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92 The intcrest elasticity of demand for rural credit is highest in LICs (-0.25 to -1.98 with an average of -1.31) followed by MICs (-0.,13 to -1.83 with an average of- 1.10), and I llCs (0 to -2.29) (Table 41). Lower elasticity in LICs is for farmers with traditional technology, but this does not hold for farmers with new technology. Both in Brazil and India, this elasticity is becoming more elastic over tinit. In hidia, it idcrcased from -0.79 in the 1950s to -1.30 in the 1970s to -1.37 in the mid-1980s. In Brazil, it increased firom -1.75 in 1960 to -1.83 in 1971. 'his is perhaps because of the increased burden of inte'est costs oti a(count of the larger credit requirement and the incr('asc(d inter st rates on loans. Moreover, in India, interest c!asticity of (leinand for rural loans by mediun-sized faris iechianized for irrigation is higher (-1.64 t- -4.52) than that for farms with traditional technology (-0.2,1 to -0.25). But, in the United States, this clasticity is becoming iore inelastic over time (-2.29 dming 1921-59 to almost zcro during 19,17-69). This Iny be because I.S. agriculture had htly lraisforiid technlologically by that time. It may already have achieved crilical iuiiii growth. l ence, .S. futers may have been aleh to lina:ice relatively t~r~" o~Mi internal sollit's. Thest cxplaiiations appear consistent with tl- high"cr interest elasticity of r +ra lposits in the U.,lited States mlamill lAl's and MICs, as will be shown in tht next chapter. Rccursive i)rograinining studies on the iidn i laniiujab (Day and Singh 1977) and Brazil (lPeres 1976), wherc agriculturt is not hilly transformend twchnologi ally, show that, ovel liii :is agricuhltuc becies nIOT c()nIiitercializc(I and more intimately linked with the markets for new inpuits and for surpils production, Ihe inttcrest elasticity of demand for itral cledit increases. Tht'se st udiois, howeve'r, also show that this elasticity is higher folaruger faiiirs than for,smaller olcs. Iis resull may havc bccii inlluetnced by the filtt that these studies typically consider only working capital critil fo mcting fimut input expenses. But aurisk i--gl;og ming iiiodctl for 0 a (ross-scction of satll)l" F[ariicrs ill Brazil (Peres 1976) shows that smiall farmrs' 1 eiidman(l for rural loans is more inltecst-elastic than iitl large liniers' dcmad Ifor stich loa s. Morcover, it shows that this de-mand becomes evci i-or. interest-elastic for simall fum tinc-s whlvn fa ilily labor is rightly considered as a variabilc instead of as a fixed factor, with co'responding cash outlay to pay for it. The case for large, f.,mers is similar when tle- constiaint oil labor availability is introduced. Only I of' the 22 studies tn(r rewiew Ipovidc relevant data to compute ilttrest elasticity of dem id for rural c cr(it by (tiffert'it-sized farms. A study on Brazil (Adamus 1979) shows that this clasticiy is higher for large farmi ers (-2.33) than for intditin hfitinrs (-1.33) (Table '12). But two studioes oii India (Agriultumra lFinamicv Coiporatioi 1988; Pani 1966), and one oii Nepal (Iia 1978), also prsmntcd in 'Tal, '12, show that this elasticity is higlic for smitallcm farmers, incluing landless laborers and medium-sizcd frins (--0.25 to A.35) than for larger farms (-0.15 to -2.04). The two studies on India also show that over time the interest elasticity of demand for rural credit for the poorer farm people is increasing (-0.10 to -2.04), whereas that for tile richer is weakening (-0.51 to -0.24).
Table 4 2 -Evidence on interest elasticity of demand for rural loans by farm size or income group in selected Farm Size or Income Group developing countries Brazil Mid-1960s" (by Farm Size, CIL) (Adams 1979) 19 5 1 /5,b (by Income Group, CIL and CNIL) (Pani 1966) India 1956/57' (by Income Group, CIL and CNIL) (Pani 1966) 1 9 8 6 / 8 7 d (by Farm Size, ILO) (Agricultural Finance Corporation 1988) Nepal Late 1960s' (by Farm Size, CIL and CNIL) (Jha 1978) Landless (50 percent )/low-income a rgi 3 rl/ ut iddlen come (-0 l rcenrt) S 1Illl, ighl ICncoe (30 'rent) Mediumn ILa I0 rge (501 prcent) fi .rccnr)/high~income Silrple avelage ... . '""•-.-.9-. ... -1.33 -2.33- - -1.83 0. 10 . . 0.51 ...5. -t ,1 -0.25 -0.39 -0.10 -0.15 -0.22 -0.71 -0.71 -0.24 .. .. -0.93' -3.35 -136.16 1 6 1 -2.04 -47.189 Notes: CI. is current (-1.15) instittional loans, (NI1 (-2.78) .Arc is elasticities Current "onlinstiti,titial are estimated lontis, frm) group and 11() data is istitutiljoral for a small sample loans oitstanding. including of 150 interest firiers and These ion ii[crest elasticities costs of are borrowing. withf respect Medium to total farm uit size costs is -19.4-I of borrowing, lBalsedl il Iiinitivariate diotubl-log -11350 loan acres demliand arid large size in(Kil is based greater on than large-scalt- 113.50 it acres. l; lt se of Iald incorie pie sitlv , dcCiles, ilia:t. Ili this c lihriil elasticities are 'Sante for two as namely, boton 50 percent and tip 50 groups note b above exce[t lilal rhe elasticities percent. are fmr r income dtilh g, ups. raniuels, hrottor 30 _percent, niddle 40 percent, top 30 percent, Estirnted 1op 10 perceit. and at tie inean levl on till clasticities basis of ;a siniple are senrilog for landless, loan uielliard niargi ro il del ]lascd (ml large-scale liarioitwide 'These are sample also rip arc tt 2.5 acres), small (2.51 to surve% elasticities 5 data. estitiated These nean from groip data fi ra cris), sitiall and sanple large (f 1-t2 (above L rMiers in 5 acres) tire Tarai farii regnot sizes. tif Nepal. Small-farm size is tan defi ned 10 acres, as less miediitini-size as 10 no 17 acres, and large TThe as figure 17 to in 29 parentheses acres. is a simple average computed gThe figure after in parentheses exclding large is a simple Li rrr average computed after excludiing niedit, m-size farms.
