk efficiently and earned money from this activity. |
| Keywords: | financial system, credit market, cotton industry, commercial network, information costs |
| JEL: | G21 L14 D83 L22 N23 G12 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:bar:bedcje:2008189&r=mfd |