I Fiance Apicultural

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effect of interest rates on trnsaiction costs and vice versa. The leve! of real
interest rates is a complex issue with vital effects on private investment for
agricultural development and on the viability (profitability) of RFIs.
Second, in developing countries, rural borrowing, savings, and deposits
are all influenced more by accessibility, liquidity, and safety of
these services aiir availability of related nonfinancial services of RFIs
than by interest rates. High density of these institutions is thus critical to
the rapid development of larger coverage of geogriphical areas and
rural clients. Tie effort to realize these benefits initially poses a problem
of discconomics of scale in transaction costs, as well as higii administrative
costs and loss of discipline associate i with rapid expansion. Reducing
transaction costs by perforuting maiy functio;ns and providing a
high density of service would enable RFIs to reduce costs through larger
economies of scale and scope rather than through higher interest rates.
These are important and complex relations.
Successfil examples of such cilerging RFIs ate the Granlucen Bank
and the Sonali Bank in Bangladesh; cooperatives, natioialized cointmiercial
banks, and to some extent regional rural haiks illIndia; the Bank for
Agriculture an d .Agrici ltuial C(m,'pIraives ai ic r-level cooperatives
ill Thailaud; two hri-chlcs of the \gricultural Bank of' Sudani in Sudan;
and colilly aold to niship coopcritivcs in the Republic of' Korea. Most of'
thesc RFIs li;tve greatly iluililaled agiictiltual dcvelo)metnt aiid reaped
ccoilonuies of, scale in their transaction costs. "IlIc are also viable iin that
tIey ern'irofits and hliave lower luI al delinquency rates. They mepresent
a tramnsition to systCl us organized arounid the last fotrr oftlti earlicr-nienlioned
six organizing principles with their interacting influences.