Page 1 and 2:
,AFOOD POLICY EVIEWl Institutional
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FOOD POLICY REVIEW 1 Institutional
Page 5 and 6:
Chapter One Chapter Two Chapter Thr
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15. Unit transaction costs, unit ir
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47. Relative importance of intcecst
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Foreword Thiis report introduces a
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1 Summary This study analyzes two a
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3 Six organizational principles for
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2 Introduction Finance and Economic
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An obvious problem innate to an act
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9 Selection of Theme and Issues for
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I1 TIhe issue of scale economies is
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13 There is also a problem of indiv
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15 Figure I-Share of borrowing of f
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17 Figure 2-Share of'agricultural l
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19 specific or economywile developm
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Table 1- Continued 21 Region, Count
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Table 2-Continued Government Nation
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25 regional without higher or lower
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27 Caribbean, compared with Asia. T
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Table 3 -Continued Proportion of Pe
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31 LICs (including Bangladesh, Indi
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33 Functional Structure of RFIs and
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35 approximated from available lite
Page 49 and 50:
Figure 3-Stylized organizational fr
Page 51 and 52:
5 Transaction Costs, Profitability,
Page 53 and 54: 411 or fiom new borrowers. Moreover
Page 55 and 56: 43 Table 6-Unit transaction costs o
Page 57 and 58: 45 tiotis largely by borrowing fi'o
Page 59 and 60: 47 Table 9 -Transaction costs of br
Page 61 and 62: 49 'T7heSonali Bank's unit uct marg
Page 63 and 64: Table 14-Estimated parameters of th
Page 65 and 66: 53 PACS) was established ill March
Page 67 and 68: 55 Table 16-Deposit growth rates of
Page 69 and 70: 57 rIIIIal Output (28 p)Celt) and o
Page 71 and 72: 59 Although APS loans were dominant
Page 73 and 74: Table 2 0-Pattern of loans advanced
Page 75 and 76: 63 Table 2 1- Unit profit and unit
Page 77 and 78: 65 resources are mainly channeled t
Page 79 and 80: 67 Table 25-Various costs, gross ma
Page 81 and 82: 69 BAAC also en1joyced sc.;le ,~ol
Page 83 and 84: 71 iuzividual farmers at the distri
Page 85 and 86: 73 Agriculture and Cooperatives 197
Page 87 and 88: 75 like the county and plimaly coop
Page 89 and 90: 77 Table 33-Transaction and financi
Page 91 and 92: 79 Table 3 6 -Structure of assets a
Page 93 and 94: Response of Rural Loan Demand to In
Page 95 and 96: 83 Table 3 9-Estimated multivariate
Page 97 and 98: 85 Table 40-Estimated multivariate
Page 99 and 100: 87 separate deteriminants of demand
Page 101 and 102: Table 4 1-Continued Type of Demand,
Page 103: Table 4 1-Confinued Type of Demand,
Page 107 and 108: 7 Response of Supply of Rural Depos
Page 111 and 112: 99 Table 4 6-Relative importance of
Page 113 and 114: 101 I1e positivc respolse of supply
Page 115 and 116: Table 48- Continued 103 eBased on t
Page 117 and 118: Table 4 9 -Pattern of total rural s
Page 119 and 120: 107 is substantial saving even in d
Page 123 and 124: 111 nient), and lastly, the inverse
Page 125 and 126: 113 Table 54-Positive and negative
Page 127 and 128: 9 Flow of Funds of the Rural Financ
Page 129 and 130: 117 interest I'evellie and payment.
Page 131 and 132: Table 5 5 -Continued 119 cin scenar
Page 133 and 134: 10 Conclusions and Implications ase
Page 135 and 136: 123 differential increase in demand
Page 137 and 138: 125 can be attained. Multifunctiona
Page 139 and 140: 127 fully achieved. Had the institu
Page 141 and 142: 129 so doing, improvements in verti
Page 143 and 144: The standard error of The standard
Page 145 and 146: Appendix 2 Reasons for Delinquency
Page 147 and 148: Region/Country 135 Reaso.z Near Eas
Page 149 and 150: References Abbott, J. C. 1 9 7 3a.
Page 151 and 152: 139 Aku, P. S. 1986. Lending to far
Page 153 and 154: 141 Caibbean Country Department II,
Page 155 and 156:
143 144. Princeton, N.J., U.S.A.: W
Page 157 and 158:
145 1975. Agriculturalcredit in Asi
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__ 147 Gurley, J. G., and E. S. Sha
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149 G. Hunter and A. F. Bottrall, 5
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151 Lee, T. Y., D. H. Kim, and D. W
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153 __ _. 1976. The new economics o
Page 167 and 168:
155 Olu, W. 1985. Formal credit and
Page 169 and 170:
__ 157 Rao, B. P. 1970. The economi
Page 171 and 172:
159 Singh, G., and S. R. Asokan. 19
Page 173 and 174:
-- 161 Verghese, S. K. 1983. tivfit
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