Presentation is loading. Please wait.

Presentation is loading. Please wait.

The weakness of formal rural finance in Peru : a supply-side problem? « Limitado financiamiento formal para la pequeña agricultura:¿Solo un problema de.

Similar presentations


Presentation on theme: "The weakness of formal rural finance in Peru : a supply-side problem? « Limitado financiamiento formal para la pequeña agricultura:¿Solo un problema de."— Presentation transcript:

1 The weakness of formal rural finance in Peru : a supply-side problem? « Limitado financiamiento formal para la pequeña agricultura:¿Solo un problema de falta de oferta?” Catherine Guirkinger University of Namur, Belgium Carolina Trivelli Instituto de Estudios Peruanos, Peru

2 Conventional wisdom The lack of rural credit is an obstacle to agricultural development.

3 Empirical evidence Market conditions for formal financial institutions have improved over the last 15 years. HOWEVER: Household survey in Piura: No deepening of formal credit market between 1997 and 2003.

4 The questions Research question: Why do farmers not borrow (more) from the formal sector? Policy question: Should we be worried?

5 Outline of talk Rural finance in Peru since 1990 Credit markets in Piura and Huancayo Supply constraints?  A majority of farmers in Piura and Huancayo claim having access to formal loans Demand constraints?  Some simply do not need formal loan  Many are discouraged by risk and transaction costs Conclusions  Supply and demand constraints have a negative impact on the ag sector  The deepening of rural formal finance requires a broad policy response

6 Rural financial sector in Peru: recent evolution 1992: closure of state development bank (banco agrario) : El Niño + financial crises

7 BA Closed Crisis

8

9 Positive changes in market conditions for small farmers Micro-finance institutions (municipal and rural banks) increased their supply

10 Ag-portfolio of CMAC Sullana Graphe page 41

11 Positive changes in market conditions for small farmers Land titling program Information: credit bureaux

12 Micro-level evidence: the case of Piura and Huancayo Mantaro Valley Central Highlands (3,200 m.) Irrigated & rainfed ag Potatoes, fava bean, grains Artichokes Piura Only irrigated ag Rice, cotton, corn Banana, Lemons, Mango

13 Micro-level evidence: the case of Piura and Huancayo Credit use terms

14

15 Does the lack of access explain the limited credit market participation ? The percentage of farmers claiming having positive supply to formal loan increased from 56% to 71% between survey years in Piura and was 73% in Huancayo in 2003.

16 Why not taking a loan if it is available: Demand constraints? Do farmers need formal credit?  Many who have access to cheaper formal loans take an expensive informal loan.

17 Transaction costs as an obstacle. Why not taking a loan if it is available: Demand constraints?

18 Risk as an obstacle. Why not taking a loan if it is available: Demand constraints?

19

20 Conclusions Credit constraints are prevalent and costly Demand-side obstacles require specific interventions


Download ppt "The weakness of formal rural finance in Peru : a supply-side problem? « Limitado financiamiento formal para la pequeña agricultura:¿Solo un problema de."

Similar presentations


Ads by Google